Q2 2022 36Kr Holdings Inc Earnings Call

Hello ladies and gentlemen.

Thank you for standing by for 36KR Holdings, Inc.'s 2nd Quarter 2022 earnings conference call.

At this time all participants are in listen-only mode.

After management's remarks, there will be a question and answer session.

Today's conference call is being recorded.

I will now turn the call over to your host Yang Li, IR manager of the company. Please go ahead Yang.

Thank you very much. Hello, everyone, and welcome to 66P, our 14th second quarter 2022 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 earlier chat release by visiting the IR section of our website at IR.66PR.com. Participants on today's call will include our co-chairman, CEO , Mr. Dang Dang Phong, and our chief financial officer, Ms. Ling Wei.

Mr. Feng will start a 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 a pass dream.

Before we continue, please note that this discussion will contain a local statement made under the Safe Harbor provisions of the U.S. Traveling Securities Legitiation Reform Act of 1995.

For looking statements involving hearing risk and uncertainties. As such, the company's result may be materially different from the view expressed today. Further information regarding this and other risks and uncertainties is included in the company's perspectives and other public feelings as well with the US SEC. The company does not assume any obligation to update any for-looking statements except as required in the applicable law. Please note that 66 KR earnings class release and this company's call included discussion.

of the unaudited GAAP financial measures as well as the unaudited non- GAAP financial measures. 66 KRs earning price release contains the reconciliation of the unaudited non- GAAP measures to the unaudited GAAP measures . And please note that all our members are in RMB. I would now like to now call over to our co-chairman CEO , Mr. Da Gongfeng. Pal, please go ahead.

Thank you. Hello everyone. Thank you for joining our second quarter 2022 earnings conference call.

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We delivered robust financial performance with double-digit growth in terms of revenue and continued increase in growth margin, while also achieving profitability for the third consecutive quarter, attachment to our powerful brand influence and our business's strong resilience and vitality.

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High-quality content has always been our most prominent advantage and the bedrock of our business development. In the second quarter, we continue to optimize our content ecosystem and innovate our content columns and formats. Bolstered by our content platform strategy, we still focus on PGS and UGC, with turning our content to more industries with diverse perspectives, calculating, and even richer content ecosystems, helping us expand our reach to a wider high-quality user base.

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Let's take a closer look at some of our accomplishments in content during the quarter. First, our constant content refinements have contributed to more than 150 articles with over 100,000 views, leaving us at the forefront of the industry. In a second quarter, our hit articles have contributed to more than 150,000 views, leaving us at the forefront of the industry.

gathered leadership over 100,000 views each due to their trendy content following the latest dynamics of popular industry. With more, all youth joined the topic of wave war, which deeply resonates with users, attracting nearly 300 million views and sparkling animated discussion across the internet.

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We launched a series of innovative sub-media in China, which significantly improved the reach of our common coverage while meeting the needs of a more diverse array of users and customers. For example, we launched the Long China 50 series in May, where we selected and showcased 50 of the new economies' most representative companies, all of which are important players. About their noteworthy accomplishments in our efforts to empower them to become a force in propelling the economies.

We also launched a host of programs as our submedia targeting different workflows, including TR carbon, waste, digital TR and pre-bonus to improve the breadth and depth of our content within the next topic selection and perspective, satisfying the content needs of more diversified user groups. Finally, we recently launched a new channel targeting specialized waste, find, differentiated and innovative companies, keeping them informed of the latest industry trends.

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On a related note, I'd like to highlight that by harnessing our premium talent, we continue to enhance our secondary market product influence among the wider public. Through our various niche columns such as KR Gold and KR Intelligence, we explore unique topics from various range press keys.

Conducting in-depth professional analysis and self-provoking interpretation of the LISI company and capital markets, and providing insight into the company's performance and trading trends. Attracting massive new followers through PR finance. For example, our analyst reports on Lianghua Tumon capsule locking coffee needs fresh and tourism during the May Day holiday, receiving recognition from many users and professionals. Making a solid foundation for our commercialization efforts.

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Meanwhile, our rich media formats, including our short video and live streaming products, are growing more mature. In the second quarter, our short video attracts over 7 million followers cumulatively, including multiple standout videos produced by 66kR, which rank in over 1 million views each on Bilibili. For example, data posts of vocational schools in China attract a total of 2.46 million views

54 million streams and 150,000 likes across Internet platforms. Thanks to our high-quality content, we ranked number 5 on Bilibili's hot radio charts in June . We are also becoming the only organisation on the list that is not affiliated with the Chinese government authorities.

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Regarding live streaming, we actively integrated our existing resources and leveraged the influence of our Vecha video account to create a new IP entitled, KR Planning Live Stream Room with YouthWatch and CEO Tips as its core program. We held a total of 16 live streaming sessions in this quarter, covering topics including enterprises' leading options and how companies can pull through the window in the capital market.

These events activate 66-character video resources that help you to reach your content scenarios and service model.

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As we unseasonally strive to build and refine our content ecosystem, we have achieved consistent growth in our page view, with the number of our total followers exceeding 25 million, an increase of 20% year-over-year, and the robust endorsement of our premium content and brand influence. Meanwhile, we have been exploring our community concepts that will aggregate our users and improve our user engagement while optimizing our closed-loop ecosystem.

In short, our relentless calling and refinement of contents and our development of innovative now to product and service like another quarter of our performance.

Not only did we post solid double digit year over year growth in total revenue and ongoing improvements in growth margin, but we also achieved profitability for the third consecutive quarter. Next, I'd like to share the progress we are made in commercialization across our business partners.

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Our advertising business continues to thrive up to 12% year-over-year in the second quarter. With that going back to resurgence and economic challenges, we achieved year-over-year growth above industry average, a clear indication that Sixty6 PR remains an indispensable partner for advertisers' brand marketing.

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During this quarter, we capitalized on 56 pairs of omni-China presence and multi-dimensional services to continue expanding our customer base, increasing our number of advertisers by 13% year-over-year. We are able to empower customers from both traditional industry and the new economy to creatively innovate and operate in our brand marketing. Among traditional industry customers, many in the all-time mobile and real estate industry continue to promote their brands and content in the 66...

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With respect to our collaborations with the new economy and the small-care industry, we leveraged O-Youth to provide brand philosophy promotions for more customers, especially those starting C and consumers. Following our kickoff of its systematic commercialization in the beginning of this year, O-Youth experienced explosive growth in the second quarter, achieving 270% sequential growth in contract sales. During the second quarter, we collaborated with an area of well-known companies, including InHealth, Vavio.

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During the second quarter, against the backdrop of COVID-19 and complicated macroeconomic happenings, large and small companies across all industries faced various challenges and changes. In May, we initiated the Speaking the Life program to fulfill our social responsibilities of health business, particularly small and media-side enterprises, to maintain their brand share of voice, despite the market downturn. By optimizing our product portfolio and records, we achieved a marked increase in the number of customers while maintaining a greater number of customers.

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Deploying short video as our flagship product alongside our C&C program matrix, such as SuperReview and OUS, has also been used in our commercialization progress. In the second quarter, we will play an order to promote this product in the traditional commercial bank, Bank of China, promoting its up to 66 pairs SuperReview. Short video is flowing in popularity among customers...

It's a useful format for us to effectively attract more advertisers and improve our monetization efficiency.

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Turning to Value-ID Enterprise Service, we were able to maintain our enterprise Value-ID service revenues at a stable level compared to the current period of last year. In terms of offline activities, we proactively transferred certain services offline and online combining scenarios during the quarter, which partially mitigated the overall impact from the pandemic and related control measures.

In addition, our consulting facilities and integration marketing program performed remarkably well during the quarter.

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In June , we held an online Grand Event, Act 66, and...

As a companion of the world of enterprises plus verticals, we invited numerous investors and investor representatives from various industries to share their brilliant success stories and convey the most authentic voice of China's new generation of entry-preneurs. Given the current uncertainty environment, 56 camera operators grant online ceremonies for entry-preneurs to boost the venture capital community's confidence and help forge connections among all parties.

In addition, we also partnered with Quaishou and Douyin to promote the ceremony and scan the great faction among users, achieving total user exposure of 350 million.

Thank you for your attention. We hope you will continue to watch the video. We will continue to watch the video. Please subscribe to our channel.

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In terms of regional business pensions, while foster cities including Beijing and Shanghai were under strict control due to the pandemic, our regional offices in Sichuan, Chongqing and Guangdong were a great form to our business. For instance, our regional offices in Sichuan and Chongqing jointly created a preparatory IP event entitled, The Marvelous Taste of Baxu, a summit which brought together local farmers and over 100 new consumption entities.

Creating projections in progress works R&D 10 of millions as well as potential for making orders.

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Furthermore, through an approach combining industry insights and data analysis, 56KR Research Institutes track the latest developments of popular industries and produce frequent high-quality research reports, achieving content dominance and improving customer loyalty. As present, in addition to a large number of local government clients on the corporate side, 56KR Research Institute is also providing consulting services to a wide range of renowned companies, including...

Moving on to our integrity marketing services. During the quarter, we continue to make positive progress in our content operation agency service. For instance, through our recent partnership with Wotet Securities, 36KRA will provide content support and agency operations for Wotet's John Llewell Fortune App, following our partnership with China Mortuance Bank and Shanghai Pudong Development Bank.

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With respect to subscription services, we implemented innovative upgrades to our subscription service system in this program, which increased our revenue from subscription service by 58% year-over-year. Take our institutional subscription service at your own risk.

36 years, conducting quality capital with the Wuxi Municipal Government for Industry Collaborations and Integration, demonstrating the value of the customized membership surveys we provided for our institutional clients. Furthermore, despite the postponement of starting forces into our individual subscriptions due to the pandemic, we made breakthrough progress in multiple subscription products such as the business plan building camp and the funding.

See you next week.

Q2. Q3. Q4. Q5. Q6. Q7. Q8. Q11. Q11. Q12. Q13. Q14. Q15. Q16. Q17. Q18. Q19. Q20. Q21. Q22. Q22. Q23. Q24. Q25. Q26. Q27. Q28. Q29. Q30.

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In terms of operating data, our mentally active user rose more than 18 times year-over-year to nearly 900,000, and the number of authentic reviews climbed 17 times to over 32,000, up 56% sequentially. Meanwhile, we optimized the platform's business coordination, function layout, and user experience. And as a result, the number of customers willing to list their information on the platform more than doubled compared

with the beginning of the second quarter. We showcased over 6,600 pieces of mainstream software on the platform, up 84% year-over-year and nearly 20% quarter-over-year. These margin-oriented features were launched in September 2021. A total of over 860 margins have set up presence on our platform, dressing almost 30% quarter-over-quarter.

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Regarding commercialization, the 36kAUR enterprise service review platform reached a strategic collaboration with VolcanoEngine Explorer, focusing on the functions and features of a diversified portfolio of VolcanoEngine's products, including cloud computing, deep data, and staff applications. Meanwhile, we built a product library on our enterprise service review platform for VolcanoEngine, providing price and targeted access to specific customer groups. For more information, visit www.bikin.com

Furthermore, the 36-year Enterprise Service Review Platform will collaborate with Volcano Engine to produce and disseminate various formats of content, such as live broadcasts and in-depth interviews. Taken together, these strategies will cultivate customer awareness as well as shape Volcano Engine's threatlessness and unique positioning in the sales market.

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Despite the challenging external environment, including pandemic research in macroeconomic downturn, we achieved double-digit growth in total revenue and profitability for the third consecutive quarter. Our robust financial results again demonstrated our business model's resilience, as well as massive development potential. We will start defining our business foundation well.

handling the inflection point of company value. Meanwhile, as our second growth engine, our enterprise service review platform has achieved strong growth in all major operating metrics, together with the steady development of its commercialization, expanding our service boundaries and unlocking more business credentials. As a newly coming service group, 36KOR remains committed to its original aspirations and will continue to empower its partners with high quality content.

flying an innovation driven content ecosystem with dedicated and effective services, while hoping to enhance broader business decisions in Chinese enterprises. Moving forward as a companion and enabler of the new economy, 36era will continue to empower more industry participants to achieve high-speed development. Capitalizing on the wave of digital transformation, we are confident that we can create experience level value for more users, customers and investors.

Thank you very much.

Thank you, pal. And hello everyone. Against the backdrop of the pandemic and macroeconomic uncertainties, we achieved solid top-line growth in the second quarter, with a 13% year-over-year increase in total revenues and a third consecutive quarter of profitability, a strong testament to our business' resilience and viability.

Notably, our advertising revenues continued to grow up 12% year-over-year to RMB 57.8 million, outpacing the overall market. In addition, through our multiple efforts to navigate the impact of stringent COVID-19 prevention measures, we were able to maintain our enterprise value-added services revenues at stable levels, while our subscription services revenue recorded remarkable growth of 58% year-over-year.

as we proactively executed certain services through online and virtual scenarios. In addition, as we continually optimized our cost structure and operating efficiency, we further improved our growth profit margin to 62% in the second quarter, up 5 percentage points year-over-year. On the cash position front, we once again generated positive operating cash flow in the second quarter.

Our cash, cash equivalents and short-term advancements increase by over 20 million RMB quarter over quarter and over 40 million RMB year over year respectively.

Looking ahead, we will continue to hone our core capabilities and explore diversified growth avenues to drive monetization. We are also strengthening our long-standing commitment to cultivating a compelling value proposition for more customers, users, and investors.

Now I'd like to walk you through more details of our second quarter 2022 financial results.

Total revenues will be $81.7 million in the second quarter of 2022, an increase of 13% compared to RMB, $72.1 million in the same period of last year. Online advertising services revenue increased by 12% year-over-year to RMB, $57.8 million in the second quarter of 2022.

The increase was primarily attributable to more innovative marketing solutions we provided to our customers, as well as the proactive skills strategies we adopted to navigate the challenging environment during the quarter.

The number of advertising customers increased by 13% year over year, while the appoo remained largely stable during the quarter.

Enterprise Value Added Services revenue were on the 14.3 million in the second quarter of 2022, largely flat compared with the same period of last year. We were able to maintain our Enterprise Value Added Services at a steady level despite the resurgence of pandemic during the quarter. This is mainly because we proactively executed certain services through online and virtual scenarios.

Subscription services ran new to RMB 9.5 million in the second quarter of 2022, compared to RMB 6 million in the same period of last year. The increase was primarily equitable to our continuous efforts to offer high quality subscription products to our subscribers.

Cost of revenues for RMB is 30.8 million in the second quarter of 2022 compared to RMB 30.7 million in the same period of last year. Growth profits increased by 23% year over year to RMB 50.9 million in the second quarter of 2022 compared to RMB 41.4 million in the same period of last year.

Growth profit margin was 62% in the second quarter of 2022, compared to 57% in the same period of last year. The increase was mainly attributable to the economy of skill achieved by our revenue growth, as well as the optimized cost structure driven by more services delivered online during the quarter.

Operating expenses were RMB $64.6 million in the second quarter of 2022, compared to RMB $75.3 million in the same period of last year.

Sales and marketing expenses were RMB 27.4 million in the second quarter of 2022, compared to RMB 33.4 million in the same period of last year. The decrease was primarily attributable to the decrease in payroll related expenses, share based compensation expenses, marketing expenses, and business travel related expenses.

G&A expenses were RMB $23.8 million in the second quarter of 2022, compared to RMB $29.9 in the same period of last year.

The decrease was primarily attributable to the decrease in allowance for credit losses and professional fees, partially upside by the increase in payroll relative expenses.

Research and development expenses were RMB 13.4 million in the second quarter of 2022 compared to RMB 12 million in the same period of last year. The increase was primarily attributable to the increase in payroll relative expenses as we bolstered our research and development capabilities, especially for our 36KR enterprise review platform.

Share-based compensation expenses recognized in cost of revenues, sales and marketing expenses, research and development expenses, as well as G&A expenses totaled RMB $2.6 million in the second quarter of 2022, compared to RMB $3.3 million in the same period from last year.

Other income was RMB 22.7 million in the second quarter of 2022, compared to other expenses of RMB 0.4 million in the same period of last year. This fluctuation was primarily acceptable to investment income arising from self-valued changes of long-term investments and more government grants received in the second quarter of 2022.

Net income was RMB 9 million in the second quarter of 2022 compared to net loss of RMB 34.3 million in the same period of last year. non-GAAP adjusted net income was RMB 11.6 million in the second quarter of 2022 compared to non-GAAP adjusted net loss of RMB 31 million in the same period of last year.

Net income attributable to statistics they are holding ordinary shareholders with RMB 8 million in the second quarter of 2022 compared to net loss of RMB 34.1 million in the second quarter of 2022.

Basic and diluted net income per ADS were both on the 19.5 cents in the second quarter of 2022. Compared to basic and diluted net loss per ADS of R&D 83.4 cents in the same period of last year.

As of June 30, 2022, the company had cash, cash equivalents and short-term advancements of RMB $194.3 million, increased by RMB $23.2 million compared to the previous quarter and by RMB $44.7 million compared to a year ago. The increase was primarily applicable to cash inflow from operating activities.

This concludes our prepared remarks today. We will now open the call for questions. Operators, please go ahead.

Thank you. If you're asking a question, please press star 1 on your Touchdown phone.

If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys.

To withdraw your question, please press star then 2.

And for the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English.

We'll pause momentarily to assemble our roster.

And today's first question comes from Ling Yi with SWS Research. Please go ahead.

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have been scheduled, what are our expectations and arrangements for offline activities in the second half of the year? My third question is, Enterprise Service Review Platform officially announced the One Step Marketing Service Corporation with ByteDance.

Could you give us more color on this cooperation program? Thank you.

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We are currently seeing some improvements in advertising business in the third quarter compared to the same period of last year. Compared with last year, we have been following several efforts to improve the vitality of advertising business this year. First, we have expanded the coverage industries of content this year such as June Carbon, digital transformation, career, and so on. So we will bring new business opportunities in the third quarter and the second half of the year.

Second, after more than one year of free participation, short video and two free columns have attracted more and more advertisers. At the same time, we are further expanding more breath-talking fee and users.

Finally, we will continue to optimize our product portfolio and wait cards, so we can go through the hard times together with our advertising clients and grow our advertising revenue. So our advertising is more of a combination of branding and effects, but therefore, even under economic pressures, advertisers' demand for brand advertising still exists.

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So for offline business in the first half of this year due to the impact of the pandemic, many of our offline events were delayed or transferred to online form, which did have some impact on revenue. However, we confident in the pandemic controlling the second half of the year. We have planned many theme conference in our pipeline. For example, going global forum, super automation forum, new media transform and expiry series.

and the end of year event vice conference. Even if the resurgence of the pandemic has a certain impact on offline events, we still have the capability to prepare online forums. For example, the flagship IP 36 and the 36 series we held in June was a pure online event with great performance in terms of both influence and commercialization. Therefore, we remain cautiously optimistic on the revenue forum.

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So for subscription sources, we have maintained a certain proportion of growth in the institutional subscriptions, mainly because we continue to innovate in the membership system and have more potential collaboration connections between investment institutions and enterprises' customers. In terms of individual subscriptions, many courses were postponed in the fourth half of the year due to the impact of the epidemic. While we're seeing July 36th, KRI Business School has successfully delivered several offline courses.

with relatively high average revenue for users. So we expect a certain increase in the supporter and the second half of the year.

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So now is the second conference regarding the offline events. So we believe that pandemics will be manageable in the second half of the year, and most offline summits will take place as planned. So we will launch a series of events related to our key IPs.

such as the ICPETI series talking to the end users, the end of year brand event-wide conference, going global forum, launch partner summit, light-up enterprise services and many customer industry forums.

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So even if the pandemic resulted in the second half of the year leading to reinforced control measures, as we already have mature capabilities of operating online summaries, we will organize some of them online. On the other hand, our regional offices will expand business to pro health roles. Our regional business expansion helps us reshape many IPs, such as the recognition of the Marblo series spanning our IP activities with regional characteristics.

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So regarding collaboration with Volcano Engine, they will focus on the functions and features of a diversified portfolio of Volcano Engine products, including cloud computing, big data, and staff applications. Meanwhile, we built a product library on our enterprise delivery platform for Volcano Engine, providing precious and targeted access to specific customer groups. Furthermore, to enhance customer awareness and brand influence, we will collaborate with

Volcano Engine to produce and disseminate various forms of content, such as live streaming and in-depth interviews. Volcano Engine has set up its presence on the enterprise service review platform as a war chain, and we are helping them with overall operations on the platform and content production, as well as handling certain sales leads and customer information.

Thank you for watching.

Thank you for your attention.

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Recently we have operated on collaboration with several well-known SaaS suppliers.

And we will provide the list to them going forward, including offering a self-list regarding our plans to expand coverage into more self-providers. We will approach it from...

to perspective both through industrial park and business in larger markets. We will cover more sales products and invite more providers to join our platform to make our platform more complicated.

while accumulating more potential customers through the operation and maintenance of the more challenging features. Second, by enhancing operational efficiency and optimizing the process for customers to leave their information or sales list. We will improve the conversion rate and attract more providers to work with the 36KRR Enterprise Service Review Platform and leveraging our customer bank of Enterprise Service Industries.

We will start with promoting enterprise-based providers to our customers through forums, lab streaming, and consulting, then moving on to in-depth sources such as acquisition of more precious leads. So this is the end of the third question and thank you.

Thank you. Our next question comes from Pei Pei Ku with Industrial Securities. Please go ahead. Wallachian time is now. I learn what I'm early to.

I will translate my question. The first question is about advertisement. We can expect the economy is going to be in the low level for a relatively longer time as expected. Could you give us more color of the growth of advertisement clients in that pool? What we can expect for the coming two quarters? And the second question is about...

My second question is, could management explain more about your plan of growth and monetization in short video platforms? Thank you.

Hi, Fei-Fei. Thank you for your question. Yes, you can see that in Q2 we delivered another very strong quarter of advertising revenue growth and compared to others, I think this is a very remarkable success. The reason being actually if you look at our pool and the number of the advertisers in our earnings release, actually our number of advertisers grew by 13%. And they are actually for the first time in many quarters I think...

declined slightly 1%. That's because as mentioned, as the CEO mentioned in our prepared remarks, that we launched Speaking the Light program which means in Chinese, xiang guang, eu xing ji hua, that means we actually adjusted our product portfolio and the red card in the second quarter, meaning that we actually provide some favorable pricing based on what consumer complaints were, we were able to

for customers, especially SME advertising customers. That's why you can see that by that program we expanded effectively the number of advertisers. That number grows strongly. Well, we can see that our pool remained at a very stable level. It actually only slightly declined by 1%. And if you look at our industry-wise, actually the top industries in our advertisers...

Namely number one, we call it hardcore technologies. And number two, steel Internet services. And number three is enterprise services. And also there is intelligent manufacturing and new consumer businesses. So that's very diversified and especially the hardcore technology sector emerged as a very top ranked advertising industry for us. I think that's partially —

is more and more welcomed by many advertisers. They previously mainly advertise with us with some articles or retried accounts, disclosure. But now they are more and more using short form video and our new columns. We created for example, the OUs, Hold On and Usual, and Super Review, Cholera andwedWhole.

As we mentioned in the prepared remarks, this quarter we entered into advertising cooperation with Intel, and Icon, Guobin, and Kuaishou, and even IT and ZHU, a lot of Internet brands advertised with us. So that's another success. And to give you some ballpark idea of the contribution from short form video, actually if you remember by the end of last year I said the proportion of short form videos was 32.

revenue contribution for advertising dollars is less than 10%. But by the end of the second quarter actually, the contribution from short form video has already rose to around 15%. You can gauge how quickly that short form video has been developing for the company. I hope this answers your question, Tepe. Thank you.

And check your results. And our next question today comes from Jing Ting with CICC. Please go ahead.

I will translate myself. Congratulations on the strong financial performance and the challenging environment. The company has strong content capability. Is there any consideration for improving the monetization capability?

So at present our CN monetization is mainly reflected in our individual subscription business, especially 36 kR business schools.

So the 36th Carabinian School has set up a number of products such as the recently we completed

business plan building camp, and finance and acceleration camp, which have been completed recently. So those courses are mainly high value offline courses, and the main target customer is the founders of the start-up. On the other hand, we also have a low cost online training courses like KR class which focus on course content such as skill improvement. So moving forward, we will provide the course content in the form of open class.

Thank you and showing no further questions I'd like to turn the conference back over to the company for closing remarks.

Thank you once again for joining us today. If you have further questions, please feel free to contact 36-karat semester relations for the contact information provided on our website.

Thank you. This concludes this conference call. You may now disconnect your lines. Thank you.

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