Hello, ladies and gentlemen, thank you for standing by for 36Kr Holdings Inc. Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. At this time, all participants are in listen-only mode. And after management's prepared 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, Yolanda Liu, IR Manager of the company. Please go ahead, Yolanda..

Thank you very much. Hello, everyone, and welcome to 36Kr Holdings' fourth quarter and the fiscal year 2020 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..

Thank you. And hello, everyone. Thank you for joining us today. Before we begin, I would like to extend my sincere gratitude to all of our stakeholders for your continued support over the past year. 2020 was an extremely unusual year for the whole world and also for our business.

As with many companies, we encountered varying degrees of challenges and macro economic uncertainties stemming from the widespread impact of the COVID-19 pandemic. Thanks to proactive responses from our supporters and other exceptional employees and their timely adaptation to changing market dynamics.

We believe we have weathered the storm having seamlessly overcome this short-term obstacles. Our fundamentals are evolving to be stronger and we’re entering 2021 from a position of strength as we return to more normal business activities.

First of all, we’re proud to have concluded 2020 with strong traffic momentum in the fourth quarter across our core platforms and the major third-party platforms, thanks to consistent delivery of high quality content and diverse distribution channels.

Our total average monthly page views reached a new record high of 630.2 million for the full-year 2020 increasing 48.1% from the prior-year and 11.3% sequentially.

This stellar performance marks our 11th consecutive quarter of PV growth and further validates that our ever growing and engaging PGC and UGC content are resonating well with our expanding audience..

Thank you, Yolanda. Thank you. Hello, everyone. As Feng indicated, the lingering impact from the COVID-19 pandemic expanded into our fourth quarter performance. However, revenue from our online advertising services and subscription services delivered sequentially growth which we see as a good sign of a gradual demand recovery.

Given the challenging environments and the license we learned, we had seen activity business operations in order to achieve long lasting efficiency, notably our gross marketing increased by 400 basis points to 42% in the fourth quarter of 2020 from the third quarter.

We also realized the positive operating cash flow for the third continuing quarter exemplifying the resilience and agility of our business model.

Additionally, we continue to see quarter-over-quarter improvements in our accounts receivable after we made our prepayment policy adjustments, and tightened requirements for the selected quality clients as we enhance or core trends in industry leading content production capabilities, and broadened monetization channel basically, they are well positioned to serve new economy participants and the growth alongside that.

Now, I will go through more detail our fourth quarter of 2020 financial results. Our total revenue were RMB 121 million in the fourth quarter of 2020 compared to RMB 323 million in the same period of 2019.

Online advertising services revenue decreased by 54% to RMB 69 million in the fourth quarter of 2020 from RMB 150 million in the same period of 2019. The decrease was mainly caused by the big demand from certain advertiser and expansion of stricter credit policy for customer selection.

Enterprise value-added services revenue were RMB 41 million in the fourth quarter of 2020, compared to RMB 154 million in the same period in 2019. The decrease was mainly caused by the decrease in revenue from integrity marketing services as company decrease the inputs in certain business.

Subscription services revenue were RMB 11 million in the fourth quarter of 2020, compared to RMB 18 million in the same period of 2019. The decrease were mainly caused by the decrease in revenue from individual subscription as some of the offline training courses were canceled due to the negative impact of COVID-19.

Cost of revenues were RMB 71 million in the fourth quarter of 2020 compared to RMB 166 million in the same period of 2019. The decrease was mainly caused by the decrease in revenue. Gross profit was RMB 51 million in the fourth quarter of 2020, compared to RMB 156 million in the same period of 2019.

Operating expenses were RMB 127 million in the fourth quarter of 2020 compared to RMB 107 million in the same period of last year. The decrease was mainly due to the increase in G&A expenses in the fourth quarter of 2020.

Sales and marketing expenses were RMB 35 million in the fourth quarter of 2020 compared to RMB 15 million in the same period of 2019. The decrease was mainly caused by the decrease in payroll related expenses and the share based compensation expenses.

G&A expenses were RMB 82 million in the fourth quarter of 2020 compared to RMB 47 million in the same period of 2019. The increase was mainly caused by the increase in allowance for doubtful accounts partially offset by the decrease in the share based compensation expenses.

R&D expenses decreased by 12% to RMB 9 million in the fourth quarter of 2020 compared to RMB 10 million in the same period of 2019, the decrease was mainly caused by the decrease in share based compensation expenses.

Share based compensation expenses recognized in cost of revenue, sales, marketing, R&D expenses and general admin expenses in total were RMB 9 million in the fourth quarter of 2020 and RMB 36 million in the same period of 2019.

Other expenses were RMB 10 million in the fourth quarter of 2020, which includes a loss of RMB 15 million from equity method investments and an income of RMB 5 million from government grants compared to other income, $2 million in the same period of 2019.

Income tax expenses were RMB 4 million in the fourth quarter of 2020, compared to RMB 20 million in the same period of 2019. The increase was mainly caused by the increase in the allowance for deferred tax assets. Net loss was RMB 19 million in the fourth quarter of 2020, compared to an income of RMB 32 million in the same period of 2019.

Non-GAAP adjusted net loss was RMB 81 million in the fourth quarter of 2020 compared to an income of RMB 68 million in the same period of 2019. Net loss attributable to 36Kr Holdings Inc.

ordinary shareholders was RMB 91 million in the fourth quarter of 2020 compared to income of RMB 99 million in the same period of 2019 which includes operation returnable non-controlling interest, accretion and redefinition effects of convertible redeemable preferred shares.

Basic and diluted net loss per share was RMB 0.09 in the fourth quarter of 2020 compared to the basic and diluted net loss per share of RMB 0.1 and RMB 0.03 in the same period of 2019.

As of December 31 2020, the company had cash and cash equivalents, restricted cash and short-term investments of RMB 209 million compared to RMB 264 million at the same time in the last year.

To be mindful of the lines of our earnings call, for the fiscal year of 2020 financial results, I will encourage listeners to refer to our earnings press release for further detail. This concludes all of our prepared remarks today. We will now open the call to questions. Operator, please go ahead..

Thank you. Our first question comes from the line of of Credit Suisse. Your line is open. Please go ahead..

So good evening management. Thanks for taking my question. I just have a quick one. Just wanted to ask ad demand by vertical. How does it trend in the fourth quarter? Thank you..

Okay, thank you for your question, Abby. And I think directly on the customer demand side, our multinational customers have been affected the most leading to delayed budgets for advertising. However, since Q3 advertising mix from some customers began to recover like what's being in automobile and three seats.

At the same time, quite a few Chinese consumer brands which are, which we actively reached out in the second half of 2020 show their growing demand for our platform. And another characteristic for our new economy customers, they show their resilience during and post the COVID-19 as their own businesses keep growing.

And this contributed to the increases in the number of customers and average customer price in this year, especially when it comes to those giants and super unicorns.

And we can share some more color on the industry distribution, the Top five are in 2020 are consumer entertainments, Enterprise Services, 3C and e-commerce besides we also saw strong demand growth for our advertising services in the AI and online education industries.

So to sum up, we can see that we achieved nearly 36 percentage sequential just to correct the little mistake. And if we see in the last quarter, we can see this sequential growth have already achieved as 63% in the 2Q, so we can see these consecutive recovery from our advertisement segment. I think this is for your question. Thanks..

Thank you. Our next question is from the line of Vincent Yu of Needham & Company. Your line is open. Please go ahead..

Thank you management for taking the question.

The first question is about the 2021 outlook, can management share some insights on the fiscal year 2021 outlook and where do we see the most potential in terms of revenue growth and where are we investing the most? The second question is can management share some insights on the shift in revenue mix in first quarter were pretty drastic.

So what drove the shift and is this going to be the new normal going toward? Thank you..

Thank you so much, Vincent for questions. And I think these two questions are well linked. So first question, to comment on our outlook for this year, I think like for us and for most of the companies in China and globally 2020 must be very challenging year. And from the macro economic level and for the fact that involving market dynamics.

So this situation made us to think about our business from a longer-term perspective. But also in the short-term, we also proactively made multiple adjustments in our operations.

In the short and medium term maybe we will remain focused on our video oriented strategy, and to explore opportunities in broader addressing markets for ourselves I mean for the private and the public markets. And second, you can see we already explained for the longer-term, we will involve our business model into a more scalable and political.

We expected maybe a decrease in our enterprise value-added services in this year. But we believe it's extremely important for our longer-term developments.

And in this year, our advertising sites, we expected a continued recovery in this year, just like we performed in last Q3 into Q4 and as the offline activity restrictions are totally lifted, I believe our offline businesses will continue to restore and be strengthened.

And on the investment side, we’ll keep investing in our technical and data capabilities, so as to facilitate the evolution and upgrading for our current enterprise value-added services and our subscription products as well as to innovate other new products. So, to sum up, we’ll see the main driver will still be our Enterprise VS.

And for the second question as you noted that, there is a little bit structure changing for our fourth quarter, but actually from the whole year's scope, the Enterprise VS was the top contribution to our total revenue around 50% and compared to the advertisement accounts for 44.7%.

As I just shared the idea the structural change brought by the pandemic impact will mainly lie in our enterprise value-added services. So, we made this prudent adjustment and evolved into a more scalable and contract political model for our enterprise value-added services over the last two quarters in 2020.

And at the same time, we cut down some low margin integrated marketing business, which is accounted for the most in our enterprise value-added service segments. So that you can see, that's why the revenue of the enterprise value-added services in Q4 decreased.

However, we believe it's also brought already higher GP margin and continue the improvement in operating cash flow for us. So these are for your two questions and thank you for your questions..

Thank you. .

Thank you. Our next question is from the line of of CICC. Your line is open. Please go ahead..

I will translate for myself, in 2020 the pandemic did have an impact on offline activities and how was the progress of offline Enterprise Service recovery and how to look forward in 2021? Thank you..

Thank you for your question, Josh and as we mentioned earlier, just started from the late August of 2020, we started to hold offline events in Shanghai as soon as domestic restrictions were lifted, initially lifted and these events were highly praised.

And again in December, early December in Beijing, as Paul just mentioned, we successfully hosted our featured WISE 2020 Conference which is also highly praised by industry and all kinds of new economy participants. We extended agenda setting and the guest invitation for WISE and efforts.

These efforts have facilitated this WISE 2020 to achieve a record high of online and offline engagements. And even though we extend this scale of this conference by the JP Morgan for our offline events, do retained high level, so that you can see that we still retain this ability to hold these offline events.

And following the popularity of WISE Conference, we hosted another offline event in Shanghai for our 2C IP Amazement Series. And this event focused more on like culture and the connected emerging Chinese consumer brands with potential consumers and for this year, there is no new outbreak and we believe there will be a strong recovery as well.

Our WISE series will be expanded across a wider range of industries and regions. For example, the coming GPLP Conference and the WISE Featured Industry Summit will be held in Shenzhen soon in this May. And more 2C IP will be launched in Shanghai, Beijing and other cities this year as well, along with our growing and broader user base.

And as I just shared with you, also some new offline IPs like exclusive seminars on strategy and industry interview by 36Kr were launched in fourth quarter against the backdrop of the integration of the private and the public markets.

So to sum up, we’re strengthening our ability to serve reference in New Economy participants better with more offline initiatives. Thank you. Thank you, Josh for the question..

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Thank you. Due to time constraints, that concludes today's question-and-answer session. Now I'd like to turn the call back over to the company's closing remarks..

Sorry for the time limitation. So that’s it for us today. Thank you once again for joining us today. If you have further questions, please feel free to contact us at 36Kr Investor Relations through contact information provided on our website or The Piacente Group investor relations. Thank you all..

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