36Kr - Q1 2023

Transcript

Operator (participant)

Hello, ladies and gentlemen. Thank you for standing by for 36Kr Holdings Inc. Q1 2023 earnings conference call. At this time, all participants are in a listen-only mode. After management's remarks, there'll be a question and answer section. Today's conference call is being recorded. I would now like to turn the conference over to your host, Xiaoquan Yuan, IR Manager of the company. Please go ahead, Xiaoquan.

Xiaoquan Yuan (IR Manager)

Thank you very much. Hello, everyone, and welcome to 36Kr Holdings' Q1 23 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 on 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. Lin Wei. Mr. Feng will start the 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 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 earnings press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures. 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. Pal, please go ahead.

Dagang Feng (Co-Chairman and CEO)

Thank you. Hello, everyone. Welcome to our Q1 2023 earnings conference call.

Xiaoquan Yuan (IR Manager)

Thank you. Hello, everyone. Thank you for joining our Q1 2023 earnings conference call.

Dagang Feng (Co-Chairman and CEO)

As the pandemic's impact faded away, we are delighted to report stellar financial results, delivering double-digit revenue growth in the Q1 of 2023. Our total revenue reached RMB 55.5 million, up 12% year-over-year, with expansive growth across all three of our primary business segments. For our segments, our advertising revenue reached RMB 41.9 million, up 11% year-over-year. Our enterprise value-added services delivered revenue of RMB 10.0 million, up 7% year-over-year, and revenue from our subscription services jumped 36% year-over-year. These achievements across the board are the direct result of our consistent effort in forging ahead with content, product, and technology, ushering in a new phase of high-quality business growth. Let me start with content.

As we expanded our content coverage to new industries, we also continued to direct more attention to leading enterprises and major events, while stepping up our output of exclusive reports, offering users a holistic and insightful professional content experience. The number of our blockbuster articles is on the rise. In the Q1, we had around 160 articles, with views exceeding 100,000, many of which covered heated topics and racked up more than 200,000 page views, including a story featuring founder of Baidu, an article on TikTok CEO Shou Zi Chew's face-off with the U.S. Congress, and a piece covering the 24 hours after Silicon Valley Bank collapsed, each hitting over 200,000 page views. These thought-provoking articles, among others, showcase 36Kr's leading insights and industry influence.

Our enhanced content influence also contributed to significant growth in our user base. As of the end of the QQ, we had more than 29 million followers, up 22% year-over-year.

2023 开 年 以 来, 我 们 紧 密 关 注 生 成 式 AI 和 大 语 言 模 型 等 新 兴 产 业 的 发 展 动 态, 并 迅 速 推 出 全 新 公 众 号 智能导线, 深 入 报 道 AI 新 时 代 下 奔 涌 前 行 的 行 业 全 景. 本 季 度, 我 们 也 发 布 了 全 新 的 汽 车 内 容 公 众 号, 启 动 PowerOn, 聚 焦 汽 车 产 业 在 智 能 化 和 新 能 源 技 术 的 变 革.

这 些 垂 直 自 媒 体 的 推 出, 为 公 司 持 续 加大 在 AI 和 新 能 源 汽 车 领 域 的 布 局 打 造 了 坚 实 的 基 础, 进 一 步 提 升 了 业 务 的 增 长 势 能.

Xiaoquan Yuan (IR Manager)

Since the beginning of 2023, we have been closely following the latest development in booming industries, including generative AI and large language model. In response to current trends, we soon launched a new WeChat account, The Emergence of Intelligence, to provide in-depth coverage on the AI era's transformation across multiple industries. In the Q, we also rolled out Power On, a WeChat account focusing on the evolution of the auto industry enabled by intellectualization and new energy tech. These two verticals have laid a solid foundation for us to advance our ongoing initiative in AI and the EV sector, further enhancing our growth potential.

Dagang Feng (Co-Chairman and CEO)

此 外 ， 随 着 众 多 期 盼 已 久 的 行 业 盛 会 相 继 举 办 ，36 氪 积 极 奔 赴 现 场 覆 盖 报 道 ， 通 过 速 递 资 讯 、 精 彩 图 片 、 看 展 视 频 等 多 媒 体 手 段 ， 为 读 者 带 来 最 前 沿 的 行 业 动 态 ， 包 括 CES 国 际 消 费 类 电 子 产 品 展 览 会 、MWC 世 界 移 动 通 信 大 会 、AWE 中 国 家 电 及 消 费 电 子 博 览 会 等 。

Xiaoquan Yuan (IR Manager)

In addition, many long anticipated industry events are finally underway. 36Kr has been on the front lines covering the latest developments on site through multiple channels, such as breaking news, photo galleries, and on-site video reports. Notable examples from the Q include CES, MWC, and AWE.

Dagang Feng (Co-Chairman and CEO)

在 四 月 份 的 上 海 国 际 车 展 上 ， 我 们 也 第 一 视 角 对 车 展 现 场 车 型 对 比 、 中 外 车 企 、 传 统 与 新 能 源 车 交 锋 以 及 重 点 人 物 进 行 全 方 位 深 度 报 道 ， 并 借 此 契 机 重 磅 推 出 36 氪 汽 车 内 容 矩 阵 ， 包 括 公 众 号 Power On、 公 众 号 未 来 汽 车 和 视 频 号 36 氪 汽 车 。

为 用 户 带 来 优 质 内 容 的 同 时 ， 趁 着 新 能 源 汽 车 市 场 强 势 增 长 的 浪 潮 ， 加 速 布 局 新 能 源 汽 车 领 域 ， 为 公 司 带 来 新 的 业 绩 增 长 空 间 。

Xiaoquan Yuan (IR Manager)

Specifically, we leveraged our firsthand perspective of the Shanghai Auto Expo to deliver comprehensive, in-depth reports on the exhibition, as well as new car model comparisons, various auto enterprises from homeland and abroad, the differentiation between traditional vehicles and EVs, and a broad cohort of industry VIPs. We also took this opportunity to roll out an upgrade to 36Kr's auto content matrix with our PowerOn WeChat account, Future Auto Daily WeChat account, and a WeChat video account titled 36Kr Auto. These channels not only deliver rich, insightful content to users, but also allows us to tap into the EV market's strong growth momentum and massive market potential, accelerating our electric vehicle industry coverage to ultimately generate greater revenue upside.

Dagang Feng (Co-Chairman and CEO)

值 得 一 提 的 是 ， 2023 年 第 一 季 度 ， 我 们 的 短 视 频 业 务 继 续 凭 借 出 色 的 内 容 原 创 和 优 质 的 制 作 能 力 ， 用 户 数 快 速 增 长 ， 粉 丝 数 量 已 突 破 八 百 万 ， 同 比 增 长 百 分 之 四 十 二 。36 氪 也 成 为 全 网 首 家 全 程 利 用 AI 技 术 开 设 电 商 店 铺 的 行 业 先 行 者 。 其 中 我 们 的 AI 淘 宝 店 铺 芦 苇 咪 已 经 开 业 ，AI 设 计 的 相 关 产 品 热 卖 中 ， 彰 显 了 36 氪 对 AI 技 术 的 敏 感 性 和 前 瞻 性 。

原 创 视 频 《 我 用 AI 开 了 家 淘 宝 店 》， 展 示 了 36 氪 在 业 内 率 先 运 用 AI 真 实 操 作 完 成 淘 宝 开 店 的 关 键 环 节 ， 包 括 店 铺 命 名 、 店 铺 搭 建 、 产 品 设 计 、 图 片 制 作 和 文 案 撰 写 等 ， 大 幅 提 高 了 店 铺 的 运 营 效 率 ， 降 低 店 铺 运 作 成 本 。

原 创 视 频 先 后 登 上 B 站 、 微 博 、 小 红 书 的 热 门 榜 ， 全 网 曝 光 超 过 三 千 五 百 万 ， 点 赞 量 超 过 八 万 ， 并 收 获 淘 宝 官 方 的 持 续 关 注 。 专 业 能 力 与 AI 技 术 的 有 机 结 合 ， 为 公 司 开 创 多 元 化 创 收 渠 道 ， 解 锁 更 大 的 企 业 价 值 。

Xiaoquan Yuan (IR Manager)

I also want to highlight our short video business. In the Q1 of 2023, we built upon an outstanding content generating and production capabilities, driving a huge surge in user numbers. Our number of short video followers exceeded 8 million, a remarkable 42% year-over-year increase. 36Kr became the first-ever industry pioneer in using AI technologies to create an e-commerce store throughout the whole process. Its AI Taobao store, LumiWink, is in operation now, and the AI designed products are popular.

These are convincing demonstrations of our AI tech sensitivity and foresight. For instance, our original video, I opened a Taobao store with AI robots, which features the key steps of 36Kr's experimental opening of a Taobao store using AI technologies, including naming and establishing the store, product design, image generation, and copywriting. The AI technologies greatly improved efficiency while reducing costs of the store's operations.

This original video was listed as hot and trending by Bilibili, Weibo, and Xiaohongshu, and attracted over 35 million clicks and more than 80,000 likes. It also triggered continued official follow-ups on this topic by Taobao. The organic combination of know-how, expertise, and AI technologies diversified our revenue generating channels and locking more value for our company.

Dagang Feng (Co-Chairman and CEO)

与 此 同 时 ， 我 们 迈 出 了 制 作 长 视 频 内 容 的 重 要 一 步 ， 推 出 了 首 档 访 谈 节 目 Foreseeing 2033。 在 该 节 目 的 首 季 中 ， 我 与 Baidu Founder Robin Li 、 Vanke Group Founder Wang Shi 、 Trip.com Group Founder James Liang 、 Leapmotor Founder 朱江明 、 De Dao Founder Luo Zhenyu 等 行 业 大 咖 展 开 了 深 入 对 话 ， 为 观 众 提 供 洞 察 未 来 的 优 质 内 容 。

同 时 ， 该 节 目 在 优 酷 和 北 京 广 播 电 视 台 、 河 南 广 播 电 视 台 同 步 播 出 ， 这 标 志 着 在 社 交 媒 体 之 外 ， 我 们 完 成 了 长 视 频 平 台 和 电 视 传 播 渠 道 的 司 法 布 局 ， 形 成 了 更 大 的 内 容 版 图 和 壁 垒 ， 进 一 步 完 善 了 三 十 六 氪 长 短 视 频 共 存 ， 图 文 音 视 频 并 茂 的 内 容 生 态 ， 开 创 了 新 的 增 长 空 间 。

Xiaoquan Yuan (IR Manager)

In addition, we have made major strides in long video content production and recently launched our first talk show, Foreseeing 2033. In the first season, I conducted in-depth interviews with industry proponents, including Robin Li, founder of Baidu, Wang Shi, founder of China Vanke, James Liang, co-founder of Trip.com Group, Jiang Minzhu, founder of Li Auto, and Jin Yulu, founder of De Dao. Captivating audiences with fascinating insights into the future. Foreseeing 2033 was simultaneously live streamed on Youku, Beijing Radio & Television Station, and Henan Broadcasting System, marking our success in building a full coverage content dissemination network with long video platforms and TV channels.

These add to our established and growing reach across social media outlets, expanding our content landscape and closed loop ecosystem, which further enriches 36Kr's content ecosystem and encourages synergies among our diverse formats, including long and short form videos, as well as text, graphics, and audio mediums, unlocking our further growth potential.

Dagang Feng (Co-Chairman and CEO)

在 产 品 方 面 ， 三 十 六 氪 创 作 平 台 本 季 度 进 一 步 完 善 了 针 对 创 业 者 和 投 资 人 的 通 知 和 触 达 能 力 。 同 时 ， 我 们 的 微 信 小 程 序 进 行 了 全 面 升 级 ， 增 加 了 对 专 精 特 新 等 优 质 特 色 企 业 、 热 门 项 目 与 精 选 项 目 集 的 运 营 和 推 荐 力 度 。

我 们 的 对 接 次 数 、 活 跃 人 数 、 新 增 创 业 者 数 量 及 平 台 流 量 等 关 键 指 标 均 实 现 大 幅 增 长 。 本 季 度 ， 三 十 六 氪 创 作 平 台 还 成 功 帮 助 超 过 五 千 家 创 新 科 技 企 业 实 现 高 效 的 投 资 对 接 ， 为 他 们 的 壮 大 提 供 了 重 要 支 持 。

Xiaoquan Yuan (IR Manager)

In terms of products, we further improved the 36Kr venture capital platform's ability to notify and approach end users, including entrepreneurs and investors, in the Q. In addition, we fully obligated, upgraded its niche and mini programs by enhancing the operations and recommendations in highly specialized and innovative enterprises, popular fields, and curated portfolios. The platform's key indicators all substantially increased, including matching frequency, number of active investors, and new entrepreneurs, as well as platform traffic. In the Q of 2023, the 36Kr venture capital platform efficiently connected over 5,000 tech startups with funding investors, providing valuable support for their growth.

Dagang Feng (Co-Chairman and CEO)

36Kr 一 直 关 注 前 沿 科 技 的 发 展 ， 随 着 AIGC 技 术 的 蓬 勃 发 展 及 其 与 内 容 生 产 行 业 的 天 然 契 合 性 ， 我 们 积 极 地 将 生 成 式 AI 技 术 应 用 到 业 务 中 ， 与 我 们 的 内 容 生 态 和 产 品 研 发 相 融 合 。 我 们 重 点 围 绕 图 片 生 成 、 文 本 翻 译 和 资 讯 整 理 等 环 节 ， 以 及 刚 才 提 到 的 AI 开 店 等 ， 积 极 融 入 AIGC 技 术 ， 极 大 提 升 了 我 们 的 生 产 效 率 ， 降 低 运 营 成 本 ， 扩 大 营 收 。

企服点评 平 台 也 迅 速 应 用 了 AIGC 技 术 ， 为 用 户 提 供 了 更 加 精 准 、 高 效 的 产 品 全 景 信 息 和 决 策 支 持 ， 并 通 过 智 能 客 服 高 效 实 现 与 用 户 的 互 动 交 流 。

Xiaoquan Yuan (IR Manager)

Before I move on to commercialization, let me briefly update you on our AIGC initiatives. Over the years, 36Kr has always paid close attention to the most advanced frontiers of tech development. As AIGC technologies evolved, we leveraged its natural fit with content production and actively applied generative AI tech to our business, integrating these technologies with our content ecosystem and product R&D. We focused on actively integrating AI techs into image generation, text translation, data collection, and other areas, as well as leveraging AI techs to open the Taobao store, as I just mentioned, for higher production efficiency, lower operation costs, and revenue increase.

This enterprise service revenue platform also quickly adopted AIGC techs to provide our users with more precise and efficient overall product information and decision making support. We implemented chatbot technology for smart, efficient customer service.

Dagang Feng (Co-Chairman and CEO)

从 上 内 容 生 态 的 丰 富 ， 产 品 性 能 积 累 ，AI 技 术 的 赋 能 ， 使 得 我 们 的 商 业 化 能 力 持 续 加 强 ， 从 而 带 来 了 稳 健 的 营 收 增 长 。 下 面 我 就 来 具 体 回 顾 一 下 2023 年 第 一 季 度 我 们 在 商 业 化 方 面 取 得 的 进 展 。

Xiaoquan Yuan (IR Manager)

In summary, we fortified our content ecosystem, accumulated product advantages, and equipped our teams with AI techs during the quarter. These advances consistently boosted our commercialization capabilities and have enabled our steady revenue growth. Next, I'd like to share the details of our commercialization progress.

Dagang Feng (Co-Chairman and CEO)

本 季 度 ， 我 们 总 收 入 同 比 增 长 百 分 之 十 二 ， 达 到 五 千 五 百 五 十 三 万 元 ， 三 大 主 要 业 务 均 取 得 业 务 增 长 ， 其 中 广 告 收 入 达 到 四 千 一 百 八 十 八 万 元 ， 同 比 增 长 百 分 之 十 一 ， 广 告 客 户 数 量 同 比 增 长 百 分 之 九 至 一 百 四 十 七 家 ， 客 单 价 同 比 增 长 百 分 之 点 二 三 至 二 十 八 点 五 万 元 。

Xiaoquan Yuan (IR Manager)

In the Q1 of 2023, our total revenue increased by 12% year-over-year to RMB 55.5 million. We achieved growth across all three of our primary business segments. Notably, our advertising revenue reached RMB 41.9 million, up 11% year-over-year. The number of advertising customers grew to 147, up 9% year-over-year, with ARPU increasing to RMB 285,000, up 2.3% year-over-year.

Dagang Feng (Co-Chairman and CEO)

三 十 六 氪 深 入 洞 察 客 户 的 品 牌 定 位 和 目 标 受 众 。...

为 客 户 打 造 品 效 合 一 的 一 站 式 营 销 解 决 方 案. 在 第 一 季 度, 我 们 继 续 赢 得 众 多 知 名 互 联 网 巨 头 和 Fortune Global 500 企 业 的 年 框 合 同, 而 且 中 小 企 业 客 户 群 也 在 不 断 增 长.

不 仅 于 此, 我 们 还 通 过 打 造 品 牌 出 海 创 造 营 活 动, 收 获 了 如 Amazon, Meta, Tesla 海 外 巨 头 的 青 睐. 例 如, 在 与 Meta 的 合 作 中, 我 们 邀 请 了 企 业 出 海 领 域 的 专 家, 以 独 立 演 讲 和 会 谈 的 方 式, 与 企 业 共 同 探 讨 品 牌 出 海 的 相 关 话 题, 链 接 海 外 平 台 与 国 内 企 业, 提 高 了 双 方 的 品 牌 传 播 声 量.

此 外, 我 们 也 持 续 加 强 向 新 行 业 的 延 伸 和 拓 展, 与 Gree 的 首 次 合 作, 为 我 们 打 开 了 家 电 行 业 的 增 长 空 间. 此 外, 我 们 还 获 得 了 Samsung, Haier, Midea, Joyoung 等 知 名 企 业 的 复 购. 这 些 成 绩 的 取 得, 体 现 了 36Kr 在 广 告 营 销 业 务 方 面 的 专 业 能 力, 以 及 拓 展 和 深 化 客 户 合 作 中 的 卓 越 实 力.

Xiaoquan Yuan (IR Manager)

Leveraging our deep understanding on customers brand positioning our target audiences, 36Kr offers one-stop marketing solutions centered on branding and advocacy. In the Q1, many tech giants and Fortune Global 500 companies renewed their annual service contracts with us. At the same time, we also expanded our customer base amongst small and medium-sized enterprises. On top of that, we received recognition from global giants such as Amazon, Meta, and Tesla for the notable results they achieved from improved brand communications based on our 14 brand globalization initiative camps.

For instance, for Meta, we invited experts in global business expansion to conduct speeches and interviews with companies to exchange ideas about brand globalization and connect Chinese companies with overseas platforms, lending both sides a bigger voice in brand communication. In addition, we ventured into new industries and joined hands with Three, creating potential revenue upside in the home appliance industry. We also renewed contracts with top brands including Samsung, Haier, Midea and Joyoung. These achievements confirmed our advertising and marketing expertise while also demonstrating our strong capabilities in expanding and enhancing constructive press partnerships.

Dagang Feng (Co-Chairman and CEO)

我 们 的 短 视 频 业 务 依 旧 表 现 亮 眼 ， 打 造 了 一 系 列 备 受 欢 迎 的 作 品 ， 涵 盖 不 同 主 题 和 领 域 ， 如 科 技 创 新 、 商 业 洞 察 、 生 活 方 式 等 ， 受 到 了 各 行 业 广 告 主 的 青 睐 与 认 可 。 例 如 本 季 度 的 短 视 频 客 户 包 括 惠 普 、 华 为 、Intel、 劲 酒 等 。

其 中 ， 在 与 高 通 骁 龙 的 合 作 中 ， 我 们 通 过 幕 后 故 事 挖 掘 、KOL 联 动 等 多 种 形 式 ， 帮 助 客 户 实 现 产 品 的 精 彩 呈 现 ， 解 读 和 传 播 ， 推 动 我 们 的 客 单 价 再 创 新 高 。

Xiaoquan Yuan (IR Manager)

Our short video business also delivered another quarter of stellar results. We launched an array of popular programs covering diverse topics including technological innovation, business insights, and lifestyle. These programs drew us both praise and recognition from advertisers in various sectors, including our Q1 short video customers such as Hewlett Packard, Huawei, Intel, and China Jinju. Among these programs, we partnered with Qualcomm Snapdragon to help them fully showcase and disseminate Snapdragon products while comparing communication, including behind the scenes stories and KOL marketing, boosting our contract size to another new record high.

Dagang Feng (Co-Chairman and CEO)

企 业 增 值 服 务 方 面 ， 本 季 度 随 着 疫 情 的 结 束 ， 我 们 的 线 下 活 动 业 务 逐 渐 正 常 化 开 展 ， 总 收 入 达 到 一 千 零 二 万 元 ， 同 比 增 长 百 分 之 七 。

我 们 在 AI 大 模 型 热 潮 的 推 动 下 ， 举 办 了 全 新 的 IP 峰 会 ，AIGC 产 业 发 展 峰 会 ， 与 微 软 、 科 大 讯 飞 、 百 度 、 商 汤 科 技 等 AI 领 军 企 业 一 起 探 寻 新 一 代 技 术 浪 潮 下 ，AIGC 行 业 的 先 行 之 路 ， 不 仅 提 升 了 三 十 六 氪 在 该 领 域 的 影 响 力 ， 也 取 得 了 不 错 的 商 业 化 成 果 。

Xiaoquan Yuan (IR Manager)

Back to enterprise value added services, we experienced a rally in various businesses, including offline events and activities as the pandemic receded, driving revenue up 7% year-over-year to RMB 10.0 million during the Q1. To capitalize on the rise of AI large language models, we hosted the all new WISE 2023 AIGC Summit, sharing ideas with various AI industry giants, including Microsoft, iFlytek, Baidu, SenseTime, and other leading enterprises, to explore the road ahead for the AIGC industry as next generation technologies take hold, further enhancing 36Kr's industry influence and delivering positive commercialization results.

Dagang Feng (Co-Chairman and CEO)

整 合 营 销 服 务 方 面 ， 本 季 度 我 们 继 续 拓 宽 服 务 广 度 ， 涵 盖 原 创 公 众 号 代 运 营 、 原 创 视 频 平 台 代 运 营 、KOC 业 务 等 多 元 化 的 服 务 形 式 ， 促 进 客 户 群 体 的 不 断 壮 大 ， 收 获 了 与 雅 迪 电 动 车 、 华 泰 证 券 等 知 名 企 业 的 合 作 订 单 ， 收 入 取 得 增 长 。

Xiaoquan Yuan (IR Manager)

On integrated marketing side, in the Q1, we continue to expand our service content, providing diversified offerings, including agency service operations for both original WeChat accounts and original video platforms, as well as KOC businesses. These new features facilitated the continuous expansion of our customer base. We also entered into cooperation agreements with renowned companies, including Yadea and Huatai Securities, spurring an increase in our integrated marketing revenue.

Dagang Feng (Co-Chairman and CEO)

在 订 阅 服 务 方 面 ， 我 们 不 断 优 化 会 员 体 系 和 订 阅 产 品 ， 使 得 我 们 的 收 入 规 模 大 幅 增 长 ， 同 比 增 长 百 分 之 三 十 六 。 尤 其 在 商 业 会 员 业 务 的 优 化 上 ， 我 们 持 续 完 善 课 程 设 计 和 培 训 内 容 ， 积 极 打 造 创 业 增 长 型 的 课 程 ， 并 增 加 开 课 频 次 ， 使 个 人 订 阅 业 务 的 客 单 价 大 幅 提 升 ， 增 长 至 一 点 五 万 元 。

Xiaoquan Yuan (IR Manager)

As for subscription services, we continue to optimize our membership system and subscription products. potentially increasing our revenue scale by 36% year-over-year. Pay particular attention to the optimization of 36Kr business school, actively developing growth-oriented entrepreneurship courses by improving course design and training programs, while increasing class frequency, which vastly with the approval of our individual subscription services to RE, 150,000. Last but not least, I'd like to share an update on the 36Kr Enterprise Service Review platform. In the Q1 of 2023, we continued to improve and optimize its product library, adding basic information such as product reference cases, pricing, and parameters. We also completed product mapping in 9 core areas, including SCRM, new retail, and e-commerce, increasing our product classification accuracy rate to over 95%.

While optimizing the platform's functions, we revamped the interfaces of both PC and mobile devices. By further improving the reading module and search function, we made the product more accessible and easier to use. The conversion rate from platform visits to customer profile creation nearly doubled year-over-year. We adopted AIGC text to automatically generate product descriptions and responses to user inquiries. With this support in enhancing user experience, our platform's operational efficiency increased by over 10 times year-over-year. Our ongoing product function enhancements have comprehensively improved the convenience, efficiency, and intelligence level of the 36Kr Enterprise Service Review platform, reflected by rapid growth in its operating metrics across the board. As of the Q1 of 2023, the cumulative number of reviews exceeded 60,000, up 198% year-over-year.

The cumulative number of products on the platform reached nearly 9,000, up 55% year-over-year, and the number of merchants on the platform topped 1,200, doubling year-over-year. In terms of commercialization, this quarter, we implemented our next iteration of commercialization for the 36Kr Enterprise Service Review platform. Building upon the existing offerings of brand promotion and content marketing, we reinforced our integrated service capabilities and successfully built an all-new business model featuring lead generation and commission-based services, further empowering enterprise customer acquisition and decision-making support. Our new profit-generating model has began to bear fruit as we have received payments from 12 such enterprises. Going forward, we will further enhance the platform's service capabilities and provide enterprise customers with more secure and efficient services, transforming corporate decision-making by enhancing corporate digital awareness and realizing smartification of the decision-making process.

As we embark on our new journey in 2023, we are excited to welcome a new era of growth and development. The latest wave of AI large language models and rapid development in next-generation innovative technologies provide us with significant catalysts for growth in the new economy sector. As a business-to-business platform hosting visionary insights, 36Kr will directly benefit from this historical opportunity and deliver disruptive growth across our three core business segments in content, product, and commercialization. As a prominent brand and a pioneering platform dedicated to serving new economy participants in China, we are gearing up for more impressive growth in our core business segments. We are committed to stepping up our capabilities in the creation of high quality content, further expanding the depth and breadth of our business, and actively exploring product innovation.

We will also tap into new opportunities to advance and apply innovative technologies such as AIGC, drive revenue growth, and enhance our profitability, thereby generating long-term sustainable value for shareholders, customers, and society as a whole.

Dagang Feng (Co-Chairman and CEO)

With that, I will now turn the call over to our CFO, Ms. Lin Wei, who will discuss our key financial results. Please go ahead, Lin.

Lin Wei (CFO)

Thank you, Pal. Now I'd like to walk you through more details of our Q1 2023 financial results. Please note all amount numbers are in RMB, unless otherwise stated. Total revenues were RMB 55.5 million in the Q1 of 2023, an increase of 12% compared to RMB 49.6 million in the same period of last year. Online advertising services revenue increased 11% year-over-year to RMB 41.9 million in the Q1 of 2023. The increase was primarily attributable to more innovative marketing solutions, as well as a gradual recovery of market demand in the Q1 of 2023. Enterprise value-added services revenue increased 7% year-over-year to RMB 10 million in the Q1 of 2023, as we continuously developed various proactive enterprise level services for our customers.

Subscription services revenues increased 36% year-over-year to $3.6 million in the Q1 of 2023. The increase was primarily attributable to our continuous efforts in offering high quality subscription models to our subscribers. Cost of revenues was $32.4 million in the Q1 of 2023, compared to $23.9 million in the same period of last year. The increase was primarily attributable to higher fulfillment costs and content costs. Gross profit was $23.1 million in the Q1 of 2023, compared to $25.7 million in the same period of last year. Gross profit margin was 42% in the Q1 of 2023, compared to 52% in the same period of last year.

The decrease was primarily attributable to the resumption of offline events and offline training courses in this quarter, which occurred higher fulfillment costs, as well as the cost of some new content we produced this quarter, such as video program Foreseeing 2033, and so on. We believe this is more of a one-off scenario, and we expect gross profit margin to rebound back to the 50% range as commercialization of this new content kicks in and revenues continue to grow in the coming quarters. Operating expenses were $63.6 million in the Q1 of 2023, compared to $33.4 million in the same period of last year. Sales and marketing expenses were $31 million in the Q1 of 2023, compared to $29.7 million in the same period of last year.

The increase was primarily attributable to the increase in payroll related expenses, partially offset by the decrease in marketing related expenses. G&A expenses were $17.2 million in the Q1 of 2023, compared to -$10 million in the same period of last year. The fluctuation was primarily attributable to the release of allowance for credit losses of $32.9 million in the same period of last year, which was mainly due to the cash collection from accounts receivables fully impaired in previous year. Excluding such financial items impact, our G&A expenses actually went down by approximately 25% year-over-year, thanks to various cost control measures we rolled out. Research and development expenses were $15.5 million in the Q1 of 2023, compared to $13.8 million in the same period of last year.

The increase was primarily attributable to the increase in payroll related expenses. Share-based compensation expenses recognized in cost of revenues, sales and marketing expenses, G&A expenses, as well as R&D expenses, totaled $1.9 million in the Q1 of 2023, compared to $4.1 million in the same period of last year. Other income was $1.2 million in the Q1 of 2023, compared to $4.3 million in the same period of last year. The decrease was primarily because the company recognized approximately $38 million of gain arising from disposal of a subsidiary in the same period of last year. Net loss was $39 million in the Q1 of 2023, compared to net income of $32.6 million in the same period of last year.

Non-GAAP adjusted net loss was $37.1 million in the Q1 of 2023, compared to Non-GAAP net income of $36.7 million in the same period of last year. Net loss attributable to 36Kr's ordinary shareholders was $38.4 million in the Q1 of 2023, compared to net income attributable to 36Kr's ordinary shareholders of $33 million in the same period of last year. Basic and diluted net loss per ADS are both $0.92 in the Q1 of 2023, compared to net income per ADS of $0.80 in the same period of last year. As of March 31, 2023, the company had cash equivalents, restricted cash, and short-term investments of $170 million, compared to $185 million as of December 31, 2022.

The decrease was mainly attributable to the payment of year-end employee bonuses and benefits.

as well as a small size investment were made in a new economy startup company in the Q1 of 2023. This concludes all of our prepared remarks today. We will now open the call to questions. Operator, please go ahead.

Operator (participant)

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. For the benefit of all participants on today's call, if you wish to ask question to management in Chinese, please immediately repeat your question in English. The first question comes from Jane Tang from CICC. Please go ahead.

Jane Tang (Analyst)

Hey, Daniel. Thank you for taking my questions. I have two questions. The first is, how is the advertising business recovering in the Q2 and the 618 E-commerce Festival? What is the outlook for the recovery of advertising market and the company's advertising business?

My second question is: what are the plans to further develop the growth potential of short video business, given its strong growth in the past? We see, we also launched long video content. How do you consider the exploration of diversified content formats? Thank you.

Dagang Feng (Co-Chairman and CEO)

好 的 ， 谢 谢 。 本 季 度 我 们 的 广 告 业 务 应 该 说 还 是 有 一 个 比 较 好 的 恢 复 态 势 的 ， 我 们 看 到 数 据 上 是 同 比 增 长 了 11% ， 然 后 客 户 数 和 ARPU 值 是 实 现 了 双增长 。 随 着 市 场 的 回 暖 ， 我 们 看 到 广 告 需 求 在 逐 步 升 温 ， 同 时 我 们 提 供 了 合一的 广 告 解 决 方 案 ， 赢 得 了 更 多 客 户 的 信 任 和 支 持 ， 实 现 了 业 务 的 稳 步 增 长 。

对 于 618 大 促 的 广 告 业 务 ， 我 们 感 觉 比 去 年 要 略 好 ， 比 如 Taobao 、 JD.com 等 头 部 电 商 也 在 我 们 的 平 台 进 行 投 放 。618 主 要 是 以 GMV 为 导 向 的 投 放 政 策 ， 广 告 主 有 可 能 会 偏 好 流 量 平 台 会 更 多 一 些 。 36Kr 作 为 重 要 的 品 宣 阵 地 ， 对 匹 配 的 品 牌 进 行 一 定 的 投 放 。 目 前 这 项 行 业 位 列 我 们 广 告 主 分 布 的 第三大 行 业 。

至 于 Q2 以 及 全 年 的 整 个 广 告 行 业 ， 我 们 持 一 个 谨 慎 乐 观 的 态 度 。 我 们 观 察 到 ， 疫 情 后 虽 然 有 恢 复 ， 但 是 恢 复 速 度 并 没 有 想 象 的 那 么 快 ， 需 要 一 段 时 间 来 观 察 。我 们 相 信 ， 36Kr 作 为 新 经 济 领 域 的 参 与 者 ， 在 这 种 市 场 环 境 下 具 有 独 特 的 优 势 。

比 如 我 们 看 到 快消品 、 3C 以 及 出 海 企 业 的 需 求 稳 定 增 长 ， 我 们 将 基 于 蓬 勃 发 展 的 新 经 济 行 业 ， 提 供 更 具 吸 引 力 和 差 异 化 的 广 告 产 品 和 服 务 ， 持 续 加 强 我 们 在 短 视 频 领 域 的 商 业 布 局 。 我 们 相 信 2023 年 将 是 一 个 充 满 机 遇 和 挑 战 的 年 份 ， 广 告 业 务 仍 将 取 得 稳 健 的 发 展 。 谢 谢 。 Thank you.

Xiaoquan Yuan (IR Manager)

In the Q1, we were delighted to see that our advertising business was on the road to recovery, with revenue increasing by 11% year-over-year, delivering growth in both number of customers and ARPU. As the market began to pick up, demand for advertising gradually increased. Moreover, our advertising solutions, centered on branding and efficacy, earned us the continuous trust and support of our customers, and we delivered steady growth, business growth. This year's advertising business was the 618 brand promotion fare, better than 2022. For example, e-commerce giants, including Taobao and JD.com, placed advertisements on our platform. As 618 grand promotion advertising is mainly GMV-oriented. Some advertisers prefer to utilize platforms with more heavily concentrated traffic. However, as an important brand marketing platform, we successfully channeled e-commerce, now ranks the third in our advertising industry.

We remain cautiously optimistic about the broader advertising industry in the Q2 and full year 2023. The post-pandemic recovery was not as rapid as expected and needs more time to observe. For 36Kr, as part of the new economy sector, we are uniquely positioned to benefit from our advantages in this market environment. For instance, we observed steady growth in demand from FMCG, 3C companies, and Chinese enterprises expanding overseas. We will provide more appealing, differentiated advertising products and services to support the booming new economy sector, including further enhancing our short video offerings. We believe 2023 presents both opportunities and challenges. Our advertising business remains on track to achieve solid growth.

Dagang Feng (Co-Chairman and CEO)

好 ， 关 于 第 二 个 问 题 ， 我 们 关 于 我 们 的 短 视 频 业 务 ， 我 们 继 续 推 出 了 一 系 列 的 原 创 短 视 频 内 容 ， 涵 盖 不 同 的 主 题 和 领 域 ， 如 科 技 创 新 、 商 业 洞 察 、 生 活 方 式 等 ， 引 发 观 众 的 兴 趣 和 共 鸣 。 我 们 的 粉 丝 数 已 突 破 八 百 万 ， 这 里 面 指 的 是 视 频 的 粉 丝 数 。 同 时 我 们 在 形 式 上 不 断 创 新 ， 如 近 期 推 出 的 长 视 频 栏 目 ， 看 见 二 零 三 三 。

This is a talk I with industry experts talk show program, opened up a new field of long video platform and television broadcast channels. In terms of cooperation with clients, we provide creative marketing solutions for clients, including Qualcomm, HP, Huawei, Intel, and Jinjiu, among others. The cooperation with Qualcomm is also our guest speaker. It is a new high. AIGC technology provides further exploration of the company's content format, providing enormous opportunities. 36Kr can use AIGC technology, such as voice text, image synthesis, video synthesis, etc., to greatly promote the enrichment of the content ecosystem. 36Kr, as a new economy content production platform, will directly benefit from this technological progress. While exploring the content ecosystem, it is also conducive to the exploration of diversified creative production. Thank you.

Xiaoquan Yuan (IR Manager)

Thank you. We launched a series of original short videos that cover diverse topics, including technological innovation, business insight, and lifestyle, with the goal of fully engaging our users. By the end of the Q1, we had over 8 million short video followers. At the same time, we kept launching innovative offerings. Recently, we launched our long video program, Foreseeing 2033, a show featuring in-depth interviews with industry tycoons. This was a milestone for us in building a brand new, full coverage content dissemination network with long video platforms and TV programs. Regarding our commercial cooperation agreements for creative brand marketing, our work was recognized by high-profile customers from various sectors, such as Qualcomm, Hewlett-Packard, Huawei, Intel, and China Telecom.

The success of our program supported a deeper collaboration with some of our partners, including Qualcomm Snapdragon, with whom we secured another new record high in terms of contract size. AIGC technology provides us with an excellent opportunity for the company's further diversified exploration of content forms. 36Kr applies AIGC technologies such as text generation from graph generation from text, and video generation from text and et cetera, which greatly promotes the enrichment of the content ecosystem. As a platform empowering the new economy, 36Kr will directly benefit from this technological advancement. We will explore diversified revenue generation channels while exploring content ecosystem. That's the end of the presentation.

Operator (participant)

Thank you. Your next question comes from Ling Yi Zhao from SWS Research. Please go ahead.

Lingyi Zhao (Retail Chief and eCommerce Analyst)

Hello, Dai, hello, Lin. Thank you, management of 36Kr for taking my question. I am Ling Yi Zhao from SWS. I want to ask a financial question. That is, we see that the company's gross profit margin in Q1 is slightly down year-on-year and quarter-on-quarter. How do we interpret the change in the gross profit margin in the Q1, and how do we look at the long-term trend and change of this indicator? I translate it. 36Kr Q1 GP margin decreased year-on-year and quarterly. How should we understand that the changes in margin this Q1? Could you share some outlook of long-term changes in GP margin? Thank you.

Lin Wei (CFO)

Thank you, Ling Yi. That's a really good question. This is Lin. I will address this question. I think there are several reasons result in a gross margin fluctuation. First of all, as you know, as the pandemic receded, we are resuming a lot of offline businesses, including offline events and offline training courses. Obviously, there will occur more offline costs, such as hotel venue fees and on-site setup fees, and things like that. Compared to the year ago, there will be more offline costs. Secondly, as we introduced in our prepared remarks, we also produced some new content columns, namely, you know, Foreseeing 2033, the View program, as well as the new EV content metrics, such as PowerOn, et cetera.

Those content production also occurs costs, where those costs are mostly recognized immediately in this quarter, rather than amortized over the year. I think as we gradually the commercialization of those new content kick in, the gross margin will definitely come back. There's another reason, too. The third reason is Q1 usually is the lowest seasonality during the year. If you look at our previous years, Q1 to Q4, our revenue will consecutively go up. You know, at the coming quarters in the year, as our commercialization kicks in, I think the gross margin will come back to the 50% range level.

I think, more long term with our new initiative, like the long-form video, as well as our 36Kr Enterprise Review platform, et cetera, I think that gross margin will continue to improve in the long term. To sum up, I think the Q1 growth margin is really a one-off scenario rather than a recurring growth margin level. In the coming quarter, that will rebound back. I think, this helps to answer your question, Ling Yi. Thank you.

Operator (participant)

Thank you. Your next question comes from Rui Yin, from Sealand Securities. Please go ahead.

Rui Yin (Associate Director)

Gong Zongwei, good evening. Very much appreciate the opportunity to ask a question. I have a question, which is, what measures are we currently taking to improve customer stickiness, including raising the customer's payment rate? I'll translate myself. What measures are we taking to enhance customer stickiness or enhance, increase customer payment rates? Thank you.

Lin Wei (CFO)

Thanks, Ray. I will briefly answer your question. In terms of the number of clients and also the customer engagement, we mainly have three major measures rolled out to address that. First of all, our content is our major competence. We continue to expand our service content, increasing our in-depth coverage of top players and, you know, advancing the breadth of exclusive reports. Our distinct content covers extensive areas, including AI and hardcore technologies, as well as highly specialized and innovative enterprises, those small and medium enterprises, health and healthcare and new energies. With the content category can continue to expand our customer base, we will naturally expand as well. That's number one.

Number two, on the product side, we are really very proactive on the production side. For example, our short form video as well as our newly launched long form video, has become a key component of our product metrics. Those metrics have helped us to not only grow our advertising customer portfolio, but also our enterprise value-added services client pool. On the enterprise value-added services side, we not only have IP event like WISE, AIGC conferences, things like that, but also we have integrated marketing as well as some other new initiatives, including our business school, you know, project. We launched some individually high pool training courses and programs in the Q1.

If you look at our individual subscriptions, our pool level, that has increased significantly to close to 150,000. That's a very remarkable growth. The third, you know, category is we are also expanding geographically and on the sector side. For geographic expansion, we now not only have headquarters in Beijing, but also a headquarters in South China, namely Shenzhen. On top of that, we have 12 regional offices in all major, you know, the major cities in China, like Hangzhou, Chongqing, Hebei, Qingdao, and, you know, Jiangsu and those areas. We are actively penetrating into low-tier cities and expand to those markets.

Our clients in those areas not only cover the business side, but also on the government side. You know, we work with a lot of local governments to expand their local business. That will, you know, grow again, our relationship with the government as well as local key accounts there. That's the three major, you know, solutions we looking at our grow our customer base as well as customer engagement. Thank you for your question again, Rui Yin.

Operator (participant)

Thank you. Your next question comes from Pei Pei Xu, from Industrial Securities. Please go ahead.

Pei Xu (Analyst)

I will translate your question. Could you give us more detail about your strategy or plan of using AI? Are you already using any large model in daily content production? What kind of financial benefits could we expect from these applications? Thank you.

Dagang Feng (Co-Chairman and CEO)

Thank you, Pei Pei. Let me say, today we are already widely in contact with a variety of large models. This includes, for example, Baidu's large model, and Microsoft's large model. We are using them quite extensively. We are also doing internal integration, bringing all these large models together for our internal employees to use. Among these, we have already implemented some things, such as those related to image generation. For example, we have image generation, text translation, and our own knowledge retrieval and aggregation.

These aspects have already significantly reduced our costs. In terms of revenue generation, I think it can be divided into 2 aspects. The first aspect is that in our main business, including our content production, we are actively exploring how to use content to assist in interviews and help with draft writing. This is still in the experimental phase.

If it succeeds, I believe it will have a very direct improvement on our entire production process. The other aspect is our service business, our service review business. After using AIGC, we use it to optimize our search experience and improve our interaction with users, including our customer FAQ. In this FAQ, using AIGC has increased our efficiency by more than 10 times.

最 后 又 是 一 些 其 他 的 行 业 应 用 ， 比 如 说 我 们 在 Taobao 上 开 用 AI 开 通 ， 这 个 ， 这 是 一 个 非 常 有 影 响 力 的 传 播 内 容 ， 它 上 了 Weibo 的 热 搜 ， 也 是 一 个 非 常 好 的 刚 性 的 尝 试 。 我 想 从 大 概 从 这 几 个 方 面 都 会 对 我 们 的 生 产 ， 给 我 们 的 这 个 营 收 带 来 比 较 直 接 的 影 响 。

我 想 信 相 信 媒 体 类 的 公 司 会 对 AIGC 本 身 就 更 加 敏 感 ， 同 时 因 为 AIGC 今 天 的 这 个 能 力 ， 模 型 非 常 适 用 于 媒 体 类 公 司 ， 我 想 ， 我 相 信 这 样 的 趋 势 对 我 们 这 样 的 公 司 是 利 好 的 。 谢 谢 。

Xiaoquan Yuan (IR Manager)

Okay, thank you. On the platform, generally speaking, you know, economy sector, there is a natural fit between services care and AIGC technology, supported by the emergence of intelligent large language models. We are benefited in various ways by seamlessly integrating AIGC technologies with a variety of our business areas. AIGC tech enhance the efficiency of our content production, while saving costs across the board. For instance, as we integrated AIGC tasks into image generation, text translation, consulting, and data collection.

We saved on cost, manual effort, and time. Moreover, we were able to provide more personalized and user engagement. We achieved overall cost reduction and enhanced the efficiency of our business. Services care became the first-ever industry pioneering using AI techs to create an e-commerce store throughout the whole process. Its AI Taobao store, LumiWink, is in operation now, and the AI design products are available.

These are convincing demonstrations of our AI tech sensitivity and foresight. Our original video, I opened the Taobao store with AI robots, which features the key steps of services care's experimental opening of our store using AI techs, including naming and establishing the store and product design, image generation, and copywriting. This original video also triggered continued official follow-ups on this topic by Taobao. The organic combination of know-how, expertise, and AI techs diversified our revenue-generating channels.

The large language models have been the most disruptive technological revolution in recent years, and it may trigger the most extensive industrial innovation ever since mobile internet. It's brought new opportunities and growth momentum to the new economy sector. As a prominent brand and a pioneering platform dedicated to serving new economy participants in China, we will directly benefit from this new evolution.

Going forward, we will continue to provide users with high-quality content driven by advanced AIGC technologies, and more thoroughly integrate AIGC techs with content production. Thank you. That's my question. That's my answer.

Operator (participant)

Thank you. Your next question comes from Xiaocang Chen from Great Wall Securities. Please go ahead.

Xiaocang Chen (Analyst)

领导 好, 我 这 边 有 一 个 问 题, 就 想 请 教 一 下, 公 司 这 边 线 下 业 务 的 一 个 恢 复 情 况. 好, 谢 谢.

Dagang Feng (Co-Chairman and CEO)

就 2023 年 以 来, 36Kr 的 峰 会, 论 坛, 沙 龙 等 线 下 活 动 终 于 可 以 正 常 开 展 了. 比 如 最 近 我 们 举 办 了 全 新 的 IP 峰 会, AIGC 产 业 发 展 峰 会. 同 时 随 着 线 下 活 动 的 恢 复, 我 们 也 可 以 去 推 出, 继 续 完 善 我 们 的 这 个 商 学 院 的 课 程 设 计 和 培 训 内 容. 通 过 开 展 线 下 的 商 学 院 业 务, 我 们 的 个 人 订 阅 服 务, 客 单 价 大 幅 能 达 到 1,500 RMB.

刚 才 讲 到, 主 要 是 2 个 方 面: 一 个 是 我 们 的 峰 会 活 动, 包 括 我 们 的 商 学 院 的 课 程 培 训, 这 2 方 面 都 会 在 这 个 随 着 疫 情 恢 复, 又 获 得 明 显 的 提 升.

Xiaoquan Yuan (IR Manager)

Going into 2023, we were able to resume hosting offline events as frequently as before in summits, forums, and fireside chats. A case in point is that we recently launched all-new summit IP, the WISE 2023 AIGC Summit. As COVID fades away, we managed to optimize our B-school course design and training programs through organizing offline B-school courses. Our pool of individual subscription services increased substantially to RMB 150,000. Thank you.

Operator (participant)

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

Xiaoquan Yuan (IR Manager)

Okay. Thank you all for participating in today's call. If you have any further questions, please feel free to contact our investor relations team. Thank you again.

Operator (participant)

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