36Kr Holdings Inc. (NASDAQ:KRKR) Q1 2022 Earnings Conference Call June 1, 2022 8:00 AM ET

Company Participants

Yang Li - IR Manager
Dagang Feng - Co-Chairman and CEO
Lin Wei - CFO

Conference Call Participants

Jing Chen - CICC
Peipei Qiu - Industrial Securities
Lingyi Zhao - SWS Research

Operator

Hello, ladies and gentlemen, thank you for standing by, and welcome to 36Kr Holdings Inc. First Quarter 2022 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded.

I will now turn the call over to your host, Yang Li, IR Manager of the Company. Please go ahead, Yang.

Yang Li

Thank you very much. Hello, everyone, and welcome to 36Kr Holdings first quarter 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 the 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 this and other risks and uncertainties is included in the company's prospectus and other public filings as filed with 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 earnings press release and this conference call include a discussion 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 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

[Foreign Language] Thank you. Hello, everyone. Thank you for joining our first quarter 2022 earnings conference call.

Despite the recent resurgence of the COVID-19 pandemic and ongoing macro headwinds, we achieved solid top line performance in the first quarter with double-digit revenue growth and a record high quarterly net income since our IPO. Notably, our advertising business and the enterprise value-added services both reported robust results and year-over-year growth. As a prominent brand and a pioneering platform dedicated to serving New Economy participants in China, we remain committed to establishing a high-quality service system to build a flywheel of growth with diversified business offerings.

I'd like to begin with an overview of our content initiatives. In the first quarter, we continued to upgrade our content offerings and create new programs and formats to expand our service boundaries. For example, we launched several official content accounts during the first quarter: KR Carbon, [Wave] and [indiscernible] for more service coverage from the active of China's new carbon policy, investment institutions and creative-development audiences. respectively. These programs quickly engage users and had all enjoyed high popularity thus far.

Our content team also explored new content formats and strengthened our collaboration with WeChat video accounts and live streaming projects. The live streaming audiences attracted by our new program [technical difficulty].

Going forward, we will roll out additional live streaming series focused on hot niche markets. This new video and live streaming projects fully mobilize 36Kr's content creation and editing capabilities as well as industry resources to deliver newer high-quality content, industry updates and expert opinions to our users. We are also meeting the content needs of more diversified user groups, which substantially broaden our user base.

Furthermore, for our public active market content side, our Warren Buffet Shareholder Meeting series that we jointly created with Tiger Securities, also gained traction. Building on our content production capabilities, we conducted an in-depth analysis of the investment sales, target assets and investment transit costs at meetings, winning acclaim among institutional users with our high-quality content and innovative formats. After the meeting series, the Omaha Value Investment Education and Research Center reached out to 36Kr to explore future potential collaboration opportunities.

Finally, alongside our efforts in short-video and live streaming, we also continued to make strides in audio content during the quarter. For example, we established a cooperation with [indiscernible] to showcase KR Finances rich content in audio scenarios, which effectively elevates our user experience.

Content quality is always a top priority for 36Kr. As we remain committed to executing our content platform strategy, we still focus on PGC and UGC. We have consistently incorporated more high-quality content into 36Kr's ecosystem. The number of content pieces on our featured channels with pages views about 100,000 -- 20,000 continuously increased during the quarter. Notably, the topic [indiscernible] streamed for primary school students of [indiscernible] we initiated recently has sparked animated discussion online, catapulting the topic to Weibo's hot searches list.

Our focus on premium engaging content is paying off, leading to a remarkable 15th consecutive quarter of page view growth. To better reflect the 36Kr's content influence and user coverage, starting from this quarter, we will report the total number of our followers inside of our page views. This new matrix will provide investors with a more comprehensive perspective from which to assess 36Kr's performance across the entire network. As of the first quarter of 2022, the number of our followers exceeded 24 million, a year-over-year increase of 25%.

As the number of our followers on Bilibili is well beyond 1 million in the beginning of 2022, 36Kr's video also gained traction on other platforms such as [indiscernible] demonstrated by the surging number of our followers. As of the end of the first quarter of 2022, our short-videos have attracted nearly 7 million followers in all, not only -- we gained over 180,000 new followers of our official corporate accounts on Toutiao in just one day.

Riding on the popularity of Bing Dwen Dwen, the mascot of the Beijing Winter Olympics, we created a short video, which was viewed more than 30 million times, rising to number one on Toutiao's chart of top Winter Olympics-related searches.

The incremental building of premium brand requires not only innovation content and formats, but also an unwavering commitment to our mission of empowering New Economy participants to achieve more. We have consistently adhered to our philosophy of working closely with start-offs in helping them grow bigger and stronger. We applaud them for their progress and lend a helping hand in times of difficulty.

As a companion -- a company and enabler of the industry, we hope to truly assist entrepreneurs during these exceptionally challenging times. To that end, in early May, we officially launched the Seeking the Life program to help business, particularly small- and medium-sized enterprises to maintain their brand share of voice despite the market downturn. This program, again, facilitated a seamless integration of information, capital, talent and technology.

Looking at our ongoing business expansion efforts despite the recent COVID-19 resurgence, we did not slowdown our expansion in the Greater Bay Area and overseas markets. We conducted a virtual live streaming session [indiscernible] in South China for the first time during the quarter, generating new ideas for product launches against the backdrop of the current COVID-19 outbreak.

On the international front, the 36Kr Global which specializes overseas markets continue to provide efficient connection services, helping various Chinese brands operating overseas network in Global from agencies and investment institutions to explore our business development opportunities in those markets.

New products and models have helped us build a closed loop service framework and a diversified three-dimensional ecosystem, staying true to our vision of empowering new economy participants to achieve more. We consistently strive to broaden our media service boundaries and refine our business model, which are also reflected in our commercialization performance. Next, let's look at our achievements on that front.

As our cash core business, advertising business performed well in the first quarter, achieving an increase of 13% year-over-year. Even against the backdrop of COVID-19 resurgences and macroeconomic challenges, our advertising revenue disrupted mainly from brand marketing has experienced growth far above industry average, thanks to our relentless efforts to create innovative service formats and improved customer satisfaction levels.

Leveraging our short video format, we achieved a new high in terms of contracts sets for our advertising services during the quarter. Not only Intel continued to promote its new products through our short video formats with these contract sets continuing to rest. Moreover, we launched an original program [indiscernible] to promote sense and safe policy risk, resulting in a contract far larger than those of the traditional tax and image-based marketing solutions.

We also helped various well-known companies, including Panasonic, Changan Auto, Toyota, BYD, Dali Education, and iFLYTEK, promote their brand concepts and create product launch videos. The continuous stream of new customer and repeat orders of existing customer are a testament to the effectiveness of our short video format in brand marketing, targeting fee and consumers while also further raising our average revenue per customer.

Our consistent innovation in tax and graphics content also contributed to excellent commercialization performance, for example or use attractive increased attention from young user groups with service on young people's consumption trends, featuring well-funded reasoning and plans format and garnered white spread acclaim by creating unique promotion matters for customers, including DingTalk, Huawei, HLA, Pinduduo, Juhu and IGE.

Given all use advantages in the first quarter, we were able to raise this record to a level considerably higher than that of similar official accounts. Going forward, we believe this program will pro-help the expansion of our service presence and raise our advertising revenue selling.

Turning now to our enterprise value-added services, which grew 35% year-over-year in the first quarter despite COVID-19 impact, thanks to our strategy adjustments and new service formats. On the corporate service side, 36Kr jointly hosted the display of enterprise service forum with DingTalk and collaborating with them to planned events agenda and content.

Leveraging our knowledge of enterprise in enterprise services, we not only help the participant in enterprise service platforms better understand the latest industry updates and future development opportunities, but also assisting DingTalk in funding potential partners along the value chain.

In terms of institutional collaboration, 36Kr partner with [Orion] Securities to organize the dual carbon star sustainable innovation contest aimed at discovering innovative companies with potential in four major sectors: new energy, new materials, new technology and new business models, we hope to help companies gain a deeper understanding of the dual carbon policy, better guard market demands and connect with industrial capital.

Our regional expansion also achieved good results during the quarter. We entered into a partnership with additional government agencies, including Jianye district in Nanjing, the China standing of Information and Communications Technology affiliated with the Ministry of Industry & Information Technology and the high core business school of regional versus talent association to integrated resources in innovative fields such as the megawatts and industrial Internet such as close connections between local governments and enterprises in both the upstream and downstream of the industry chain to empower industry upgrades.

In addition, we are also working to expand our enterprise line base as a new growth avenue. During the first quarter, the proportion of our enterprise client grew substantially, not only both the number of enterprise clients and value of contract execution increased significantly year-over-year. Moving forward, we will also focus on serving high-quality, innovative local enterprises who are becoming a new catalysts to our regional business growth.

Looking on to our subscription services, we continue to test waters with new variations in the subscription services including launch innovations and business for training programs and other forms of institutional interactions supported by our continuous upgrades and premium services cost in a fourth quarter revenue from institutional and corporate clients increased 57% year-over-year. The number of contract signed by investment institutions nearly doubled compared with the same period in 2021, among which the repeat orders from existing customers accounted for up to 70%.

Mostly, I'd like to share with you the latest upgrades on our enterprise service review platform. In terms of operating data, major matrix all improved substantially year-over-year. Our monthly active users rose more than 25x year-over-year to nearly 900,000, up 49% sequentially, and the number of authentic reviews surged almost 50x to over 21,000, up [27]%.

Meanwhile, as we continue to establish our platform service system and to its reputation, which showcases nearly 6,000 pieces of mainstream software on the platform following the main enterprise service software of 16 industry and 200 industry segments accounting for 80% of the entire market.

36Kr's enterprise service review platform now both complete coverage of leading brands as well as coverage of many mid-range brands and other widely known staff apps available in the market. Since merchants oriented features were launched in September 2021, a total of nearly 700 merchants have set up presence on our platform compared with approximately 400 merchants a few months ago, nearly doubling our coverage of mainstream staff provider in just a short few rate of time.

I'd like to highlight that through the joint efforts of our online and off-line events, as well as our newly launched feature, the 66Kr enterprise service review platform automatic report. We have effectively enhanced the platforms visibility and traffic. The number of lease has fallen significantly compared with the same period of last year with a steady conversion rate of 30%. The significant improvement in the number of lease and year conversion rate are key indicators of our capabilities to efficiently empower sales provider to acquire customers presently while lowering their customer acquisition costs.

In the first quarter, our enterprise service review platform performed well in terms of commercialization. Up to now, we have signed contracts with Kingdee, Beisen, Huawei, HiteVision, and EC SCRM. I will empower these lines in customer acquisition, brand management and marketing services.

And the two sessions this year, the government drive the strategic importance of digitalization. We will continue to improve our enterprise service review platform service system to contribute to the digital transformation of more enterprises and performance agencies. To the more detailed this year, we will remain focused on growing our platform [technical difficulty] evaluation standards and creating our own magic quadrants for China's enterprise service industry.

Seeking consistent breakthroughs in the areas of software product libraries, user review, libraries, key person databases and knowledge graph libraries. Meanwhile, we are also accumulating typical collaborative cases of solid foundation for commercialization and establish strategic partnership in the upstream and downstream of the industry chain. We believe that with our relentless efforts, our enterprise service review platform will have a promising future in commercialization.

In conclusion, I'm pleased to say that despite the COVID-19 resurgence and complicated internal and external economic conditions, we still achieved solid first quarter results. Note fully, our new business initiative, 36Kr enterprise service review platform continues its strong growth trajectory with major metrics improving substantially year-over-year.

More excitingly, its commercialization subside during the quarter clearly demonstrates that the enterprise service review platform is becoming 36Kr's second growth engine. We will capitalize on the growth prospects in the new economy to fill new hubs as we start the next chapter of our development.

Going forward, we will continue to be a push there for the new economy sector for expanding our user base and calculating our diverse content and service ecosystem while also shouldering our corporate, social responsibilities and empowering more industry participants to achieve greater success.

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

Thank you, Feng, and hello, everyone.

Our first quarter results kicked off the year with a solid start despite multiple headwinds, including COVID-19 resurgences and macroeconomic challenges. We achieved growth of 14% year-over-year in our total revenues and a record high quarterly net income since our IPO of RMB33 million, marking our second consecutive quarter of profitability.

Notably, not only did our advertising business maintained its strong growth trajectory with a year-over-year increase of 13%, our enterprise value-added services also recorded remarkable growth of 35% year-over-year.

In addition, thanks to our disciplined cost control measures, strengthened efforts in accounts receivable collections, as well as our strategic refocus on core business and disposal of certain lingering assets, our profitability improved significantly during the quarter.

Looking ahead, we will continue to solidify our industry presence in China's new economy space, cultivating our diverse ecosystem of business communities, along with our user base to empower more enterprises while also expanding our monetization approaches to deliver sustainable growth.

Now I'd like to walk you through more details of our first quarter 2022 financial results. Total revenues were RMB49.6 million in the first quarter of 2022, an increase of 14% compared to RMB43.5 million in the same period of last year.

Online advertising services revenue increased 13% year-over-year to RMB37.6 million in the first quarter of 2022. The increase was primarily attributable to more innovative marketing solutions we provided to our customers. The number of advertising customers and the average revenue per advertising customer both increased in the first quarter of 2022.

Enterprise value-added services revenue increased 35% to RMB9.3 million in the first quarter of 2022 compared to RMB6.9 million in the same period of last year. Subscription services revenue were RMB2.7 million in the first quarter of 2022 compared to RMB3.4 million in the same period of last year.

The decrease was primarily attributable to the decrease in revenues from individual subscriptions as some of our off-line training programs were canceled or delayed due to the resurgence of COVID-19. However, on the institution side, our institutional subscription revenues increased by 57% year-over-year, mainly driven by the growth in the number of institutional subscribers.

Cost of revenues was RMB23.9 million in the first quarter of 2022 compared to RMB20.2 million in the same period of last year. This increase was generally in line with the company's revenue growth. Gross profit increased 10% year-over-year to RMB25.7 million in the first quarter of 2022 compared to RMB23.4 million in the same period of last year.

Gross profit margin was 51.8% in the first quarter of 2022 compared to 53.7% in the same period of last year. The slight fluctuation of GP margin was because enterprise value-added services accounted for a higher mix of total revenues this quarter than a year ago, while its margin was a bit lower than that of our advertising business.

Operating expenses were RMB33.4 million in the first quarter of 2022 compared to RMB64.8 million in the same period of last year. Sales and marketing expenses were RMB29.7 million in the first quarter of 2022 compared to RMB35.7 million in the same period of last year. The decrease was primarily attributable to the decrease in payroll-related expenses and marketing expenses.

G&A expenses were negative RMB10 million in the first quarter of 2022 compared to RMB20.2 million in the same period of last year. The fluctuation was primarily attributable to the release of the launch for credit losses of RMB32.9 million, partially offset by the increase in the payroll related expenses.

The release of allowance for credit losses was mainly due to the collection of RMB36.6 million of long-aged accounts receivable during the quarter as we continuously increase our efforts in accounts receivable collection.

Research and development expenses were RMB13.8 million in the first quarter of 2022 compared to RMB9 million in the same period of last year. The increase was primarily attributable to the increase in payroll-related expenses as we bolstered our research and development capabilities, especially for our enterprise review platform.

Share-based compensation expenses recognized in cost of revenues, sales and marketing expenses, research and development expenses, as well as G&A expenses totaled RMB4.1 million in the first quarter of 2020 compared to RMB2.7 million in the same period of last year. The increase was primarily due to the growth of new share options.

Other income was RMB40.3 million in the first quarter of 2022 compared to RMB1 million in the same period of last year. As we previously announced through our 6-K filing in March 2022, the company has one of the investors in the round B financing of Hangzhou Jialin Information Technology Co., Ltd. acquired its 7.3% equity interests that by transferring the 100% equity interests the company held in Beijing Dianqier Creative Interactive Media Culture Co., Ltd. to Hangzhou Jialin, which is a fresh produce supply chain solution provider in China.

The subscription price is the same for the company and other independent investors in this financing round. The fair value of equity interests the company acquired is RMB40 million. The company recognized approximately RMB38 million of gain arising from such investment and disposal in the first quarter of 2022.

Net income was RMB32.6 million in the first quarter of 2022 compared to net loss of RMB40.5 million in the same period of last year. Non-GAAP adjusted net income was RMB36.7 million in the first quarter of 2022 compared to net loss of RMB37.8 million in the same period of last year.

Net income attributable to 36Kr Holdings ordinary shareholders was RMB33 million in the first quarter of 2022 compared to net loss of RMB39.5 million in the same period of last year. Basic and diluted net income per ADS were both RMB0.8 in the first quarter of 2022 compared to basic and diluted net loss per share -- net loss per ADS of RMB0.9 in the same period of last year.

As of March 31, 2022, the company had cash, cash equivalents and a short-term investments of RMB171.1 million compared to RMB216.1 million as of December 31, 2021. This was mainly attributable to payment of year-end employee bonuses and benefits, as well as small-sized long-term investments we made in several new economic start-up companies during the first quarter of 2022.

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

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And our first question coming from the line of Jing Chen from CICC. Your line is open.

Jing Chen

[Foreign Language] Congratulations on the first quarter financial performance. I have two questions. The first is how is the impact of COVID-19 on the company's business in the second quarter? Are there any corresponding adjustments to mitigate the negative impact? And my second question is cost and expense control has become a key trend this year and the company's net profit is also increasing. Can you provide some guidance in terms of cost reduction in the year and how should we look at tax to the profitability of the company? Thank you.

Dagang Feng

[Foreign Language] We have seen this change since March in this year. And from April when the pandemic started in Shanghai in May when Beijing also implemented three control measures, COVID-19 has impacted us in both Q1 and second quarter -- first quarter and second quarter. The delivery of our enterprise value added services, especially off-line activities was intended, resulting in project suspensions or delays. It also affected our advertising business and the pandemic reality control measures posed challenges to the macro-economy, reducing customer willingness particularly advertisement.

We have maintained a positive towards addressing these challenges, which is the off-line deliveries as well we provide the other options such as online solutions like live streaming and short video. In addition for our advertisement business, we launched work winter initiative to provide favorable price for our customer vis-à-vis to help them over during the pandemic period.

As the lockdowns in Shanghai, Beijing gradually lifted, we believe our business will fairly return to normal. We will take steps to ensure smooth business operation and delivery. We have reached an positive expectations for the second half of the year.

For the advertising business, we hope to continue the award momentum and make breakthroughs in the form of advertising ARPU and the number of customers. As an important component of enterprise value-added services, we hope our enterprise service review platform to make a big breakthrough in its commercialization this year. We published a subscription products such as business school will also be gradually launched in the second half of the year, injecting your vitality into the company's business.

Since the beginning of 2022, there has been a stream of news about employee optimizations in other companies. So far, 66Kr does not have any plans to cut cycles. Our cost reductions and efficiency enhancements focus more on the strict control of business costs, which are already reflected in the first Q financial statements.

For example, while maintaining double-digit revenue growth, we have achieved a steady growth profit margin benefiting from the year-over-year decline in sales and marketing expenses and improved accounts receivable collections position to over RMB30 million of net income in Q1.

We think 36Kr business fundamentals remain positive. As the pandemic is ease, our business will return to normal. We will work hard to increase revenue and improve operating efficiency. From our perspective, good performance, less free cost and pest control are the right ways to cost reductions and efficiency improvements.

Regarding profitability, we talked about the full year profitability in last quarter and we keep profitability in this quarter, given the impact of COVID-19, the second quarter, we are cautious, but still anticipate the overall profitability in the first half of the year. Looking to the second half of the year, we are positive about recovery of China macroeconomic and the slowing driving our business.

Meanwhile, as the third quarter and fourth quarter is a big season for us, profitability in the second half of the year should also be achieved. So in general, as long as pandemic does not recur on a large scale, we maintain our outlook on full year profitability, cautiously optimistic.

Okay. So do you have any other questions.

Operator

Our next question coming from the line of Peipei Qiu from Industrial Securities. Your line is open.

Peipei Qiu

[Foreign Language] So I will translate my question. So given the difficult macroeconomic environment, how do you consider the commercialization pace of your enterprise service review business? Thank you.

Dagang Feng

[Foreign Language] Thank you, Peipei, so under the [small sense] so we think the provider we all have more difficulty in acquiring the customer from online. So 36Kr enterprise service review platform will benefit from this situation.

So our KPI for the enterprise service review platform to focus on developing the platform and refining our products primarily covering operating metrics such as the number of authentic reviews MAUs as well as product and chance on the platform.

I'd like to share with you some operating data. So at the end of the March 2022, DAUs on our enterprise service review platform rose 25x year-over-year to 900,000 in the number of reviews surged almost 50x to over 21,000. Up to now our enterprise service review platform has showcased nearly 6,000 pieces of mainstream service on the platform.

So the number of leads on our enterprise services review platform has increased dramatically on interface. So with steady conversion rate of over 30%, these metrics will continue to improve.

So last quarter, we said we will start our commercialization this quarter. And our enterprise service review platform commercialization, we will focus on generating sales lease, product promotion and research reports. So this year, we launched our commercialization pallets featuring simultaneously brand marketing and lease-related products. And we already see some results. We have reached the agreement with several enterprises including of signing contracts with Kingdee, HiteVision, EC SCRM and Basin. We will continue to provide them with service regarding customer acquisition, brand management and marketing services.

So we believe as we refine our product and for the commercialization mostly, the enterprise service review platform role includes 36Kr's overall fundamentals will be more significant and it will become the second growth of the company and we want that to become as early as possible and materially change the market perception of 36Kr valuation logic, so maybe in the future quarters, the portion from 36Kr enterprise service review platform revenue will be increased significantly.

Peipei Qiu

Okay, thank you.

Operator

Our next question coming from the line of Lingyi Zhao with SWS Research. Your line is open.

Lingyi Zhao

[Foreign Language] And my first question is how is the recovery efforts in each business progressing with the gradual easing of COVID in Shanghai and around the country, which business segment can we could lost sales in the following six months, just a firm full-year breakeven goal being revised and my second question is with the current downward pressure on the economy, what steps will the firm take to maintain the resilience of the advertising business segments? And my third question is what is the progress of the Enterprise Service Review Platform commercialization and how does the company expand the user base and cultivate the consumer mindset, that's my question. Thank you.

Lin Wei

Thank you, Lingyi for your questions. This is Lin. I will answer your first question regarding the pandemic impact on the business and outlook for this year's profitability. And Mr. Feng will answer the other two questions for you.

Yes, just as Mr. Feng just mentioned, the COVID-19 and the macro challenges did have some impact on our later Q1 and first half of Q2 business, especially on some of our enterprise value-added services, there are some off-line events involved where we could see some impact. However, we have taken several measures to mitigate that impact. For example, we hold online plus off-line forums and we utilize the online live streaming forum as well as the short video format to host the forums and the conference for our customers. That's for our enterprise value-added services.

Actually, that revenue segment grew 35% year-over-year in Q1, even outgrow the total revenue, that's a very significant growth during Q1. And regarding the advertising business, obviously, that's a major component of our total revenue. That again also increased 13% year-over-year and if you look at the industry average, if you look at those companies who already reported their Q1 results, and if you look into their online advertising, I would say is it's easy to say that most of them have booked an active year-on-year growth. Well, we have a double-digit year-on-year growth. And I think that's thanks to our 36Kr's content strength and brand image that the SMEs as well as big companies, the Fortune 500 companies all comes to us to pursue brand image as well as performance-based ads.

With that said, our advertising business is less reliant on the macro economy and more resilient to the cycle. So that's why we think we have a very good result in Q1 and looking into the Q2 and the rest of the year, first of all with the pandemic, the control is lived. Our off-line events, our Enterprise value-added services will come back. And with the macro economy gradually recover, the advertising spending will also come back and we have a lot of initiatives -- for example, the adjustment to the rate card and some more innovative marketing solutions, especially our short-form video is picking up really, really, very quickly.

So that gives us confidence that in the second half or in the remaining of the year, we can catch up what's left in the first half is actually in Q2. So we are still, as Mr. Feng mentioned, we are still very cautiously optimistic about the full-year, and we would maintain our forecast for the full-year basis profitability. Hope that answers the question.

Dagang Feng

[Foreign Language] So for the resilience of the online advertising services, we still maintain our influential and maintain the quality is the most important thing for 36Kr and we will continue to reach content offerings and consistently provide high quality content. So also, we will continue to diversify our distribution channels so that to strengthen the influence of 36Kr.

So next product delivery, quality and advertising effects, we will continue to optimize our products and provide customer with more options from tax images to short form video and less premium. So this strategy will strengthen customer stickiness to 36Kr.

So for this pirate measure, we launched a warm winter initiative to provide variable price for customer in difficulty to help tide them over during the pandemic period. So when the COVID-19 is under control, we will adjust our pricing strategies flexible according to the demand.

So we think the content ability is a montage for 36Kr enterprise service review platform. And for user to expansion, we will remain focused on growing our platform influence of building a set of industry evaluation standards and create 18 of our own magic contracts for China's enterprise service industry. So seeking consistent breakthroughs in the areas of where product leverage, user review leverages, key person databases and knowledge graph leverage to build 36Kr Enterprise Service Review Platform from our China's largest most authorities and most convenient enterprise service software selection platform.

So for the commercialization process, as we said in last quarter, we will start the commercialization this quarter, but we still will improve our operating data and efficiencies. So for the commercialization part, we will feel positive, and we have already covered with Tencent, Kingdee and some famous brands. So in the future, we think this will become the second growth engine for the company, and we'll have much more potential in -- regarding to the commercialization. Thank you.

Operator

And our next question coming from the line of [Don Tang] with BH Capital. Your line is open.

Dagang Feng

Hello Don.

Unidentified Analyst

[Foreign Language] Congratulations on the strong results. Thanks very much for taking my question. My question is regarding advertising business. As mentioned, along with the impact on the ongoing COVID-19 in China in the first and second quarter and weak macro environment recently. We still achieved a strong growth year-over-year in advertising business that outpaces ad industry. So can management share what the driver for this performance. Thank you.

Lin Wei

Thank you, Don for your questions. This is Lin. I will answer your question. Yes, our advertising performed quite well in Q1. I think it's mostly driven by both our -- the number of advertising customers as well as the ARPU. Our number of advertising customers increased 2% compared to the same period of last year, while our ARPU increased 11% compared to the same period of last year.

And talking about the advertising ARPU, I think there are several factors. First of all, at every beginning of the year, we will address our red card based on the supply and demand, because our resources, our advertising inventory is really very highly sought after. So we adjusted upwards our red card. That's number one.

And number two is we have launched several initiatives, including our short form video content as well as a lot of content columns that are specifically targeting free end users. For example, the whole use in Chinese whole long and some Kr test [indiscernible] and those columns are really expanding the customer base as well as increasing the contractors will translate into the higher ARPU for us. And that's number one, from the technical point. The number wise, how we calculate the increase of our advertising revenue.

And secondly, in terms of collative analysis, our advertising is mostly brand advertising. Thus, it's less vulnerable to economic cycles, because either in uptimes and downtimes, companies always need to build their brand image. That's why our brand advertising is less reliant on macroeconomy and more resilient to the cycles. That's number two.

And I think giving that side, our advertising is a major component. But remember that the 36Kr Enterprise Review Platform is picking up as well, that commercialization of that product will be much more performance-based, which is a very good and perfect supplemental flavor to add into our overall product offerings because 36Kr enterprise review platform, that commercialization will be based on sales leads that's mostly performance-based as well as some research reports and some marketing resources. That's a very good combination in the future. So I think that's a good balance between brand and a performance-based business. That's very good for the future growth for the company. Hope this answers your question Don.

Unidentified Analyst

[Foreign Language]

Lin Wei

Thank you.

Operator

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

Dagang Feng

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

Operator

Ladies and gentlemen, this concludes the conference call. Thank you for your participation. You may now disconnect.