36Kr Holdings Inc.
Q4 2023 Earnings Call Transcript

Published: 28 Mar 2024

[Operator:]

Hello, ladies and gentlemen. Thank you for standing by for 36Kr Holdings Inc. Fourth Quarter and Fiscal Year 2023 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. I will now turn the call over to your host, Jianan Ding, IR Manager of the Company. Please go ahead, Jianan.

[Jianan Ding:]

Thank you very much. Hello, everyone and welcome to 36Kr Holdings fourth quarter and fiscal year 2023 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 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 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 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 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.

[Dagang Feng:]

Thank you. Hello, everyone. Thank you for joining our fourth quarter and full year 2023 earnings conference call. 2023 was an extraordinary year for 36Kr as we continuously strengthen our content ecosystem, leveraging our periods content creation partners and comprehensive marketing offerings we drove growth in both our user base and monetization. As a result, our annual revenue reached RMB340 million, up 5% year-over-year and we sustained our high gross profit margin of 54%. 2023 also marked the year of exposed growth in AC by actively embracing the vast opportunities brought by this industry transformation, we were able to dive deeper into visionary AGI applications. accelerating AGI adoption in real-world scenarios. Let me share some additional details of our 2023 progress across 3, 4 areas

[Lin Wei:]

Thank you, Paul. Now I'd like to walk you through more details of our fourth quarter and fiscal year 2023 financial results. Please note our numbers are in RMB, unless otherwise stated. Total revenues were RMB103.3 million in the fourth quarter of 2023, a 7% increase from 96.6% in the same period of last year. Total revenues for the full year of 2023 were RMB340.2 million, a year-over-year increase of 5.5%. Online advertising services revenue were RMB68.6 million in the fourth quarter of 2024 [ph], an increase of 10% compared to the same period of last year. For full year of 2023, our online advertising services grew by 8% year-over-year to RMB238.7 million. The increase was primarily attributable to more innovative marketing solutions we provide to our customers as well as proactive sales strategies we adopted during the year. The average revenue per online advertising customer in 2023 were RMB489,000, a 17% increase year-over-year. Enterprise value-added services revenues were RMB26.3 million in the fourth quarter of 2023, a 4% increase from the same period of last year. For full year 2023, our enterprise value-added services revenue was RMB67.3 million compared to RMB72.6 million in the previous year. The 7% decrease was primarily due to the transition of our integrated marketing services, partially offset by the growth of our app enterprise value-added services in 2023. Subscription services revenues were RMB8.4 million in the fourth quarter of 2023 compared to RMB8.9 million in the same period of last year. The slight decrease was primarily attributable to the structural changes to our institutional clients in China, partially outside by the increase in individual subscription services. For full year 2023, our subscription services revenue was RMB34.2 million, representing an increase of 1% year-over-year. The increase was primarily attributable to our continuous efforts to offer high-quality subscription products to our subscribers, especially individual subscribers. Cost of revenues was RMB45.8 million in the fourth quarter of 2023 compared to RMB47.6 million in the same period of last year. The decrease was primarily attributable to the optimization of personnel-related costs. For full year 2023, our cost of revenues was RMB158.2 million compared to RMB137.8 million in the previous year. The increase was primarily attributable to higher content costs and fulfillment costs. Gross profit was RMB57.6 million in the fourth quarter of 2023, increasing by 18% from the same period of last year. Gross profit margin was 56% in the fourth quarter of 2023, up 5 percentage points from 51% in the same period of last year. For the full year of 2023, our gross profit was RMB182 million compared to RMB184.6 million in the previous year. Gross profit margin for full year 2023 was 54% compared to 57% in the previous year. Operating expenses were RMB30 million [ph] in the fourth quarter of 2023 compared to RMB69 million in the same period of last year. For full year 2023, operating expenses were RMB276.2 million compared to RMB229.2 million in the previous year. Sales and marketing expenses were RMB30.3 million in the fourth quarter of 2023, a decrease of 8% from the same period of last year. This is primarily attributable to the decrease in payroll-related expenses, partially upside by the increase in marketing expenses. For full year 2023, sales and marketing expenses were RMB127.5 million compared to RMB122.1 million in the previous year. The slight increase was primarily attributable to the increase in marketing expenses and promotion fees during the year. G&A expenses was RMB35.3 million in the fourth quarter of 2023 compared to RMB21.7 million in the same period of last year. The increase was primarily attributable to the increase in the loss of credit losses. For full year 2023, G&A expenses were RMB107 million compared to RMB52.1 million in the previous year. The increase was mainly attributable to the increase in allowance for credit losses as well as certain one-off expenses, including severance payments as we optimized our organization and office lease termination fees as we moved our headquarters office in fiscal year 2023. Research and development expenses were RMB4.4 million in the fourth quarter of 2023, a 70% reduction compared to RMB14.5 million in the same period of last year. For full year 2023, our research and development expenses were RMB41.7 million, 24% down from RMB55 million in the previous year, as we proactively embrace AI technology and streamlined our research and development teams, resulting in a decrease in payroll-related expenses. Share-based compensation income recognized in cost of revenues, sales and marketing expenses, research and development as well as G&A expenses totaled RMB0.4 million in the fourth quarter of 2023 compared to SBC expenses of RMB4.6 million in the same period of last year. This fluctuation was primarily due to the reversal of share-based compensation expenses related to future in Q4 2013. For the full year of 2023, the total amount of share-based compensation expenses were RMB4.7 million compared to RMB13.9 million in the previous year. Other expenses were RMB5.1 million in the fourth quarter of 2023 compared to other expense of RMB1.2 million in the same period of last year. For full year 2023, other income was RMB4.9 million compared to other income of RMB67.5 million in the previous year. The decrease was primarily because the company recognized RMB38 million gain on disposal of subsidiaries and RMB16 million of long-term investment income in 2022 but recognized RMB8.1 million fair value loss of long-term investments in 2023. Net loss was RMB17.7 million in the fourth quarter of 2023 compared to a net loss of RMB21.5 million in the same period of last year. For full year of 2023, our net loss was RMB89.2 million compared to net income of RMB22.6 million in the previous year. Non-GAAP adjusted net loss was RMB18.1 million in the fourth quarter of 2023 compared to non-GAAP adjusted net loss of RMB16.9 million in the same period of last year. For full year 2023, non-GAAP adjusted net loss was RMB84.6 million compared to non-GAAP adjusted net income of RMB36.5 million in the previous year. Net loss attributable to 36Kr ordinary shareholders was RMB18.8 million in the fourth quarter of 2023 compared to net loss attributable to 36Kr ordinary shareholders of 36Kr 20.8 million in the same period of last year. For full year of 2023, net loss attributable to 36Kr ordinary shareholders was RMB90 million compared to net income of RMB21.9 million in the previous year. Basic and diluted net loss per ADS were both RMB0.45 in the fourth quarter of 2023 compared to net loss per ADS of RMB0.50 in the same period of last year. For full year 2023, basic diluted net loss per ADS were both RMB2.16 compared to basic and diluted net income per ADS of RMB0.53 in the previous year. As of December 31, 2023, the company had cash, cash equivalents and short-term investments of RMB117 million compared to RMB160 million as of September 30, 2023. This concludes all of our prepared remarks today. We will now open the call to questions. Operator, please go ahead.

[Operator:]

[Operator Instructions] Your first question comes from Shan Jiao with CICC.

[Shan Jiao:]

Congratulation to a solid growth in the revenue in 2023. And how does the management view the advertising revenue trend in the first quarter and in 2024?

[Dagang Feng:]

Thank you. Despite persistent macroeconomic changes in 2023, our advertising business demonstrated solid growth momentum, achieving 8% year-over-year revenue growth. This success is attributable to our ongoing commitment to enhancing content influence and our ongoing client base expansion across diverse industries, particularly among top-tier and midsized advertisers. The steady growth trend in ad spending by our advertisers propelled a year-over-year increase in our pool of 17% attestment to 36Kr's robust business resilience. In addition, we have been actively exploring and harnessing AI technology to enhance marketing and craft innovative strategies including personnel, advertising content generation, advertising placement and live streaming featuring digital influencers, et cetera. As such, we are providing our customers with marketing solutions that are smarter, more efficient and more innovative. We are cautiously optimistic about our advertising growth trajectory for 2024, aimed at the ongoing macroeconomic rebound, sustained stimulus policies and new development strategies such as advanced productivity as a leading service provider for and the facilitator of new economy and advanced productivity stakeholders, we expect robust growth in our advertising business in 2024, particularly in industry sectors such as demand from business and AI business sectors as well as the need to market advanced technologies from traditional asset prices.

[Operator:]

Your next question comes from Zhao [ph] with SWS Research.

[Unidentified Analyst:]

What is the latest progress on both long- and short-video business? What are the plans for our further explore growth potential? And what is the company's layout and further developed plan in generative AI?

[Dagang Feng:]

Thank you for your question. Well, for your first question, our short video adds both the wider customer acceptance and the higher ARPU compared to other advertising formats providing the major of the company's overall advertising revenue in 2023, leveraging our peerless content creation and a substantial influence across major platforms commercial various leading companies. This generated revenue totaling [indiscernible] accounting for over 20% of the company's total advertising revenue. At the same time, our engaging content across finance, economics and useful lifestyle garnered website across major platforms that BDB, et cetera. As of the end of 2023, our short-video followers reached 9 million, including a significant 2.2 million BDB alone. Regarding long videos throughout 2023, our long video talk show series in 2033 roster of distinguished and in-depth analysis, a rarity within the industry. Our show rapidly captured audience attention and achieved a substantial monetization success while earning growing reviews as 2 amass over 350 million views. We also thrilled about the 2 programs of our upcoming series for say in 2034 which is in full swing. In 2024, we will deepen both [indiscernible] on develop, stepping up our investments in content creation and service customization and exploring a wide array We have a handful of long-video programs in the pipeline which we will further [ph]. Now for your second question, as we all know, 2023 assured in the area AIGC as a new economic content creation platform, 36Kr skillfully leverage the inherited synergies between content creation and AIG technology. We rolled out the emergency intelligence, a specialized account focused on providing high AIGC tech content. We also further pinned our integration of AIGC with content production actively harness AIGC technology for content creation across the broad copyrighting and translation to image generation and more, reducing cost and inefficiency, in addition, leveraging our king acumen visual AI technology, we pioneered the process of opening a Taobao store exclusively using AI. During the Asia games, we innovated once again to create an AI-driven Asia Games blogger on We also teamed up with Alibaba AI model. We have also advanced AI applications across scenarios and unveiled array of AI-driven perspectives, such as the AI financial report interpretation launch in collaboration with as well as a company a brief and medium coverage outreach. These offerings empower customers with intelligent information collection, analysis and reporting services. Through the strategic development of AIGC technology we broadened the preview and position of our customer operate initiatives effective enacting with a diverse spectrum of enterprise organizations previously beyond reach due to resource intensive footnote and manpower limitations.

[Operator:]

Your next question comes from Peipei Qiu with Industrial Securities.

[Peipei Qiu:]

I will translate my question. The subscription service business is growing faster than expected. So what are the main factors behind this? And what are the new growth strategies for this segment in the future?

[Dagang Feng:]

While the reps in our subscription services was primarily propelled by the launch of [indiscernible] like I just mentioned, throughout 2023, as we diligently optimize our premium training courses, that venture capital class and funding acceleration cap, we also joined hands with global team institutions, deliver world-class and programs for corporate executives. Our subscription services are pulled over RMB140,000 [ph]. Moreover, in respect to the escalating need for AI expertise and applications, we partnered with top-tier institutions, including Peking University and University unveil the global intelligent entrepreneurial initiative, enabling participants to further advance AI awareness and AI utilization through hands-on training. In 2024, we will continue to diversify our core course offerings and welcome more institutions and partners, continually inviting our portfolio of training options. We are actively expanding our AI-driven subscription offerings to cater to both 2C and 2B segments, including AI-powered solutions for financial report interpretation, corporate briefings and more by harnessing AI technology for intelligent information question, analytical intelligence and reporting, among other things. We ensure our subscribers receive a superior level of service and value for the accelerating the growth in our subscription services.

[Operator:]

Your next question comes from Ricky [ph] with Sealand Securities.

[Unidentified Analyst:]

What are the growth prospects for 2024?

[Dagang Feng:]

While Looking back on 2023, despite macro uncertainties and shifting external dynamics, we delivered solid results with 5.5% year-over-year revenue growth. We are cautiously optimistic of 2024 and we expect to sustain revenue growth and improved profitability. For one thing, we will further enrich our content ecosystem and reinforce our products and services. We will also actively minimize utilization of AIGC technology across content production initiatives and launch additional AI-driven products to engage with a diverse spectrum of enterprises and clients previously beyond reach due to resource intensive workloads and manage our limitations. Moreover, the introduction of the notion of Advanced Productivity has fostered a strong sense of confidence and assurance across the company, giving our comprehensive offerings that support and empower a diverse spectrum of businesses. We are well positioned to capture greater commercialization opportunities arising from this new strategy. Furthermore, with the optimization of our organizational structure and systematic CapEx in cost and expenses, we are posed to advance our goals of cost-reduction and efficiency enhancements which will further bolster our operating leverage, driving overall profitability to new heads.

[Operator:]

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

[Jianan Ding:]

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

[Operator:]

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