Hello, ladies and gentlemen, thank you for standing by for 36Kr Holdings Inc.'s Second Quarter 2020 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 conference over to your host, Yolanda Liu, IR Manager of the company. Please go ahead, Yolanda.

Thank you. Hello, everyone, and welcome to 36Kr Holdings' second quarter 2020 earnings conference call. The company's financial and operational results were released via Newswire services earlier today and have been made available online. You can also view the earnings press release by visiting the IR section of our website at ir.36kr.com. Participants on today's call will include our Co-Chairman and CEO, Mr. Dagang Feng; and our CFO, Ms. Jihong Liang. Mr. Feng will start the call by providing an overview of the company and performance highlights of the quarter in Chinese, followed by English interpretation. Ms. Liang will then provide details on the company's financial results before opening the call for your questions. Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the company's prospectus and other public filings as filed with US SEC. The company does not assume any obligation to update any forward-looking statements, except as required under the applicable law. Please note that 36Kr's earnings press release and this conference call include discussions of the unaudited GAAP financial measures as well as unaudited non-GAAP financial measures. 36Kr's press release contains a reconciliation of unaudited non-GAAP measures to the unaudited GAAP measures. And please note that all amount numbers are in RMB. I will now turn the call over to our Co-Chairman and CEO, Mr. Feng. Please go ahead.

[Foreign Language]. Thank you. And hello, everyone. Thank you for joining us for the second quarter 2020 earnings conference call. [Foreign Language] In the second quarter of 2020, although the COVID-19 pandemic spread has been gradually controlled in China, we along our clients were facing significant uncertainties as containment measures and policies related to these measures were not fully eased. Many of our clients have not resumed their marketing plans and promotional activities that their demand for our services was still delayed in the second quarter. Under this circumstance, we continue to proactively rely our operations to the evolving market dynamics, grasping new opportunities from clients' emerging and ever-changing needs. [Foreign Language] Despite the challenges, we are encouraged to have kept making positive strides in the content front. Our average monthly pageviews reached 499.2 million for the 12-month period ended June 30, 2020, demonstrating a strong year-over-year growth of 43.6%. Notably, our live streaming programs and newly produced short form video content have gained robust traction during the quarter. While we have not included the viewership in our monthly page views yet, our new video-based content format has garnered a very positive user reception. During the quarter, for example, the average user time spent on our live streaming and short form video content has performed quite well, especially considering the serious nature of our business related content offering. We are pivoting our efforts to seize vast opportunities in the rising popularity of these content categories, especially in the next few years and fortifying our leading position as a permanent new economy focused content platform. [Foreign Language] Turning to our revenue streams, as I just mentioned, due to the enduring impact of the COVID-19, many of our clients' marketing plans and demand for our service offerings have not been restored. This…

Thank you, Mr. Feng. And hello, everyone. As Mr. Feng mentioned, the enduring impact from this COVID-19 pandemic has presented us with a challenging second quarter of 2020. Our soft year-over-year top line performance for the quarter reflects relatively lower demand as clients postponed their marketing events and promotional activity, while waiting for pandemic containment measures to be further eased. Nevertheless, revenue from our online advertising services and subscription services delivered substantial growth, which indicate gradual event recovery. We believe that future measures and underserved demand for enterprise value-added services that we will continue to cultivate in the new normal. In regard to our internal operations, we deployed more stringent cash management policies, such as requiring prepayments for certain projects and the swift connection of the quality clients to collaborate with. These measures are able to help us maintain healthy cash flows and manageable account receivables. We are pleased that our efforts paid off well as we maintained a solid balance sheet position and, for the first time, achieved positive operating cash flow in the second quarter of 2020. Moreover, we have made prudent investments in technologies and new devices to prepare for a changing market environment, which we believe is critical for our future growth. As a unique enabler for new economy participants, we will continue to explore, identifying and understand new demand and meet with our clients across enterprises, governments, institutional investors and individuals, while leveraging our brand influence, business connections and extensive service experience coupled with new methods and technology. We are relentlessly providing effective solutions to support our clients to recover growth and thrive. And now, I'd like to walk you through more details on our second quarter of 2020 financial results. Total revenues were RMB 76.7 million in the second quarter of 2020 compared to…

[Operator Instructions]. And the first one question comes from Kenneth Fong with Credit Suisse.

[Foreign Language] Thank you, management, for taking my question. I have a question on the overall advertising demand. So, can you mind share with us by verticals in the second quarter, which are the vertical which is particularly strong and which one are particularly weak? And what is our overall demand outlook for the third quarter and then longer term into the second half of the year? Thank you.

Thank you so much, Kenneth. I think in the second quarter, due to the COVID-19, our advertising revenue decreased actually year over year by 49%, while the number of advertising clients had an increase during the quarter. By leveraging our brands and service strength, we consistently promote our services, among especially TMT companies. And anyway, from the containment of the pandemic further in China and the subsequent gradually economy recover in the first half, the number of the TMT companies purchasing our advertising services increased by 13.7% year-over-year. Especially those companies experienced a booming demand during the lockup period, such as online business, education, entertainment, et cetera. On the other note, we observed that, in general, TMT companies have been cutting their budgets. However, we had more collaboration with the top TMT players. Then let's look at demand recovery to the relatively traditional industry corporate clients. The demand recovery tends to be slower, obviously. It's mainly due to the global threat of the pandemic. These factors generally postponed the collaboration with these clients. But for the local companies in traditional industries, we actively extended our collaboration with the companies that suffered less by the pandemic, while on the other hand, at the same time, deepening our partnership with retention clients. And if we just look forward, in general, amid the pandemic, we witnessed the remarkable resilience for the TMT new economy companies, such as the industry sectors we mentioned before. Meanwhile, the traditional companies that suffered more from the pandemic actually are seeking the transformation through innovation. So, for us, we have been actively collaborating with companies that experience booming demand during the pandemic to monetize their growing demand for the marketing and promotion. We also serve more government clients actually. As we discussed in the earlier, we expect demand from these two types of clients will continue after the pandemic contains. In addition, with gradually recover of the economy and all kinds of favorable policy support, we expect recovered demand from clients in the automotive and the financial industries as well as offline consumption sectors will gradually come back. However, it seems the global overall pandemic situation is still evolving. Demand for the multinational corporate clients have not been restored yet. But we have gradually restarted discussion on the collaboration with these kind of clients. So, that's what we look into the third quarter and the second half year of 2020. Thank you.

And the next question comes from Vincent Yu with Needham & Company.

I have two questions. One is about the live streaming initiative. Can we share any updates with regards to live streaming initiative 36Kr rolled out? The second question is about gross margin. How shall we think about the gross margin for the remaining balance of the year? [Foreign Language]

[Foreign Language] Let's just pause here and I will do a translation for the first question about our live streaming programs and updates. And as we can see in the second quarter, we made the progress in these new content formats. We made investments in further constructing our own self-operated short video and live streaming platform. And at the same time, we're actively upgrading our official accounts on other top third-party platforms. And in July, our self-operated platforms, altogether we delivered 236 live stream programs, including virtual summits, roadshows, knowledge sharing panels, et cetera, with an average of 12 programs delivered on each weekday. And the total viewership in July also increased compared with the June data. And average daily time spent per user on our live streaming and short form video content showcased their good performance, especially considering the serious nature actually of our commercial-related content. And meanwhile, we are looking for the strategic collaboration with the top TMT giants in terms of live streaming and short form video, so as to further to improve our content influence across the internet to capture the opportunities for the massive user growth. [Foreign Language] And our GP margin, thanks to our disciplined cost control, the GP margin of our advertising services, enterprise value-added services, and subscription have all reported improvements for this quarter. Now that the pandemic has been gradually put under control in China and the containment measures further east, we are optimistic in the further GP margin improvement in the second half of 2020. But since the pandemic situation is still afloat globally, we are also closely monitoring the development and stay agile for our business strategies.

And the next question comes from [indiscernible] with CICC.

[Foreign Language] Thank you, management, for taking my question. I have two questions. The first one is that with the control of the COVID-19 pandemic, how is the recovery of the [indiscernible] of the enterprise customers in different structures and industries in the second quarter? And the second one is that, considering the possible structural changes in customer caused by COVID-19 pandemic, what is your strategy for future development of your company? Thank you.

[Foreign Language] Okay, I'll just do the translation for the first part. With respect to our enterprise value-added services, the number of our enterprise VAS clients from traditional industries increased year-over-year in this quarter because of the COVID-19 impact and the relatively evolving demand, we focus on the expanding client base in the consumer industry to help them enhance the exposure. Although the number of our enterprise value-added services clients from the TMT sector decreased year-over-year, the corresponding average customer price increased even further, demonstrating the attractiveness of our services to the top enterprises. Besides the clients from the online entertainment sector, who are benefited from the pandemic containment measures actually, we also think that growing demand for our enterprise services from clients in the industry, like mobile device industry. In addition, our enterprise value-added services is gaining the traction among the local governments. The growing demand not only reflects our brand influence are enhancing as we expanded our services offerings geographically, but also demonstrate the initial positive results of our swift and active strategy adjustment to our operations. And during this very challenging time brought about by the pandemic, we provided integrated online plus offline comprehensive solutions tailored to these government clients' needs. We expect continued demand from the government clients after the pandemic is contained. With a gradually recover of the overall economy under the favorable policies, we also expect demand to resume from automobile and real estate clients for our integrated online and offline solutions. [Foreign Language] As we just discussed earlier on our last earnings conference call, we believe COVID-19 will have a short-term impact on our advertising business, while bringing a structure influence on the enterprise value-added services. And we have just shared our projections regarding clients' demand recovery for the second half of the 2020, to Kenneth's question. So, for the second half of this year, what we will do, we will continue to leverage our service strength and resources to further expand our services to clients in wider range of industries. And, on the other hand, we will further solidify the data and technology capabilities for our enterprise services.

And the next question comes from Brian Lee with AMTD.

[Foreign Language] We know your business is closely related to the primary market and US Senate just passed the Holding Foreign Companies Accountable Act. What's the impact on the primary market in China and also the implication on company's business? Thanks.

[Foreign Language] This macro level background\ and environment, actually, we'd like to share some views to this quite macro level situation. First of all, we think although this act have the globally impact, but actually for the primary market, for Chinese economy, we can see the primary markets do stay very active and healthy, which is quite benefit to our own business and all our different kind of business streams. And for us, as China's new economy entrance and the serving platform, we always keep a close eye on the developments regarding this bill. And when the Senate in May, they passed this act, we immediately organized a related live stream program on our own platform, inviting experts from a well-known US legal firm to share the background information and to share the analysis of the potential results of this bill. Despite the bill, we can see the June – still in June a lot of Chinese companies successfully went public in the US market. So, overall, we will keep a close eye on this and we will stay very positive on this issue.

And the next question comes from Jay Dong with TH Capital.

[Foreign Language] Thank you for taking my question. I have a question here. The first one is about the [indiscernible]. And next one is regarding the [indiscernible] and how to continue to create more high quality content in the future? Thank you.

[Foreign Language] As everybody knows, we started our business from the content providing, so we always consider the content capability as the basis of all kinds of business streams. We have been consistently enhancing our content capability and fortifying our leading position as a content provider. You can see the proportion embrace of UGC actually in the past few years and also in the future, but this only reflects part of our content development. As the short form video and also the live stream programs are gaining the robust traction among our audience, our users, since 2020 we have putting our efforts to seize more opportunities in the rising popularity of these new medium forms in our content production. We not only launched short video and live streaming programs on our own platform, but also very actively operate our official account with high quality content on other key and very popular third-party platform. And we will continue to do this. So, I think this is the answer and the effort we will put in our content. Thank you, Jay.

And as there are no further questions now, I'd like to return the call to the company for any closing comment.

Thank you so much, everyone. And earlier today, we have released our earnings on our IR website, so feel free to contact us via our IR website and you can also contact with our IR firm, The Piacente Group investor relations. Thank you so much for your time today. Have a good night. Bye.

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