Hello, ladies and gentlemen, thank you for standing by, and welcome to 36Kr Holdings Inc. First Quarter 2022 Earnings Conference Call. 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 36 Kr Holdings first 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 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 Chief Financial Officer, Ms. Lin Wei. Mr. Feng will start the call by providing an overview of company and the performance highlights of the quarter in Chinese, followed by an English interpretation. Ms. Wei will then provide details on the company's financial results before opening the call for your questions. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in the company's prospectus and other public filings as filed with U.S. SEC. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please note that 36Kr earnings press release and this conference call include a discussion of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures. 36Kr's earning press release contains a reconciliation of the 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. Dagang Feng. Feng, please go ahead.

Thank you. Hello, everyone. Thank you for joining our first quarter 2022 earnings conference call. Despite the recent resurgence of the COVID-19 pandemic and ongoing macro headwinds, we achieved solid top line performance in the first quarter with double-digit revenue growth and a record high quarterly net income since our IPO. Notably, our advertising business and the enterprise value-added services both reported robust results and year-over-year growth. As a prominent brand and a pioneering platform dedicated to serving New Economy participants in China, we remain committed to establishing a high-quality service system to build a flywheel of growth with diversified business offerings. I'd like to begin with an overview of our content initiatives. In the first quarter, we continued to upgrade our content offerings and create new programs and formats to expand our service boundaries. For example, we launched several official content accounts during the first quarter: KR Carbon, and for more service coverage from the active of China's new carbon policy, investment institutions and creative-development audiences. respectively. These programs quickly engage users and had all enjoyed high popularity thus far. Our content team also explored new content formats and strengthened our collaboration with WeChat video accounts and live streaming projects. The live streaming audiences attracted by our new program . Going forward, we will roll out additional live streaming series focused on hot niche markets. This new video and live streaming projects fully mobilize 36Kr's content creation and editing capabilities as well as industry resources to deliver newer high-quality content, industry updates and expert opinions to our users. We are also meeting the content needs of more diversified user groups, which substantially broaden our user base. Furthermore, for our public active market content side, our Warren Buffet Shareholder Meeting series that we jointly created with Tiger Securities, also gained…

Thank you, Feng, and hello, everyone. Our first quarter results kicked off the year with a solid start despite multiple headwinds, including COVID-19 resurgences and macroeconomic challenges. We achieved growth of 14% year-over-year in our total revenues and a record high quarterly net income since our IPO of RMB33 million, marking our second consecutive quarter of profitability. Notably, not only did our advertising business maintained its strong growth trajectory with a year-over-year increase of 13%, our enterprise value-added services also recorded remarkable growth of 35% year-over-year. In addition, thanks to our disciplined cost control measures, strengthened efforts in accounts receivable collections, as well as our strategic refocus on core business and disposal of certain lingering assets, our profitability improved significantly during the quarter. Looking ahead, we will continue to solidify our industry presence in China's new economy space, cultivating our diverse ecosystem of business communities, along with our user base to empower more enterprises while also expanding our monetization approaches to deliver sustainable growth. Now I'd like to walk you through more details of our first quarter 2022 financial results. Total revenues were RMB49.6 million in the first quarter of 2022, an increase of 14% compared to RMB43.5 million in the same period of last year. Online advertising services revenue increased 13% year-over-year to RMB37.6 million in the first quarter of 2022. The increase was primarily attributable to more innovative marketing solutions we provided to our customers. The number of advertising customers and the average revenue per advertising customer both increased in the first quarter of 2022. Enterprise value-added services revenue increased 35% to RMB9.3 million in the first quarter of 2022 compared to RMB6.9 million in the same period of last year. Subscription services revenue were RMB2.7 million in the first quarter of 2022 compared to RMB3.4 million in…

Thank you. And our first question coming from the line of Jing Chen from CICC. Your line is open.

Congratulations on the first quarter financial performance. I have two questions. The first is how is the impact of COVID-19 on the company's business in the second quarter? Are there any corresponding adjustments to mitigate the negative impact? And my second question is cost and expense control has become a key trend this year and the company's net profit is also increasing. Can you provide some guidance in terms of cost reduction in the year and how should we look at tax to the profitability of the company? Thank you.

We have seen this change since March in this year. And from April when the pandemic started in Shanghai in May when Beijing also implemented three control measures, COVID-19 has impacted us in both Q1 and second quarter -- first quarter and second quarter. The delivery of our enterprise value added services, especially off-line activities was intended, resulting in project suspensions or delays. It also affected our advertising business and the pandemic reality control measures posed challenges to the macro-economy, reducing customer willingness particularly advertisement. We have maintained a positive towards addressing these challenges, which is the off-line deliveries as well we provide the other options such as online solutions like live streaming and short video. In addition for our advertisement business, we launched work winter initiative to provide favorable price for our customer vis-à-vis to help them over during the pandemic period. As the lockdowns in Shanghai, Beijing gradually lifted, we believe our business will fairly return to normal. We will take steps to ensure smooth business operation and delivery. We have reached an positive expectations for the second half of the year. For the advertising business, we hope to continue the award momentum and make breakthroughs in the form of advertising ARPU and the number of customers. As an important component of enterprise value-added services, we hope our enterprise service review platform to make a big breakthrough in its commercialization this year. We published a subscription products such as business school will also be gradually launched in the second half of the year, injecting your vitality into the company's business. Since the beginning of 2022, there has been a stream of news about employee optimizations in other companies. So far, 66Kr does not have any plans to cut cycles. Our cost reductions and efficiency enhancements focus more on…

Our next question coming from the line of Peipei Qiu from Industrial Securities. Your line is open.

So I will translate my question. So given the difficult macroeconomic environment, how do you consider the commercialization pace of your enterprise service review business? Thank you.

Thank you, Peipei, so under the so we think the provider we all have more difficulty in acquiring the customer from online. So 36Kr enterprise service review platform will benefit from this situation. So our KPI for the enterprise service review platform to focus on developing the platform and refining our products primarily covering operating metrics such as the number of authentic reviews MAUs as well as product and chance on the platform. I'd like to share with you some operating data. So at the end of the March 2022, DAUs on our enterprise service review platform rose 25x year-over-year to 900,000 in the number of reviews surged almost 50x to over 21,000. Up to now our enterprise service review platform has showcased nearly 6,000 pieces of mainstream service on the platform. So the number of leads on our enterprise services review platform has increased dramatically on interface. So with steady conversion rate of over 30%, these metrics will continue to improve. So last quarter, we said we will start our commercialization this quarter. And our enterprise service review platform commercialization, we will focus on generating sales lease, product promotion and research reports. So this year, we launched our commercialization pallets featuring simultaneously brand marketing and lease-related products. And we already see some results. We have reached the agreement with several enterprises including of signing contracts with Kingdee, HiteVision, EC SCRM and Basin. We will continue to provide them with service regarding customer acquisition, brand management and marketing services. So we believe as we refine our product and for the commercialization mostly, the enterprise service review platform role includes 36Kr's overall fundamentals will be more significant and it will become the second growth of the company and we want that to become as early as possible and materially change the market perception of 36Kr valuation logic, so maybe in the future quarters, the portion from 36Kr enterprise service review platform revenue will be increased significantly.

Okay, thank you.

Our next question coming from the line of Lingyi Zhao with SWS Research. Your line is open.

And my first question is how is the recovery efforts in each business progressing with the gradual easing of COVID in Shanghai and around the country, which business segment can we could lost sales in the following six months, just a firm full-year breakeven goal being revised and my second question is with the current downward pressure on the economy, what steps will the firm take to maintain the resilience of the advertising business segments? And my third question is what is the progress of the Enterprise Service Review Platform commercialization and how does the company expand the user base and cultivate the consumer mindset, that's my question. Thank you.

Thank you, Lingyi for your questions. This is Lin. I will answer your first question regarding the pandemic impact on the business and outlook for this year's profitability. And Mr. Feng will answer the other two questions for you. Yes, just as Mr. Feng just mentioned, the COVID-19 and the macro challenges did have some impact on our later Q1 and first half of Q2 business, especially on some of our enterprise value-added services, there are some off-line events involved where we could see some impact. However, we have taken several measures to mitigate that impact. For example, we hold online plus off-line forums and we utilize the online live streaming forum as well as the short video format to host the forums and the conference for our customers. That's for our enterprise value-added services. Actually, that revenue segment grew 35% year-over-year in Q1, even outgrow the total revenue, that's a very significant growth during Q1. And regarding the advertising business, obviously, that's a major component of our total revenue. That again also increased 13% year-over-year and if you look at the industry average, if you look at those companies who already reported their Q1 results, and if you look into their online advertising, I would say is it's easy to say that most of them have booked an active year-on-year growth. Well, we have a double-digit year-on-year growth. And I think that's thanks to our 36Kr's content strength and brand image that the SMEs as well as big companies, the Fortune 500 companies all comes to us to pursue brand image as well as performance-based ads. With that said, our advertising business is less reliant on the macro economy and more resilient to the cycle. So that's why we think we have a very good result in Q1 and looking into the Q2 and the rest of the year, first of all with the pandemic, the control is lived. Our off-line events, our Enterprise value-added services will come back. And with the macro economy gradually recover, the advertising spending will also come back and we have a lot of initiatives -- for example, the adjustment to the rate card and some more innovative marketing solutions, especially our short-form video is picking up really, really, very quickly. So that gives us confidence that in the second half or in the remaining of the year, we can catch up what's left in the first half is actually in Q2. So we are still, as Mr. Feng mentioned, we are still very cautiously optimistic about the full-year, and we would maintain our forecast for the full-year basis profitability. Hope that answers the question.

So for the resilience of the online advertising services, we still maintain our influential and maintain the quality is the most important thing for 36Kr and we will continue to reach content offerings and consistently provide high quality content. So also, we will continue to diversify our distribution channels so that to strengthen the influence of 36Kr. So next product delivery, quality and advertising effects, we will continue to optimize our products and provide customer with more options from tax images to short form video and less premium. So this strategy will strengthen customer stickiness to 36Kr. So for this pirate measure, we launched a warm winter initiative to provide variable price for customer in difficulty to help tide them over during the pandemic period. So when the COVID-19 is under control, we will adjust our pricing strategies flexible according to the demand. So we think the content ability is a montage for 36Kr enterprise service review platform. And for user to expansion, we will remain focused on growing our platform influence of building a set of industry evaluation standards and create 18 of our own magic contracts for China's enterprise service industry. So seeking consistent breakthroughs in the areas of where product leverage, user review leverages, key person databases and knowledge graph leverage to build 36Kr Enterprise Service Review Platform from our China's largest most authorities and most convenient enterprise service software selection platform. So for the commercialization process, as we said in last quarter, we will start the commercialization this quarter, but we still will improve our operating data and efficiencies. So for the commercialization part, we will feel positive, and we have already covered with Tencent, Kingdee and some famous brands. So in the future, we think this will become the second growth engine for the company, and we'll have much more potential in -- regarding to the commercialization. Thank you.

And our next question coming from the line of with BH Capital. Your line is open.

Hello Don.

Congratulations on the strong results. Thanks very much for taking my question. My question is regarding advertising business. As mentioned, along with the impact on the ongoing COVID-19 in China in the first and second quarter and weak macro environment recently. We still achieved a strong growth year-over-year in advertising business that outpaces ad industry. So can management share what the driver for this performance. Thank you.

Thank you, Don for your questions. This is Lin. I will answer your question. Yes, our advertising performed quite well in Q1. I think it's mostly driven by both our -- the number of advertising customers as well as the ARPU. Our number of advertising customers increased 2% compared to the same period of last year, while our ARPU increased 11% compared to the same period of last year. And talking about the advertising ARPU, I think there are several factors. First of all, at every beginning of the year, we will address our red card based on the supply and demand, because our resources, our advertising inventory is really very highly sought after. So we adjusted upwards our red card. That's number one. And number two is we have launched several initiatives, including our short form video content as well as a lot of content columns that are specifically targeting free end users. For example, the whole use in Chinese whole long and some Kr test and those columns are really expanding the customer base as well as increasing the contractors will translate into the higher ARPU for us. And that's number one, from the technical point. The number wise, how we calculate the increase of our advertising revenue. And secondly, in terms of collative analysis, our advertising is mostly brand advertising. Thus, it's less vulnerable to economic cycles, because either in uptimes and downtimes, companies always need to build their brand image. That's why our brand advertising is less reliant on macroeconomy and more resilient to the cycles. That's number two. And I think giving that side, our advertising is a major component. But remember that the 36Kr Enterprise Review Platform is picking up as well, that commercialization of that product will be much more performance-based, which is a very good and perfect supplemental flavor to add into our overall product offerings because 36Kr enterprise review platform, that commercialization will be based on sales leads that's mostly performance-based as well as some research reports and some marketing resources. That's a very good combination in the future. So I think that's a good balance between brand and a performance-based business. That's very good for the future growth for the company. Hope this answers your question Don.

Thank you.

Thank you. As there are no further questions, I would now like to turn the call back over to the company for closing remarks.

Well, thank you once again for joining us today. If you have further questions, please feel free to contact 36Kr's Investor Relations through the contact information provided on our website -- in our website. Thank you.

Ladies and gentlemen, this concludes the conference call. Thank you for your participation. You may now disconnect.