Participants

Xin Wang; Investor Relations Manager; 36Kr Holdings Inc

Dagang Feng; Co-Chairman of the Board, Chief Executive Officer; 36Kr Holdings Inc

Xiang Li; Chief Financial Officer; 36Kr Holdings Inc

Mengzhu Chen; Analyst; Sealand Securities

Lingyi Zhao; Analyst; SWS Research

Presentation

Operator

Hello, ladies and gentlemen, thank you for standing by for 36Kr Holdings Inc's 2024 first half year earnings conference call. (Operator Instructions) Today's conference call is being recorded. I will now turn the call over to your host, Xin Wang, IR manager of the company. Please go ahead, Xin.

Xin Wang

Thank you very much. Hello, everyone, and welcome to 36Kr Holdings first half 2024 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, Mr. Xiang Li. Mr. Feng will start the call by providing an overview of the company and the performance highlights of the first half in Chinese, followed by an English interpretation. Mr. Li 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 this and other risks and uncertainties is included in the company's prospectus and other public filings as filed with the US 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 trust press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures in the (technical difficulty) 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. (technical difficulty) please go ahead.

Dagang Feng

(spoken in foreign language)

Xin Wang

Thank you. Hello, everyone. Thank you for joining our first half 2024 earnings conference call.

Dagang Feng

(spoken in foreign language)

Xin Wang

Despite persistent market challenges in the first half of 2024, we delivered a solid operational performance. Our online advertising services ARPU rose by 22% year over year, while subscription services ARPU among institutional customers increased by 8% year over year, underscoring our competitive market standing.
As of the end of second quarter, we had over 33.28 million followers. Sustaining our growth momentum will present increase of 9% year over year. These achievements were largely attributable to the effective execution of our three-step strategy, positioning expansion and collaboration. Specifically, we were deepening our focus on premium original content, enhancing our original content supply capabilities, expanding our customer base in the segments to meet diverse customer needs, and collaboratively exploring AI applications to empower a variety of business scenarios.
These synchronized initiatives are boosting our operating efficiency into propelling us toward a new face of a diversified development.

Dagang Feng

(spoken in foreign language)

Xin Wang

Let me walk you through our major progress in each of these three steps, starting with positioning.

Dagang Feng

(spoken in foreign language)

Xin Wang

First, we continue to enhance our content creation prowess, strengthening our text and graphic content ecosystem. Harnessing 36Kr's effective content dissemination network, we have built a robust content circulation mode. In the first half of this year, nearly 400 of our articles achieved over 100,000 page views.
Our premier content has garnered extensive industry acclaim, solidifying our industry-wide readership in insight and influence. We also extended our appeal to younger audiences with sub-vertical media channels like TIDE and Oh! Youth, steadily diversifying our user demographic. With the launch of all new special license account, 36Kr Games, we meaningfully enriched our content sub-verticals, extending our cross-segment reach beyond the new economy users to a broad spectrum of knowledge and entertainment audiences.

Dagang Feng

(spoken in foreign language)

Xin Wang

Our short video business also performed exceptionally well in the first half of the year. We actively expanded our presence across leading short video platforms like Bilibili, Douyin, and Kuaishou, driving an increase in our short video followers to over 9.2 million, with a notable 2.3 million on Bilibili alone. Guided by our dual-focus on index content and high-quality IP, we consistently impressed our audience with professional, specialized, insight for original videos.
Additionally, we unveiled [AI Car], a fresh program on the auto industry's application and development of AI. We also rolled out AI Map, which attracts the latest trend in AI and to construct a new blueprint for the intelligent world. These initiatives notably elevated user engagement and overall experiences, reinforcing our position as a top content IP creator.

Dagang Feng

(spoken in foreign language)

Xin Wang

In the long-form reading segment, we collaborated with popular short-form video platform Douyin to launch a new season of our elite talk show series, Foreseeing 2034. In the second quarter, we made notable strides in content creation in the channel distribution through this robust partnership. The debuted episode of Foreseeing 2034, featuring NIO founder Li Bin, delved into upcoming shifts in the new energy vehicle sector, garnering widespread interest and racking up over 84 million views across various platforms.

Dagang Feng

(spoken in foreign language)

Xin Wang

Next, livestreaming where we continually optimized our innovative offerings during the first half of the year. Joining hands with industry veterans, we launched an array of entertaining livestreaming programs that facilitated greater interaction and real-time connections, elevating user engagement and stickiness. One prime example is our new series The Big Deal, which features insightful conversations between industry insiders and media curators and content creators.
Another is VC Insights Hub, a new show that focuses on capital dynamics and innovative initiatives, offering investors professional market intelligence. We also debuted Youth Talk, a series of face-to-face exchanges with emerging business leaders designed to enlighten users with deep, multidimensional insights.

Dagang Feng

(spoken in foreign language)

Xin Wang

Last but not least, event IP. In the first half of 2024, we achieved substantial success with the launch of a major event IP, Advanced Productivity AI Partner Summit. In collaboration with industry giants like Alibaba, Baidu, Lenovo, and Intel, we delved into the latest trends in AI applications, sharing insights on both opportunities and challenges gleaned from day-to-day business operations.
This summit attracted an impressive 100 million-plus views, sparking extensive industry buzz. Additionally, our highly anticipated signature event IP, WAVES Summit, returned in June 2024, offering a rich variety of features across the venture capital, technology, culture, and music sectors, among others. WAVES served as a bustling hub fostering connections among young entrepreneurs and investors, racking up 150 million views and precisely engaging the younger demographic.

Dagang Feng

(spoken in foreign language)

Xin Wang

By consistently crafting high-quality original programs and distinctive event IPs, we have ensured a steady flow of premium content, garnering broad visibility and inspiring lively discussions. The approach has significantly amplified our brand power, advertising potential and commercial value. Our holistic upgrade of our content and event lineup has enriched our content ecosystem, expanded our user base, and cultivated more diverse content scenarios and service models for users and customers alike, further solidifying our leadership across industry segments and boosting user stickiness.

Dagang Feng

(spoken in foreign language)

Xin Wang

Now let’s turn to the expansion piece of our three step strategy.

Dagang Feng

(spoken in foreign language)

Xin Wang

Our strategic, innovative content and event layout has empowered us to forge closer ties with top global brands like Alibaba, JD, ByteDance and Huawei. While also accelerating growth in our customer base, we are well-positioned to consistently meet our customers' diverse content marketing needs. In 2024, we made remarkable progress in broadening our customer segments and enriching relevant service offerings, in sectors such as food and beverage, restaurant chains, sports and outdoor, beauty and personal care, home appliances and more.
Notably, the proportion of new customers in the sports and outdoor category topped 60%. Meanwhile, beauty and personal care's new customer ratio exceeded 40%, and food and beverage along with restaurant chains recorded new customer ratios surpassing 20%.

Dagang Feng

(spoken in foreign language)

Xin Wang

Moreover, we ventured into the energy storage sector, crafting a specialized documentary for Ampace, a globally renowned manufacturer of advanced lithium batteries. We also provided integrated marketing services for a major player in global mobile payments, including customized solutions such as thematic summits, in-depth brand promotion, customer acquisition support, and interactive marketing. Our tailored approach effectively accelerating its global expansion and enhanced its position in the mobile payment sector while further strengthening its brand influence.

Dagang Feng

(spoken in foreign language)

Xin Wang

Meanwhile, capitalizing on 36Kr's substantial media influence and the expertise of our regional outlets and 36Kr Research Institute, we continuously refined our service architecture for governmental and public service systems. Harnessing our vast understanding of the intricacy of all levels of government operations, along with our broad-based service experience, we offer customers an integrated suite of services, including facilitating industry-specific partnerships, investment inflows in the global expansion service hubs to meet their varied needs.
Our diverse slate of premium services continues to attract new clients, expanding our government customer base in both the Yangtze River Delta and the Pearl River Delta regions.

Dagang Feng

(spoken in foreign language)

Xin Wang

Leveraging 36Kr's platform resources and expertise, we have impressed our customers with more precise market insights and end-to-end marketing solutions. Our stable and high-quality customer base, coupled with a broad and varied customer demographic, underscores our ongoing commercialization enhancements and paves the way for sustained business growth.

Dagang Feng

(spoken in foreign language)

Xin Wang

Last but not least, collaboration, the final piece of our three-step strategy. In the first half of 2024, we deepened and broadened our collaborative efforts as we integrated technology across our business segments, achieving positive outcomes.

Dagang Feng

(spoken in foreign language)

Xin Wang

One notable example is our in-depth strategic partnership with SenseTime to explore advanced applications of AI technology. We’ve jointly launched an array of AI-driven offerings, including AI Media Spotlight Seeker, AI Financial Report Interpretation and AI One-Click Image Generation, delighting users with smarter, more efficient content service offerings and expanding 36Kr's audience reach.
By integrating 36Kr's content creation prowess with SenseTime’s advanced AI technologies, we aim to create and promote an all-new AI Chief Content Officer concept, steering traditional media towards a more intelligent and interconnected future. We are confident that our enhanced content ecosystem and AI advancements will drive continued expansion in our product matrix and consistently improve our operating efficiency.

Dagang Feng

(spoken in foreign language)

Xin Wang

In summary, during the first half of 2024, our three-step strategy covering positioning, expansion, and collaboration ensured solid operations while laying a robust foundation for growth in the latter half of the year. With our innovative spirit, embrace of next-generation technologies, and vibrant partnerships with global front-runners, we are poised to enhance our content's influence and advance commercialization, propelling the company's high-quality sustainable growth.

Dagang Feng

With that, I will now turn the call over to our CFO, Mr. Xiang Li, who will discuss our key financial results. Please go ahead, Xiang.

Operator

Okay.

Xiang Li

Thank you. Now, I'd like to walk you through the details of our first half of 2024 financial results. Please note all amounts are in RMB unless otherwise stated.
First, Total revenues were RMB102.4 million in the first half of 2024, compared to RMB139.9 million in the same period of last year. Online advertising services revenues were RMB80.4 million in the first half of 2024, compared to RMB98.9 million in the same period of last year. The decrease was mainly due to the reduction in advertising spending by advertisers from certain industries and the challenging external environment. In addition, we optimized our customer structure to control credit risk, which led to a decrease in revenue scale.
Enterprise value-added services revenues were RMB13.4 million in the first half of 2024, compared to RMB26.8 million in the same period of last year. The decrease was mainly due to our ongoing service offering refinements, which involved reducing several regional offices' activities to strategically focus on cash flow and efficiency optimization.
Subscription services revenues were RMB8.6 million in the first half of 2024, compared to RMB14.2 million in the same period of last year. The decrease was mainly due to the planned evolution of our training service business model.
Cost of revenues was RMB57 million in the first half of 2024, compared to RMB70 million in the same period of last year. The decrease was mainly attributable to the decrease in operating costs in connection with the decline in our revenues. Gross profit was RMB45.5 million in the half of 2024, compared to RMB69.8 million in the same period of last year.
Gross profit margin was 44.4% in the first half of 2024, compared to 49.9% in the same period of last year. Operating expenses were RMB117 million in the first half of 2024, decreasing by 9% compared to RMB128.7 million in the same period of last year.
Sales and marketing expenses were RMB45.4 million in the first half of 2024, a decrease of 29.9% from RMB64.8 million in the same period of last year. The decrease was mainly attributable to the decrease in payroll-related expenses, rental expenses, marketing and promotional expenses, and share-based compensation expenses.
G&A expenses were RMB62.8 million in the first half of 2024, a 79.9% increase compared to RMB34.9 million in the same period of last year. The increase was mainly attributable to the increase in the allowance for doubtful accounts and partially offset by the decrease in share-based compensation expenses.
Research and development expenses were RMB8.8 million in the first half of 2024, a decrease of 69.7% from RMB29 million in the same period of last year. The decrease was mainly attributable to the decrease in the average compensation level for our research and development personnel as we restructured our R&D team.
Share-based compensation expenses recognized in cost of revenues, sales and marketing expenses, research and development expenses, and G&A expenses totaled RMB0.05 million in the first half of 2024, compared to RMB3.7 million in the same period of last year.
Other expenses were RMB24.3 million in the first half of 2024, compared to RMB6 million of other income in the same period of last year. The increase was mainly because the company recognized approximately RMB25.5 million of investment loss arising from fair value change of long-term investments this year.
Net loss was RMB95.9 million in the first half of 2024 compared to net loss of RMB52.7 million in the same period of last year. Non-GAAP adjusted net loss was RMB95.9 million in the first half of 2024, compared to non-GAAP adjusted net loss of RMB49 million in the same period of last year. Net loss attributable to 36Kr's ordinary shareholders was RMB94.4 million in the first half of 2024, compared to RMB52.3 million in the same period of last year.
Basic and diluted net loss per ADS were both RMB2.245 in the first half of 2024, compared to basic and diluted net loss per ADS of RMB1.258 in the same period of last year.
As of June 30, 2024, the company had cash, cash equivalents, and short-term investments of RMB96.9 million, compared to RMB116.9 million as of December 31, 2023. The decrease was mainly attributable to net cash outflow from operating activities.
This concludes all our prepared remarks today. We will now open the call to questions. Operator, please go ahead.

Question and Answer Session

Operator

(Operator Instructions) Mengzhu, Sealand Securities.

Mengzhu Chen

(interpreted) Could management outline the expected growth trajectory for the advertising business? How will the company strategize moving forward? Thank you.

Dagang Feng

(interpreted) We remain cautiously optimistic about future advertising growth. In terms of strategy, we have proactively optimized our products and services to navigate ongoing macroeconomic challenges, providing deeper support to core customers including leading internet giants and Fortune 500 companies. This approach has proven highly effective, driving a 20% increase in ARPU in the first half of the year. We believe there is still potential for future growth.
We will also continue to enrich our content ecosystem, expand our reach to new channels, and diversify our content-specific accounts to cover more sub-verticals. We are also actively deepening the integration of AIGC technology with content production, rolling out more AI-driven offerings will allow us to engage with a broader range of companies and institutions that were previously out of reach due to bandwidth and staffing constraints.
Our ongoing content development efforts have expanded and diversified our user base and service scenarios. While strengthening our stable partnerships with key accounts like Alibaba, JD, ByteDance, and Huawei, we're also consistently signing high-value new customers as we cater to companies' diverse content marketing needs.
In 2024, we continued to broaden our premium customer segments in sectors such as food and beverage, restaurant chains, sports and outdoor, beauty and personal care, home appliances and more, making great strides. We onboarded various premier global brands as partners, including Allbirds, KFC, and P&G. Notably, the proportion of new customers in the sports and outdoor category topped 60%. Meanwhile, beauty and personal care's new customer ratio exceeded 40%, and food and beverage along with restaurant chains recorded new customer ratios surpassing 20%.

Operator

Lin, SWS Research.

Lingyi Zhao

(interpreted) What are the latest developments in short and long video segments? How does the company plan to expand their growth potential?

Dagang Feng

(interpreted) In the first half of 2024, we delved deeper into the short and long video sectors, consistently providing diverse content offerings while expanding our range of to-C products. Our short video content lineup now covers a broad spectrum of fields including technological innovation, business insights, lifestyle and more, delighting users with rich and varied content options.
As we mentioned before, relative to other advertising channels, short video advertising boasts broader customer appeal and higher ARPU, which has contributed significantly to the company's advertising revenue growth. In 2024, leveraging our content creation prowess and substantial platform influence, we established high-visibility commercialization collaborations with multiple leading brands. Revenue performance was on track with our forecasts for this year.
Additionally, our finance and youth lifestyle content has garnered widespread visibility and user interest across major platforms like Bilibili, Douyin, and Kuaishou. We launched fresh programs like [AI Car] and AI Map, substantially elevating user engagement and overall experience, and reinforcing our position as a top content IP creator. By mid-year 2024, our short video followers surpassed 9.2 million, with a notable 2.3 million on Bili alone, which is difficult for an institution -- medium company.
Regarding long-form video, we collaborated with popular short-form video platform Douyin to launch a new season of our elite talk show series, Foreseeing 2034, in the second quarter. We made notable strides in content creation and channel distribution through this robust partnership. Its debut episode featuring NIO founder William Li Bin racked up over 84 million views across various platforms.

Operator

(Operator Instructions) Lin, SWS Research.

Lingyi Zhao

(interpreted) What key strategies will the company implement to drive growth in enterprise value-added services and subscription services in the second half of the year? Thank you.

Dagang Feng

(interpreted) First, in response to market dynamics and evolving customer needs, we launched a major event IP, Advanced Productivity AI Partner Summit, during the first half of the year. The event was quite successful, attracting an impressive 100 million-plus views and sparking extensive industry buzz. We also supported Lenovo in organizing the Lenovo New Business Innovation Ecosystem Series Roadshow.
Leveraging diverse channels such as the 36Kr official account, Weibo, and community platforms for high-impact promotions, this initiative empowered elite startups across sectors including artificial intelligence, application software, smart devices, and advanced manufacturing with end-to-end services. Moving forward, we will focus on enriching our product matrix and service scenarios to meet our customers' evolving needs.
In addition, we will launch our [wine] summit in October this year, and we'll have more innovative services for our customers in the audiences. In addition to offline events, we have consistently enhanced our value-added consulting services. In the first half of the year, 36Kr Research Institute conducted in-depth studies on emerging business models, commercial structures, and industries within the new economy sector, issuing a range of industry research reports that offered thorough analysis and insights on the trends and prospects in artificial intelligence, digitalization, global expansion, and consumer sectors.
We also refined our service architecture for governmental and public service systems this year. Harnessing our vast understanding of the intricacies of governmental customers, along with our broad-based service experience, we delivered a host of top-tier services, including facilitating industry-specific partnerships, investment inflows, and global expansion service to fulfill our customers' varied needs.
Given that globalization is an irreversible trend, we are channeling considerable strategic resources to our overseas ventures this year. For instance, we are establishing media operations targeting Europe, leveraging 36Kr's existing strengths in original content and integrating AI technology to enable real-time dissemination of a high volume of content to Europe while also bringing the latest European news back to China.
As we expand our network worldwide, we will work with Chinese government entities and businesses to establish 36Kr Global Expansion Service Centers.

Xin Wang

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.

Operator

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