36Kr Holdings Inc. (NASDAQ:KRKR) Q4 2022 Results Conference Call March 29, 2023 8:00 AM ET

Company Participants

Dagang Feng - Co-Chairman and Chief Executive Officer

Lin Wei - Chief Financial Officer

Conference Call Participants

Jing Chen - CICC

Lingyi Zhao - SWS Research

Operator

Hello, ladies and gentlemen. Thank you for standing by for the 36Kr Holdings Inc. Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's remarks, there will be a question-and-answer session. Today's conference call is being recorded.

I will now turn the call over to your host, John Anding [ph] IR Representative of the company. Please go ahead John.

Unidentified Company Representative

Thank you very much. Hello, everyone. And welcome to 36Kr Holdings fourth quarter and fiscal year 2022 earnings conference call. The company's financial and operational results were released earlier today and have been made available online. You can also view the earnings press release by visiting the IR section of our website at ir.36kr.com.

Participants on today's call will include our Co-Chairman and CEO, Mr. Dagang Feng, and our Chief Financial Officer, Ms. Lin Wei. Mr. Feng will start the call by providing an overview of company and performance highlights of the quarter in Chinese, followed by an English interpretation. Ms. Wei will then provide details on the company's financial results before opening the call for your questions.

Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the company's prospectus and other public filings as filed with the U.S. SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law.

Please note that 36Kr's earnings press release and this conference call include discussions of unaudited GAAP financial measures, as well as unaudited non-GAAP financial measures. 36Kr's earning press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures. And please note that all amount mention numbers are in RMB.

I will now turn the call over to our Co-Chairman and CEO, Mr. Dagang Feng. Feng, please go ahead.

Dagang Feng

Thank you. Hello everyone. Thank you for joining our fourth quarter and fiscal year 2022 earnings conference call.

2022 was a year full of challenges, against the backdrop of uncertainties brought above the COVID-19 resurgence and macro headwinds, we delivered solid performance, our full year revenue reached RMB322 million, growing 2% year-over-year, with the profit of RMB22.64 million. Making our first full year profit since our listing, thanks to our fine operations and the professional expertise we have acquired over our years of dedication to the new economic sector. Driven by our dual engine strategy filled by content and products, we have developed a diversified business model and comprehensive content ecosystem focusing on business, technology, and lifestyle, we’ll continue innovation across our content, product and services.

Next, I'd like to share more detailed progress update on each of our segment in 2022.

I will begin with the enrichment of our financial performance. We continue to elevate our content generation capabilities through user diverse needs with high content planning abroad variety of public. In 2022, we launched a series of sub vertical media, including Digital Kr, Kr Carbon, Hardcore Kr and Waves, providing this insight across popular fields in the investment circles such as digitalization, dual carbon, and ESG, hardcore technology and specialized innovative companies.

We also created user centric content verticals based on topics related to the younger generation's lifestyles, including Oh! Youth, Super Review and Career Bonus achieving differentiated user coverage. Meanwhile, we produce a varied late of content programs including “CEO Tips” still proceeding 2033, long China 50, and Super factory facilitating broad dissemination of new economic content.

These efforts enabled us to keep producing a considerable number of blockbuster articles throughout the year with nearly 700 articles racking up page views exceeding 100,000. The launch of this sub-vertical media also brought us revenue upside amounting to tens of millions of RMB, for instance, diving deeper into the enterprise digitalization field with digital Kr, we will expand our presence in this huge market worth hundreds of billions of RMB.

Waves, another popular program from the sub-vertical will also raise our revenue exceeding by increasing our influence among financial institutions.

Furthermore, we made continuous efforts to launch content in diverse formats, including text, graphics, short form video, audio, and live trainings through both our own platform and external channels that working with new media platforms such as Weibo, Zhihu, Toutiao, Douyin, Bilibili, Xinhua, Weixin among others. We have built a multidimensional content dissemination system with comprehensive courage and full access to users and new economy players of which our content influence.

On a related note, 36Kr has always prioritized application of artificial intelligence, technology, and content production and aggregation has adopted the latest AIGC and ChatGPT technologies in our content ecosystem. Recently, we were invited as one of the first batch of companies to partner with Baidu, ChatGPTs style ERNIE Bot ecosystem. We believe this partnership will further elevate our content production efficiency and quality, thereby enhancing user interaction and stickiness.

Second, new user expansion. Our diversified content ecosystem has continuously grows of our user base. In terms of user number, as of the end of 2022, the number of our followers exceed 28 million up 23% year-over-year, of which short video followers accounted for 7.75 million rising by 43% year-over-year. User quality of remain robust with an ever broadening array of our products, rising investment in entrepreneur related, several officials, pay employees in large and [indiscernible] will place normal and young people chasing their dreams. Furthermore, we have effectively certified user loyalty and engagement of our high quality, professional content, virtual.

Third, our new IT innovation. Over the past year since our inception, we have continuously pioneered industry benchmark ITs in the new economic sector along with our flagship, Flagship New Economy Conference in 2022, we created X360 [ph], Entrepreneurial carnival and China Investor Summit with the same maintaining the miracle. And innovative IT was efficient empower startup companies to connect with investment institutions.

Moreover, the creation of our unexpected and a marvelous series of IT which integrated consumption and entertainment drove fee end user growth and customer acquisition for enterprises. Not only, the marvelous IT made a successful foray into low experience market in 2022 versus exclusive, the marvelous taste of partial event. Currently created with our regional offices in Sichuan and Chongqing. We worked with hundreds of CEOs, government representatives and investors throughout the course of this event to unlock opportunities in the local new consumer industry, which also help our brand influence and service system to penetrate following into the region.

Fourth, innovation on digital tools. In November 2022, we launched the services Kr Venture Capital platform, reaffirming our commitment to expanding media boundaries and making our further expansion to digital tools services, by integrating information and data, we provide standardized solutions and precise financing exposure to facilitate the discovery of high quality early stage projects, while offering our management services to connect projects with potential investors.

Now, this is Kr Venture Capital platform has calculated tens of thousands of outstanding projects, of which 80% have finished at least one round of financing, having attracted the attention of over 1000 investors from hundreds of top tier investment institutions. We completed up to a 1000 venture capital measures per week on average. Currently, our venture capital platform is still in the product refinance stage. We do expect to begin commercialization in the second quarter of 2023 to give you a point of reference, a pure of similar product PE Data [ph] along with PE DataMax have achieved annual revenue exceeding RMB60 million. Therefore, we believe the 36Kr Venture Capital platform with its integrated functionality expanding resources connections, services analysis is posed to bring us considerable revenue upside.

Last but not least product upgrade. Chinese productization was an important theme for us in 2022, and as such, we integrated and upgraded some of our relatively mature product series. For example, 36Kr Research Institute continuous expand its industry coverage with a consistent focus on industry vertical development. Capital trends and policy orientations will also enhance its research depth and the level of professionalism, which helps other company as a whole improve its customer acquisition and commercialization performance through its distinct product portfolio. Clear customer positioning and evident advantages.

Related to Kr business school is a business training product we revamped in 2022. We design its venture capital class and related training programs provide training for small and medium sized enterprises in varying stages of development and connect them with capital and other resources contributing to their sustainable development. During the COVID-19 outbreaks in the second half of 2022, 36Kr business school held training sessions and public courses on refinancing in various class formats such as our funding [indiscernible], which contributed to our commercialization revenue will have observed that the thriving venture capital market is fueling increased demand for entrepreneurship training.

In fact, some of our peers have reached RMB100 million of annual revenues in this area. For 36Kr, we plan to launch a wide variety of courses and expand sales channels in 2023 to realize greater growth.

I also want to specifically highlight that we continue to upgrade and iterate our platform product, the services care Enterprise Service Review platform in 2022. In addition to creating a quadrant encompassing product databases user review libraries, pay industry person databases, and knowledge graph libraries. We have fully refined its industry product evaluation system and standards. The platform fosters deep connections between seller and buyers, helping enterprises acquire customers with position and enhanced their brand influence. I will elaborate on the development of the enterprise Service Review Platform a bit later.

In summary, we build on our enriched ecosystem, accumulated product advantages and enhanced our operational capabilities throughout 2022, consistently strengthening our commercialization capabilities. This empowered us to steadily grow our revenue and realize our first full year profit since listing.

Next, I'd like to share the details of our commercialization progress.

We’ve seen a solid result across all of our business segments in 2022, hopefully, our advertising revenue reached RMB222 million up 8% year-over-year. Number of our advertising customers grew to 532 with our relatively stable year-over-year growth.

We continue to leverage the advantages of our advertising business centered on branding and advocacy, while also exploring new scenarios and solutions for content marketing and commercial integration. Along with graphics and texts, we tap into innovative advertising formats such as short video, live streaming, and relogin, offering customers a diverse selection of media rich products.

In terms of industry expansion, we broadened our advertiser base in 2022 from our core industries such as TMT, consumer auto, mobile, real estate, advanced manufacturing, and new energy to include the medical industry, health and wellness, banks and other financial institutions. We also formed a partnership with leading industry players, including Johnson & Johnson [indiscernible], among others. At the same time, other advertising commercialization channels have become increasingly diverse, well-balanced, and we have standard our monetization skill across more traffic platforms such as Bilibili, Weixin, Xinhua, and WeChat video account, in addition to our services Kr webpage, such as Kr app, WeChat and Weibo.

Notably, our short video revenue in 2022 more than double year-over-year to reach tens of million RMB on a full year basis. Accounting for 17% of total advertising revenue, our short videos have raised the massive user traffic with high-quality original content, attracting the attention of enormous young users and advertisers. Many renowned companies have become repeat customers of our short video advertising services, such as Intel, IC, Huawei, JD.com and Zhihu.

In the fourth quarter we customize a mini variety short video for the Honor 80 smartphone, entitled [indiscernible]. The video featured array of young opinion leaders such as talk show actors, hosts and travel bloggers, explaining an enormous rating the product's functions and highlights in video form, posting the customer's contract size to a new high.

With respect to enterprise value added services, we host nearly 30 industry summits covering hot topics, including new technology, new energy and new consumption. During the COVID-19 outbreak, we adopted an integrated online offline format, leveraging video and live streaming among other formats to connect more new economy players through digital conferences, notably, our live event achieved a total exposure exceeding 4.5 billion, while X360 and Enterprise Carnival our new IT event accepted 350 million views from simultaneous live streaming on a total of 24 platforms, further demonstrating our strong influence and service capabilities in the new economy.

Regarding consultant services, our full year revenue grew by 70% year-over-year in 2022. 36Kr recently published the recent report in various formats serving many local government customers and established in-depth collaborations with a wide range of well-known enterprises including Volkswagen, Group China, Chuxing.com Ctrip, JD.com, NetEase, [indiscernible] Higher Capital, [indiscernible] and Beijing ZhongAn Fund, so many websites are coming from industry professionals.

At the same time, we continue to progress on scope of our original expansion. Thus far, will help to build the regional operating network currently in total, six countries and cities and established mutually beneficial relationships with both local governments and enterprises. This has enabled us to empower New Economy players as they expand regionally and enter lower tier markets. In 2022, the number of our original customers increased significantly creating a more balanced mix of government and enterprise customers, laying a solid foundation for exploring the wider enterprise value added services market in the future.

As for our subscription services, our full year subscription revenue amounted to RMB28 million in 2022, rising by 1% year-over-year, not only the number of our institution and enterprise subscriber as well as approved both further approve of individual subscription service also grows substantially just to the growing popularity of our 36Kr Business group new courses.

Last but not least, I'd like to share an update on our second growth engine, the 36Kr Enterprise Service Review platform. In 2022, we remain focused on growing our platform's influence and follow optimizing its service system regarding product functions, we launched enterprise service review report to compare products and recommend models based on users' actual needs, while generating independent objective data analysis, ranking reports and charts, efficiently optimizing users' decision-making scenarios.

We also refine enterprise service review platforms, search function, adding search paths for product functions and articles, increasing the accuracy of user’s researchers. In addition, we improved our product chart algorithm and its connectors to help users better understand product information, user views and industry rankings, elevating convenience and usability. In terms of customer acquisition formats, we built a variety of content products and IPs across graphics, live streaming, offline [indiscernible], and other formats from user perspective consistently rich decision makers in every industry, which follow enhance the enterprise service review platforms, brand release and influence.

Through relentless efforts in our online offline operations, we'll achieve the rapid growth in the enterprise service review platform's operating matrix across the board as of the fourth quarter of 2022, the number of leads have grown 700% compared with the same period of last year, and the cumulative number of products on the platform exceeded 8,000 a year-over-year increase of 52% with a total number of reviews surpassing 60,000 [indiscernible] increase 200% year-over-year.

The number of merchants on the platform exceed 1,200, doubled the number in the same period of 2021. Additionally, in terms of commercialization, as of now, the enterprise service review platforms contracted sales exceeded RMB10 million with all from an extensive roast of well-known size suppliers such as [Indiscernible] and TAPD, Google Cloud and [indiscernible]. We also established strategic marketing cooperation with Volcano Engine under its brand as well as the SMB unit of Lenovo, a Fortune Global 500 company in 2022.

Going forward, the Enterprise Service Review platform will serve a growing cohort of enterprises in need of digital transformation upgrades on reaching our platforms value and grid boosting our commercialization capability.

As we embark upon the post pandemic early in 2023, we have observed many positive market signals emerged, and investors confidence continues to threaten accordingly leading to increasing business vitalities throughout the new economy sector, we will see the commercialization opportunities afforded by the economic recovery to pace explore immediate boundaries and build a richer portfolio of products and services. We expected to see continued revenue growth and deliver another full year profit in 2023 with darkness gave light as COVID-19 receipt. We believe we are well positioned to consistently allow more of those potential and enterprise value differentiating ourselves as we accompany and empower our new economy partners and creating long-term sustainable value for society and shareholders along the way.

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

Lin Wei

Thank you, [indiscernible]. Now I'd like to walk you through more details of our fourth quarter and fiscal year 2022 financial results. Total revenues for the fourth quarter of 2022, were RMB96.6 million, a sequential increase of 2%. Total revenues for the full year of 2022 were RMB322.5 million, a year-over-year increase of 2% compared to the full year of 2021. Our online advertising services revenue were RMB62.2 million in the fourth quarter of 2022 compared to RMB76.4 million in the same period of last year. The decrease was primarily equitable to relatively weak advertising spending caused by the negative impact of COVID-19 control measures and infections across China during the quarter.

For the full year of 2022, our online advertising services grew by 3% year-over-year to RMB221.6 million. The increase was primarily attributable to more innovative marketing solutions we provided to our customers, as well as proactive sales strategies we adopted to navigate challenging environment during the year.

Enterprise value-added services revenue were RMB25.4 million in the fourth quarter of 2022, compared to RMB30.3 million in the same period of 2021. For the full year of 2022, our enterprise value-added services were RMB72.6 million compared to RMB74 million in the previous year. The 2% decrease was primarily because some of our offline events were delayed or down-scaled due to disruptions from COVID-19.

Subscription services revenue RMB8.9 million in the fourth quarter of 2022 compared to RMB9.6 million in the same period of 2021. The decrease was primarily attributable to the negative impact of COVID-19. For the full year of 2022, our subscription services revenue were RMB28.2 million, representing an increase of 1%, compared to RMB28 million in the same period -- in the previous year. The increase was primarily attributable to our continuous efforts to offer high-quality subscription products to our subscribers during 2022.

Cost of revenues were RMB47.6 million in the fourth quarter of 2022, compared to RMB40.7 million in the same period last year. The increase was primarily attributable to higher cost accounting costs related to expansion of our commercial oriented content program. For the full year of 2022, our cost of revenues was RMB137.8 million, compared to RMB128.8 million in the previous year. The increase was primarily attributable to the increase in content related costs, partially offset by decrease in cost of our offline events.

Gross profit was RMB48.9 million in the fourth quarter of 2022, compared to RMB75.6 million in the same period of last year. For the full year of 2022, our gross profit was RMB184.6 million, compared to RMB187.9 million in the previous year. Gross profit margin for the full year of 2022 was 57.3% compared to 59.3% in the previous year. Operating expenses were RMB69 million in the fourth quarter of 2022 compared to RMB61.6 million in the same period of last year. For the full year of 2022, operating expenses were RMB229.2 million compared to RMB282 million in the previous year.

Sales and marketing expenses were RMB32.8 million in the fourth quarter of 2022, a decrease of 16.5% from the same period of last year, primarily attributable to the decrease in marketing related expenses. For full year 2022, sales and marketing expenses were RMB122.1 million, a contraction of 15% compared to the previous year, primarily attributable to the decrease in payroll related expenses, share-based expenses and marketing expenses.

G&A expenses were RMB21.7 million in the fourth quarter of 2022, compared to RMB9.6 million in the same period of last year. The increase was primarily attributable to the release of allowance for credit losses recognized in the fourth quarter of last year. For full year of 2022, G&A expenses were RMB52.1 million compared to RMB98.6 million in the previous year. The decrease was primarily attributable to the release of allowance for credit losses and the decrease in professional fees. The release of allowance for credit losses was mainly due improved collection of accounts receivables.

Research and development expenses were RMB14.5 million in the fourth quarter of 2022 compared to RMB12.6 million in the same period of 2021. For the full year of 2022, our research and development expenses were RMB55 million compared to RMB47.5 million in the previous year. The increase was primarily attributable to the increase in payroll related expenses as we bolstered our R&D capabilities for new products and services. Share based compensation expenses recognized in cost of revenues, sales and marketing expenses, research and development expenses, as well as G&A expenses totaled RMB4.6 million in the fourth quarter of 2022 compared to RMB4.1 million in the same period of last year.

For full year 2022, the total amount of share-based compensation expenses were RMB13.9 million compared to RMB50 million in the -- compared to RMB15 million in the previous year.

Other expenses will RMB1.2 million in the fourth quarter of 2022 compared to other income of RMB1.5 million in the same period of last year. For full year 2022, other income was RMB67.5 million compared to other income of RMB3.6 million in the previous year.

The increase was primarily attributable to gain arising from disposal of a subsidiary and investment income arising from fair value changes of long-term investments as well as income generated from write-offs of accounts payable. Net loss was RMB21.5 million in fourth quarter of 2022 compared to net income of RMB15.4 million in the same period of 2021. For full year 2022, our net income was RMB22.6 million compared to net loss of RMB19.6 million in the previous year. This is the first time we achieved full year profitability since our IPO in 2019.

Non-GAAP adjusted net income was RMB16.9 million in the fourth quarter of 2022, compared to non-GAAP adjusted net income of RMB19.6 million in the same period of last year. For full year 2022, non-GAAP adjusted net income was RMB36.5 million compared to non-GAAP adjusted net loss of RMB75.6 million in the previous year.

Net loss attributable to 36Kr ordinary shareholders was RMB20.8 million in the fourth quarter of 2022 compared to net income attributable to 36Krs owner shareholders of RMB14.6 million in the same period of last year. For full year 2022, net income attributable to 36Kr owner shareholders RMB21.9 million compared to net loss attributable to 36Kr ordinary shareholders of RMB89.6 million in the previous year. Basic and diluted net loss per ADS or both RMB 0.498 in the fourth quarter of 2022 compared to net income per ADS of RMB0.356 in the same period of last year.

For full year 2022, basic and diluted net income per ADS were both RMB 0.53 compared to basic and diluted net loss per ADS of RMB2.2 in previous year. As of December 31, 2022, the company had cash, cash equivalence, restricted cash and short-term investments of RMB184.9 million compared to RMB164 million as of September 30th, 2022. The increase was mainly attributable to positive cash flow from operating activities partially offsite by the long-term investment in the new economy startup company we made in the fourth quarter of 2022.

This concludes all of our prepared remarks today. We will now open the call to questions. Operator, please go ahead.

Question-and-Answer Session

Operator

[Operator Instructions] The first question today comes from Jing Chen with CICC. Please go ahead.

Jing Chen

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

Dagang Feng

As we mentioned many times before, we will continue to enrich our content ecosystem and tap into more vertical industries such as artificial intelligence, new electric vehicles, and industry capital.

Also our product front, apart from our existing advertising and enterprise value added services, we will also explore several new product initiatives. For example, 36Kr Enterprise Service Review platform, as our second growth engine, we will refine our platform and product, and continue to pursue commercialization. 36Kr Business School will enrich course designs to empower more small and medium sized companies. This training product has been proven by our peers to be a market with RMB100 millions of market size. Also, 36Kr Research Institute will enhance its professionalism and industrial coverage, providing more in-depth reports to more enterprises.

And of course, we will clearly investing in AIGC technology, we will continue to advance the application of the AIGC technology in production and aggregation of high quality content to further improve our content production efficiency, and through AIGC personalized dialogue functions, both strengths our user interactions and stickiness.

Operator

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

Lingyi Zhao

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

Dagang Feng

Based on the Q1 2023's current situation, our ad business is already recovering steadily. However, it will take some time for advertising to return to a relatively high level, while market confidence continued to recover. And we have witnessed that, lot of our clients have regained their confidence in ad placement, but still they still have a limited budget for their advertising business. So this is why I feel, it takes time to us to recover to a relatively high level.

Based on market feedback and actual business performance so far, the entire advertising industry has been recovering at a steady pace, the initiatives in some public industries such as automobile and e-commerce have been very active in brand promotions and marketing activities, with relatively stable and placement budgets.

In Q1 2023, we made further progress in both commercialization channels and industry coverage. For instance, we completed JD.com's first commercialization order on [indiscernible] and achieved our first breakthrough in luxury goods sector. As such, we expect a fair level of growth generally advertising in both Q1 and the full year 2023.

Looking ahead, at the full year 2023, we remain optimistic as business activities and people's daily lives contract to normal in the post-pandemic era, but we will see a significant rebound in our ad business overall.

Operator

[Operator Instructions]. The next question comes from Rui Yin with [indiscernible] Securities. Please go ahead.

Unidentified Analyst

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

Dagang Feng

Actually, during the past years, our both of our number of clients and our pool has increased the significantly and we believe it will grow this year as well. On our pool side, we will provide diversified underpriced value-added services, including offline events, consulting services, and integrated agency operations services to both growth in this segment. On the number of clients, we will tap into broader vertical sector and penetrate to lower tier markets like [indiscernible] in 12 or more regional offices.

In 2023, we will also leverage more products to develop our enterprise value added services. In addition to 36Kr Enterprise Review platform, we also launched 36Kr Venture Capital platform as well as, 36Kr Research Institute to further grow our business.

Lin Wei

I think this is your first time to join the earnings call of 36Kr. We really give you a warmest welcome. And this is Lin, I will answer your second question regarding the expense ratio and the margin question.

I think, for the full year of 2022, you can see from our result, that our gross margin is at relatively stable level of 57%. I think, in 2023, we will be able to maintain that level or even have more further gross margin expansion, because as our CEO just mentioned, given the AIGC and the more AI related technology application, we will be able to have higher efficiency of operation and have some cost saving effect in our business.

And secondly, I think I will highlight that, I think for ‘23, the margin expansion as well as operating margin and gross margin will come more from the revenue rebound or revenue growth. Although in 2022, we are proud that we have been growing our revenue given the very challenging environment in 2022, but we achieved a positive 2% growth, but that ratio will be much higher in ’23, I think.

And also we mentioned several times that our cost structure and expense structure has been very stable. Given that, it will not be a linear growth pattern as the revenue growth, that means we will have a lot of leverage. So give you some quantity implication. Now, if we say that in ‘23, our gross margin can be stabilize at around 60% level, then our expense OpEx ratio will be, I mean, let's say around 50%, then we'll give you an operating margin of around 10%. I think, that will even have some upside if our top line or revenue can grow at a much higher growth rate than in 2022. Hope that answers the question, Rui.

Unidentified Analyst

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

Dagang Feng

Actually, content production, quality and efficiency have always been our priority, and we have been adopting AIGC for quite a while. Content execution and classification are key component of AIGC technology. By applying AIGC 36Kr can classify articles in various fields using labeling, that's optimizing the accuracy of user research. In addition, for some in-depth articles, AIGC will summarize the content of the articles to facilitate users efficient understanding while also improving the user experience.

On the product launch, using 36Kr and press review platform as an example, AIGC technology will assist the users to better obtain detailed information such as press and user evaluation of products more efficiently, so as to understand products more accurately and make better purchasing decisions. Also, AIGC helps us provide better customer services through more effective user interaction and communications. According to our initial analysis, AIGC has helped improve our user interaction by 90% and improved our current production efficiency by three times.

Recently, we became one of the first batch of our companies to join Baidu’s ChatGPTs their ERNIE Bot ecosystem. We have achieved the code for internal testing and are launching the first run of our internal test, with no doubt that 36Kr will be the first mover in applying AIGC technology in our content production and global expansion. Thanks for your questions.

Operator

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

Unidentified Company Representative

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

Lin Wei

Thank you and see you next time.

Unidentified Company Representative

Thank you, operator. Thank you, everyone.

Operator

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