Hello, ladies and gentlemen. Thank you for standing by for the 36Kr Holdings Inc. Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. At this time, all participants are in a 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, John Anding IR Representative of the company. Please go ahead John.

Thank you very much. Hello, everyone. And welcome to 36Kr Holdings fourth quarter and fiscal year 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 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 these and other risks and uncertainties is included in the company's prospectus and other public filings as filed with the 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's earnings press release and this conference call include discussions 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 mention 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 fourth quarter and fiscal year 2022 earnings conference call. 2022 was a year full of challenges, against the backdrop of uncertainties brought above the COVID-19 resurgence and macro headwinds, we delivered solid performance, our full year revenue reached RMB322 million, growing 2% year-over-year, with the profit of RMB22.64 million. Making our first full year profit since our listing, thanks to our fine operations and the professional expertise we have acquired over our years of dedication to the new economic sector. Driven by our dual engine strategy filled by content and products, we have developed a diversified business model and comprehensive content ecosystem focusing on business, technology, and lifestyle, we’ll continue innovation across our content, product and services. Next, I'd like to share more detailed progress update on each of our segment in 2022. I will begin with the enrichment of our financial performance. We continue to elevate our content generation capabilities through user diverse needs with high content planning abroad variety of public. In 2022, we launched a series of sub vertical media, including Digital Kr, Kr Carbon, Hardcore Kr and Waves, providing this insight across popular fields in the investment circles such as digitalization, dual carbon, and ESG, hardcore technology and specialized innovative companies. We also created user centric content verticals based on topics related to the younger generation's lifestyles, including Oh! Youth, Super Review and Career Bonus achieving differentiated user coverage. Meanwhile, we produce a varied late of content programs including “CEO Tips” still proceeding 2033, long China 50, and Super factory facilitating broad dissemination of new economic content. These efforts enabled us to keep producing a considerable number of blockbuster articles throughout the year with nearly 700 articles racking up page views exceeding 100,000. The launch of this…

Thank you, . Now I'd like to walk you through more details of our fourth quarter and fiscal year 2022 financial results. Total revenues for the fourth quarter of 2022, were RMB96.6 million, a sequential increase of 2%. Total revenues for the full year of 2022 were RMB322.5 million, a year-over-year increase of 2% compared to the full year of 2021. Our online advertising services revenue were RMB62.2 million in the fourth quarter of 2022 compared to RMB76.4 million in the same period of last year. The decrease was primarily equitable to relatively weak advertising spending caused by the negative impact of COVID-19 control measures and infections across China during the quarter. For the full year of 2022, our online advertising services grew by 3% year-over-year to RMB221.6 million. The increase was primarily attributable to more innovative marketing solutions we provided to our customers, as well as proactive sales strategies we adopted to navigate challenging environment during the year. Enterprise value-added services revenue were RMB25.4 million in the fourth quarter of 2022, compared to RMB30.3 million in the same period of 2021. For the full year of 2022, our enterprise value-added services were RMB72.6 million compared to RMB74 million in the previous year. The 2% decrease was primarily because some of our offline events were delayed or down-scaled due to disruptions from COVID-19. Subscription services revenue RMB8.9 million in the fourth quarter of 2022 compared to RMB9.6 million in the same period of 2021. The decrease was primarily attributable to the negative impact of COVID-19. For the full year of 2022, our subscription services revenue were RMB28.2 million, representing an increase of 1%, compared to RMB28 million in the same period -- in the previous year. The increase was primarily attributable to our continuous efforts to offer high-quality subscription products…

The first question today comes from Jing Chen with CICC. Please go ahead.

I will translate myself. As this improvements of the environment, what other companies priorities and plans for this year? Thank you.

As we mentioned many times before, we will continue to enrich our content ecosystem and tap into more vertical industries such as artificial intelligence, new electric vehicles, and industry capital. Also our product front, apart from our existing advertising and enterprise value added services, we will also explore several new product initiatives. For example, 36Kr Enterprise Service Review platform, as our second growth engine, we will refine our platform and product, and continue to pursue commercialization. 36Kr Business School will enrich course designs to empower more small and medium sized companies. This training product has been proven by our peers to be a market with RMB100 millions of market size. Also, 36Kr Research Institute will enhance its professionalism and industrial coverage, providing more in-depth reports to more enterprises. And of course, we will clearly investing in AIGC technology, we will continue to advance the application of the AIGC technology in production and aggregation of high quality content to further improve our content production efficiency, and through AIGC personalized dialogue functions, both strengths our user interactions and stickiness.

The next question from Lingyi Zhao with SWS Research. Please go ahead.

The advertising industry is the full size of economy. What changes have taken place in the roadmaps of advertisers to invest recently? Can you tell us about the degree of economy recovery and prospects based on the advertising business? Thank you.

Based on the Q1 2023's current situation, our ad business is already recovering steadily. However, it will take some time for advertising to return to a relatively high level, while market confidence continued to recover. And we have witnessed that, lot of our clients have regained their confidence in ad placement, but still they still have a limited budget for their advertising business. So this is why I feel, it takes time to us to recover to a relatively high level. Based on market feedback and actual business performance so far, the entire advertising industry has been recovering at a steady pace, the initiatives in some public industries such as automobile and e-commerce have been very active in brand promotions and marketing activities, with relatively stable and placement budgets. In Q1 2023, we made further progress in both commercialization channels and industry coverage. For instance, we completed JD.com's first commercialization order on and achieved our first breakthrough in luxury goods sector. As such, we expect a fair level of growth generally advertising in both Q1 and the full year 2023. Looking ahead, at the full year 2023, we remain optimistic as business activities and people's daily lives contract to normal in the post-pandemic era, but we will see a significant rebound in our ad business overall.

. The next question comes from Rui Yin with Securities. Please go ahead.

I'll translate myself. Hi management. I have two questions. The first question is about the enterprise value added business segment. So the future growth come more from the increased in the number of paying companies or the increase in the level of corporate payments. What new actions will the company take for enterprise added service segments this year? And my second question is about margin ratio. How should we expect the company expense ratio and profit margin this year? Thank you.

Actually, during the past years, our both of our number of clients and our pool has increased the significantly and we believe it will grow this year as well. On our pool side, we will provide diversified underpriced value-added services, including offline events, consulting services, and integrated agency operations services to both growth in this segment. On the number of clients, we will tap into broader vertical sector and penetrate to lower tier markets like in 12 or more regional offices. In 2023, we will also leverage more products to develop our enterprise value added services. In addition to 36Kr Enterprise Review platform, we also launched 36Kr Venture Capital platform as well as, 36Kr Research Institute to further grow our business.

I think this is your first time to join the earnings call of 36Kr. We really give you a warmest welcome. And this is Lin, I will answer your second question regarding the expense ratio and the margin question. I think, for the full year of 2022, you can see from our result, that our gross margin is at relatively stable level of 57%. I think, in 2023, we will be able to maintain that level or even have more further gross margin expansion, because as our CEO just mentioned, given the AIGC and the more AI related technology application, we will be able to have higher efficiency of operation and have some cost saving effect in our business. And secondly, I think I will highlight that, I think for ‘23, the margin expansion as well as operating margin and gross margin will come more from the revenue rebound or revenue growth. Although in 2022, we are proud that we have been growing our revenue given the very challenging environment in 2022, but we achieved a positive 2% growth, but that ratio will be much higher in ’23, I think. And also we mentioned several times that our cost structure and expense structure has been very stable. Given that, it will not be a linear growth pattern as the revenue growth, that means we will have a lot of leverage. So give you some quantity implication. Now, if we say that in ‘23, our gross margin can be stabilize at around 60% level, then our expense OpEx ratio will be, I mean, let's say around 50%, then we'll give you an operating margin of around 10%. I think, that will even have some upside if our top line or revenue can grow at a much higher growth rate than in 2022. Hope that answers the question, Rui.

What is the business connection between the company and AIGC or GPT large model? And what is the plan for AI? Thank you.

Actually, content production, quality and efficiency have always been our priority, and we have been adopting AIGC for quite a while. Content execution and classification are key component of AIGC technology. By applying AIGC 36Kr can classify articles in various fields using labeling, that's optimizing the accuracy of user research. In addition, for some in-depth articles, AIGC will summarize the content of the articles to facilitate users efficient understanding while also improving the user experience. On the product launch, using 36Kr and press review platform as an example, AIGC technology will assist the users to better obtain detailed information such as press and user evaluation of products more efficiently, so as to understand products more accurately and make better purchasing decisions. Also, AIGC helps us provide better customer services through more effective user interaction and communications. According to our initial analysis, AIGC has helped improve our user interaction by 90% and improved our current production efficiency by three times. Recently, we became one of the first batch of our companies to join Baidu’s ChatGPTs their ERNIE Bot ecosystem. We have achieved the code for internal testing and are launching the first run of our internal test, with no doubt that 36Kr will be the first mover in applying AIGC technology in our content production and global expansion. Thanks for your questions.

. And as there are no further questions, I'd like to turn the call back over to the company for closing remarks.

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

Thank you and see you next time.

Thank you, operator. Thank you, everyone.

This does conclude our conference for today. Thank you for participating. You may now disconnect.