36Kr Holdings Inc (KRKR) 2021 Q4 法說會逐字稿

Hello, ladies and gentlemen. Thank you for standing by for 36Kr Holdings Inc.'s Fourth Quarter and Fiscal Year 2021 Earnings Conference Call. (Operator Instructions) Today's conference call is being recorded. I will now turn the call over to your host, Qiuchen Wang, IR Manager of the company. Please go ahead, Qiuchen.

Thank you very much. Hello, everyone, and welcome to 36Kr Holdings' Fourth Quarter and Fiscal Year 2021 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 selection of our website at ir.36kr.com.

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

Before we continue, please note that today's discussion will contain forward-looking statements made under safe harbor provision of 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 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's earnings press release and this conference call including a discussion of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures. 36Kr's earning press release contain a reconciliation of unaudited non-GAAP measures to the unaudited GAAP measures. Please note that all amount numbers are in RMB.

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

(foreign language)

[Interpreted] Thank you. Hello, everyone, and thank you for joining our fourth quarter and fiscal year 2021 earnings conference call.

(foreign language)

[Interpreted] 2021 has been an eventful year, given the complex environment, a year when we faced both expansion opportunities and rising challenges. Despite the rapid global changes, China's new economy demonstrated strong resilience and vitality. Commitment to our mission of empowering New Economy participants to achieve more. We continued to witness, as well as accompany, many new industries and verticals on their journeys of development and expansion.

In the meantime, 36Kr delivered a solid top line growth in 2021, with our total revenue reaching RMB 317 million for the full year. Notably, we also achieved the quarterly profitability in the fourth quarter of 2021 for the first time in the past 8 quarters. These robust financial results were driven by the significant accomplishment and breakthrough in many aspects, including content strategy, product development, platform refinement, brand influence and the monetization capability.

(foreign language)

[Interpreted] In the fourth quarter, we delivered another record-setting performance in user traffic, with average monthly page views reached 850 million, up 35% year-over-year. This 15th consecutive quarter of growth demonstrated 36Kr unique leading position with New Economy. The release of the blockbuster article such as 'CATL: cracks in the Trillion -RMB battery empire'' Corporate espionage in xi'erqi: undercover intelligent hunters in internet giants and Oh!Youth's white paper stay up late is further evidence of the continued rise of our content influence. These articles attract wider attention and gain popularity with their premium quality.

(foreign language)

[Interpreted] During 2021, nearly 700 pieces of articles published on the WeChat official account has amassed over 100,000 views each, with some of them attracting more than 200,000 views. Even more impressively, some of the financial articles achieved a phenomenal levels of readership, over 300,000 views, and in some cases, over 600,000 views. Meanwhile, our content platform strategy remains intact, as we dedicated to further enhancing our content quality, depth and diversity through both PGC and UGC. In addition, our ongoing efforts bore fruit with results in product development, presentation formats, distribution channels, user experience and the expansion of our footprint.

(foreign language)

[Interpreted] With respect to the content column and product development, we continued to expand our high-quality content matrix. We targeted a wide range of industries, including new consumption, smart vehicle, high-end manufacturing sectors, corporate digital transformation and the Beijing Stock Exchange, dual carbon economy. Meanwhile, we placed more focus on New Economy and capital market and continued upgrading our product offering across both private and the secondary market. To this end, we launched a series of new products, such as Digital 36Kr, 36Kr Finance, Oh! Youth, Super Review, 36Kr Research Institute, Kr Carbon and Waves, providing in-depth professional analysis of latest business trends. In addition, we continued to optimize and innovate series of IP products, such as WISE conference, 36 under 36, Speedway star classes and 36Kr Enterprises Service Review Platform.

(foreign language)

[Interpreted] Regarding content formats, in addition to reinforcing our advantages in texts and images, we have further strengthened our strategic efforts and investments in audio, live streaming and particularly, short-form video. We have produced nearly 200 short-form videos, acquiring over 600 million views across our platforms, with close to 20 million likes. These videos are unique in terms of topic selection and visual presentation, appealing to a broad range of user demographics and have currently attracted more than 6 million followers of our videos across all platforms.

It is particularly noteworthy that the number of followers to our official corporate account on Bilibili now exceeds [1 million] (corrected by the company after the call), the testament that increasing popularity and rising influence of 36Kr's short-form video content among younger audiences.

(foreign language)

[Interpreted] 36Kr's audio content is another highlight of our content matrix. An example of one of our exciting audio programs is Kr-Walkman, which provides users with the latest business highlights in short audio clips that take just a few [moments] (corrected by the company after the call) to digest.

We also collaborated with NIO Radio to broadcast our business-centric podcast program on their NIO Radio playlist, enabling 36Kr to deliver premium content to a wider audience across various settings. Furthermore, live streaming is a significant addition to our content advantage. Leveraging its interactive first features and 36Kr's rich pool of the business gurus and industry experts, we have attracted many new users to our live streaming content.

(foreign language)

[Interpreted] On the content distribution front, we continued to reinforce our omni-channel distribution strategy, establishing a more comprehensive range of channels for distribution. In addition to our proprietary platform 36Kr website and the 36Kr App, we also distribute our content through external channels, such as our official WeChat account, Weibo, Zhihu, Douyin, Kuaishou, Bilibili and Xiaohongshu and several other web portals and Apps. We have expanded our reach to almost all the mainstream platforms and our followers exceed 22 million, providing us unprecedented influence.

(foreign language)

[Interpreted] In terms of user experience, we continued to optimize and upgrade our product offerings. For example, the iOS desktop widgets and the brand-new UI/UE upgrade have made it easier for user to discover and browse our content more conveniently and smoothly. Moreover, the new user achievement system and localized community operation strategy have greatly promoted user activity and enhanced user stickiness on our platform. Compared with the prior year, on a year-over-year basis, in 2021, the number of users posting comments increased by 47%, the number of comments rose by 204%. And our [30 day] (corrected by the company after the call) retention rate grew by 9.7% across to 36Kr websites and 36Kr Apps.

(foreign language)

[Interpreted] Moving to the expansion of 36Kr's footprint. We extend our presence across a broader range of domestic markets, lower-tier cities and international markets. In August 2021, we officially established our dual-headquarters in Shenzhen. And through our localized operations strategy, we have enthusiastically participated in the wave of New Economy development in South China's Greater Bay Area. We have expanded our regional office to 12 key provinces and cities, including Hangzhou, Chengdu, Zhengzhou, Xi'an and Chongqing, to explore the potential of the low-tier markets and the industry upgrades. [On the international] (corrected by the company after the call) front, 36Kr Global further expanding its presence from [Southeast] (corrected by the company after the call) Asia to Australia, New Zealand and Europe. Furthermore, 36Kr's premium content was adopted by the Bloomberg, Dow Jones and Nikkei, which substantially boosted our global influence.

(foreign language)

[Interpreted] Driven by the initiatives above, our customer base grew rapidly in 2021. Each of our 6 major customer communities continued to expand, including startups, TMT giants ,investment institutions, local governments, traditional enterprises and individual clients. At the same time, we have built a close-loop product and service offering that empowers the entire enterprises' life cycle, spanning from startup and development to the expansion stages, while also continuously boosting our [own] (corrected by the company after the call) commercialization efficiency.

Next, let us look our achievement in terms of commercialization.

(foreign language)

[Interpreted] Despite the recurring COVID-19 outbreaks and complex macro-economic environment, we achieved solid top-line growth on a comparable basis in the fiscal year 2021. Our full-year advertising revenue reached RMB 215 million, representing a year-over-year increase of 24%, which was above the industry average. In addition, the number of advertiser exceeded 500, and the average revenue per advertising customer was above RMB 400,000, both achieving solid year-over-year growth. Unlike other traffic platforms, 36Kr's advertisements for building brands' reputation and visibility have benefited from the platform's significant leverage capability as well as the limited impact of the recent macroeconomic cycles. Enabling us to [exhibit] (corrected by the company after the call) the powerful revenue potential, the advertisers choose to collaborate with 36Kr because of our deep set industry expertise and a strong influence on the new economy. On other hand, we are also [keen] (corrected by the company after the call) to harness 36Kr's omni-channel distribution, which accurately targets distinct audiences within our high-quality customer base, a testament to our powerful platform asset.

(foreign language)

[Interpreted] Notably, our short-form video business and the launch of various content columns targeting customer end users, have demonstrated 36Kr's advertising advantages in achieving both brand awareness and performance. Leveraging the rich-media characteristics of the short-form videos, such as its visual effect, strong engagement, diverse content and wide distribution capabilities, we provided brand promotion and the content marketing solution to help customers enhance their brand image and influence. Our customer base has expanded from corporate clients to brands targeting customer audiences, including Intel Samsung, Nike, P&G, IQiyi, Zhihu, Genki Forest and many other international and well-known local companies. At the same time, our average revenue per customer has been rising steadily.

(foreign language)

[Interpreted] Turning to the latest updates regarding our value-added enterprise services. In 2021, we have strategically reduced low-margin integrated marketing business while increasing our investments in offline events consulting services. Meanwhile, we proactively incubated platform-scale enterprise service products, such as Enterprise Service Review Platform with purpose of driving our second growth curve and as a results made positive progress. Our full-year revenue from enterprise value-added services reached RMB 74 million. Among those service, offline events and consulting services recorded a remarkable growth of 19% and 13% compared with 2020, respectively.

(foreign language)

[Interpreted] Besides usual offline events, we adopted a more flexible approach to serving customers by regularly leveraging the video and live streaming formats for offline events. In the fourth quarter, we hold our annual WISE conference with Era of Hardcore as its theme. In addition to holding high-quality offline summits, we also partnered with Douyin to create an online live streaming program under the same theme to promote our WISE conference. We successfully created a long tail effect from event promotion to live streaming, and finally, the content recreation and the distribution, and turned the event into a major industry influencer. Not only did the revenue from 2021 WISE conference remained a high level, but the user exposure also exceeds a total of 1.3 billion across our platform, effectively establishing this partnership as a benchmark for win-win collaborations between financial media and Douyin.

(foreign language)

[Interpreted] In 2021, we hold various off-line events. Furthermore, the number of our events and the revenue per event has both increased compared with last year. Our event covered a diverse range of topics, including industry trend, investment opportunity, the outlook for the [mateverse, overseas e-commerce] (corrected by the company after the call) expansion, local investment promotion and industry upgrades.

(foreign language)

[Interpreted] In 2021, we also continued to make positive progress in our consulting service, an important component of our enterprise value added solution. On the corporate side, we helped leading high-tech companies, such as bytedance, Ant Group, Mogu Zhilian and Biomind issue customized industry research report. On the government side, we produced research report on the investment, promotion and the construction planning for new developed zone for local governments in Shenzhen, Hangzhou, Xi'an, among others, generating substantial monetization opportunity. In November 2021, 36Kr Research Institute joined Arithmetic research Alliance a testimony to our professional capabilities, with recognition from professional authorities.

(foreign language)

[Interpreted] Next, I would like to share in details upgrades regarding our key incubation project, the 36Kr Enterprise Service Review Platform. The digital and smart technology trend has ushered the SaaS industry into an era of the faster growth. According to the iResearch, the size of the China enterprise SaaS market expected to grow from RMB 53.8 billion in 2020 to RMB 130 billion by 2023, with a compound annual growth rate of 34%. As a result, we launched 36Kr Enterprise Service Review Platform to fillful for this huge product demand and the market potential driven by corporate undergoing digital transformation. After more than a year of optimization and fine-tuning, our Enterprise Service Review Platform has become China largest most authoritative and the most convenient enterprise service software selection platform.

(foreign language)

[Interpreted] Targeting the pain point of information asymmetry between demand side and the sell side service providers, 36Kr Enterprise Service Review Platform team has built its platform within 3 noteworthy features to empower every enterprise seeking the best solution for their corporate digitalization transformation. First, a library rich in product information covering the key industry in China enterprise service market as major of leading players in each industry, allowing the demand side to compare similar software products in terms of the functionality, price, rating. Secondly, authentic user reviews from real users of the software products willing to share their experience. Third, a structured technology system is created by the integrating various distinct items of knowledge from across the enterprise service industry to help users [acquire] (corrected by the company after the call) accurate knowledge of this and the information.

(foreign language)

[Interpreted] As of the fourth quarter of 2021, we have grown our Enterprise Service Review Platform to including close to 6,000 software applications, up [13%] substantially and 20 times year-over-year. The platform market active user reached almost 600,000, sequentially an increase of 72% from third quarter and growth of nearly 600x year-over-year. The cumulative comments amount to nearly 20,000, increasing [more than 400x] quarter-over-quarter and 1,000x year-over-year. These outstanding operation metrics further proven that our product review portal has become appealing to an even broader, but still growing user base.

(foreign language)

[Interpreted] In 2022, we are accelerating the development of 36Kr's competitive advantages and overall influence in the enterprise service review market. Firstly, we will set the evaluation standards for China enterprise service industry and leverage our first-mover advantages to educate the market. Second, through improvements in the product library, user reviews, knowledge maps and key influencer library, we will further reinfine our enterprise service to review platform and reinforce the product competitive advantages. In addition, as an independent third-party, 36Kr Enterprise Service Review Platform will collect real comments from a wider user demographic as well as encourage users to voice their opinions to ensure the objectivity and fairness of our platform. Furthermore, we will gradually begin testing Enterprise Service Review Platforms' commercialization potential.

Looking to achieve monetization by generating sales leads, providing consulting service and brand marketing solution, plus other effective measures to realize the monetization of our platform. Building on our own advantages, we will collaborate with leading domestic SaaS and cloud service provider as well as industrial with digitalization demands, such as finance, new energy and healthcare to establish enterprise service review benchmarks and create a flagship platform.

To date, we have grown the platform to cover over [60%] (corrected by the company after the call) of enterprise service products in the market. We believe that we deepen Enterprise Service Review [Platform] (corrected by the company after the call) market penetration, advantage of our platform produced and service will position us to capitalize on the vast opportunity of this RMB 100 billion market and enable us to achieve impressively future returns.

(foreign language)

[Interpreted] Last but not least, let's turn to our subscription service. Our full year revenue from subscriptions totaled RMB 28 billion, up [35%] year-over-year. In 2021, we achieved solid growth in number of institutional and enterprise customers, which increased by 40% year-over-year, with average revenue per customer growth by [9%] (corrected by the company after the call) year-over-year.

(foreign language)

[Interpreted] Looking ahead to 2022, a prominent brand pioneering platform dedicated to serving the New Economy. We will continue to build and develop our content products and the ecosystem to provide the entire life cycle of the service for our customers. We will continuously optimize the 3 major business segments to grow our customer base, including enhancing new formats, such as short-form video, programs targeting individual subscribers. We will also increase ARPU and explore new business opportunities from low-tier market and industry upgrades.

In addition, regarding our emerging business, we will continue to maintain an unwavering commitment to bolstering the research and develop operations and commercialization of 36Kr Enterprise Service Review Platform. We believe this Enterprise Service Review Platform will become our second growth curve.

(foreign language)

[Interpreted] For quite some time, we have faced a challenge of COVID-19 outbreaks and a complex macroeconomic environment. Despite those difficulties, we have [thrilled] (corrected by the company after the call) by exceptional performance of our core business, which achieved solid year-over-year growth. Riding the wave of industry upgrades and digital transformation aimed at the rise of new consumption, advanced technology and dual carbon industry, plus the growth of specialized, refined, differentiated and innovative enterprises, we will seize the historic opportunity to build a system of optimized product and service, achieving faster and high-quality business growth. We expect 36Kr will continue to deliver strong revenue growth and achieve profitability in full year basis in 2022.

Under the circumstances that COVID-19 pandemic is progressively contained and the macro economy is stabilized, they will result in a comprehensive [reshaping of] of 36Kr business fundamentals, promoting the market to re-assess 36Kr evaluation and usher in an inflection point [for the company's value] (corrected by the company after the call). We are confident that our robust long-term fundamental will empower us to forge ahead to deliver long-term sustainable value to society and our shareholders.

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.

Thank you, Pal, and hello, everyone. We are very pleased to report another set of solid financial results for the fourth quarter and fiscal year 2021, despite the intermittent resurgence of COVID-19 and the complex macroeconomic environment.

We achieved strong growth across all 3 business segments on a comparable basis in fiscal year 2021, being Wall Street consensus on both the top line and bottom line. I want to highlight that our top -- our online advertising business grew 24% year-over-year, outperforming most of our peers in the industry. Most importantly, as we continuously improve our operating efficiency, we booked record high gross profit margin of 65% and a net income of RMB 15.4 million for the fourth quarter of 2021, the first time of profitability in the past 8 quarters. In addition, we ended the year of 2021 with a very strong cash position of RMB 216.1 million as we generated a positive operating cash flow in both the fourth quarter and full year of 2021.

When we venture farther into 2022, we will continue to solidify our core strengths in content production and service offerings while expanding our monetization channels. We believe that we are well positioned to capture the vast opportunities in China's New Economy space and create greater value for our users, customers and shareholders.

Now I'd like to walk you through more details of our fourth quarter and fiscal year 2021 financial results. Online advertising services revenue increased 10% year-over-year to RMB 76.4 million in the fourth quarter and grew 24% year-over-year to RMB 214.7 million for the full year of 2021. 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 achieved growth in fourth quarter and full year 2021. Enterprise value-added services revenue were RMB 30.3 million in the fourth quarter of 2021 and RMB 74 million for the full year of 2021.

As was stated in our earnings release, starting from the first quarter of 2021, we ceased to act as a principal in certain low gross margin businesses and acted fully as an agent. Hence, revenues of such businesses were recognized on that basis from the first quarter onward. To increase comparability of operating results and help investors better understand our business performance and operating trends, we introduced gross transaction value as a supplemental metric to describe our business.

Gross transaction value of enterprise value-added services increased 46% year-over-year to RMB 60.5 million in the fourth quarter of 2021 and increased 12% year-over-year to RMB 217.2 million for the full year of 2021. In particular, our consulting services revenue and off-line events revenue increased by 13% and 19% year-over-year, respectively, for the full year of 2021, reflecting the sustained growth despite the influence of the lingering pandemic.

Subscription services revenue decreased by 11% to RMB 9.6 million in the fourth quarter of 2021, mainly because some of off-line training programs were cancelled or delayed due to the resurgence of COVID-19. For full year 2021, our subscription revenues increased by 35% to RMB 28 million, primarily attributable to our continuous efforts in offering high-quality subscription products.

Total revenues were RMB 116.3 million in the fourth quarter of 2021 and RMB 316.8 million for the full year of 2021, respectively. Taking into consideration of the aforementioned changes in revenue recognition for enterprise value-added services, where there was a RMB 30.2 million and RMB 143.2 million variance between net revenues and gross transaction value for the fourth quarter and full year, investors can figure out that our overall business trend is upwards and demonstrated solid year-over-year growth.

Cost of revenues decreased 42% year-over-year to RMB 40.7 million in the fourth quarter and decreased 51% year-over-year to RMB 128.8 million for the full year of 2021. The decrease was primarily due to our continuous shift in focus towards higher-margin businesses and recognition of certain revenues on a net basis. Gross profit increased 49% year-over-year to RMB 75.6 million in the fourth quarter of 2021 and increased 50% year-over-year to RMB 187.9 million for the full year of 2021. Gross profit margin reached a record high of [65%] (corrected by the company after the call) in the fourth quarter of 2021 compared to 42% in the same period of last year. For full year 2021, gross margin was [59%] (corrected by the company after the call) compared to 32% last year. The increase was primarily due to our continuous shift and focus towards higher gross margin businesses and recognition of certain revenues on a net basis as well as our improved operating efficiency in fiscal year 2021.

Operating expenses decreased 52% year-over-year to RMB 61.6 million in the fourth quarter of 2021 and decreased 28% year-over-year to RMB 282 million for the full year of 2021. Sales and marketing expenses were RMB 39.3 million in the fourth quarter of 2021. The increase was primarily attributable to an increase in payroll-related expenses and marketing expenses, partially offset by decreased share-based compensation expenses. For full year 2021, the sales and marketing expenses were RMB 143.9 million. The increase was primarily attributable to an increase in payroll-related expenses, partially offset by the decrease in share-based compensation expenses and marketing expenses.

G&A expenses were RMB 9.6 million in the fourth quarter and RMB 90.6 million in full year 2021, representing an 88% and 57% reduction compared to the corresponding period of last year. The decrease was primarily attributable to a release of the allowance for credit losses and the decrease in share-based compensation expenses, partially offset by the increase in payroll-related expenses. The release of allowance for credit losses was mainly due to improved collection of accounts receivables as well as continuously increase our efforts in accounts receivable collection.

Research and development expenses were RMB 12.6 million in the fourth quarter of 2021 and RMB 47.5 million for the full year of 2021. The year-over-year increase was primarily attributable to the increase in payroll-related expenses as we bolstered our research and development capabilities. Share-based compensation expenses recognized in cost of revenues, sales and marketing expenses, research and development expenses as well as G&A expenses, totaled RMB 4.1 million in the fourth quarter of 2021 compared to RMB 9.1 million in the same period last year. For full year 2021, the total amount of share-based compensation expenses were RMB 15 million compared to RMB 39.3 million in 2020.

Other income was RMB 1.5 million in the fourth quarter of 2021 and RMB 3.6 million for full year 2021, respectively, compared to other expenses of RMB 10 million and RMB 8.3 million in the corresponding period of last year. The fluctuation was primarily attributable to net losses recognized from equity method investments in fiscal year 2021.

Net income was RMB 15.4 million in the fourth quarter of 2021 compared to RMB 90.1 million net loss in the same period of last year. This is the first [time] (corrected by the company after the call) we achieved quarterly profitability in the past 8 quarters. For the full year of 2021, net loss was RMB 90.6 million compared to RMB 279.3 million in 2020, a significant reduction of full year net loss. Non-GAAP adjusted net income was RMB 19.6 million in the fourth quarter of 2021 compared to RMB 81.1 million net loss in 2020. For full year 2021, the adjusted net loss was RMB 75.6 million compared to RMB 240.1 million last year.

Net income attributable to 36Kr Holdings ordinary shareholders was RMB 14.6 million in the fourth quarter of 2021 compared to RMB 91.4 million net loss in the same period of last year. For full year 2021, net loss attributable to ordinary shareholders were RMB 89.6 million compared to RMB 280.2 million in last year. Basic and diluted net income per share were both RMB 0.014 in fourth quarter of 2021 compared to net loss per share of RMB 0.09 in the same period of last year. For full year 2021, the basic and diluted net loss per share were both RMB 0.087 compared to RMB 0.275 in 2020.

As of December 31, 2021, the company has cash, cash equivalent and short-term investments of RMB 216.1 million, the highest cash level in the past 2 years. This was mainly because we generated positive operating cash flow in both the fourth quarter and full year 2021.

Lastly, let me provide some updates on our share repurchase program. On May 6, 2020, the company announced that its Board of Directors authorized a share repurchase program under which the company may repurchase up to a total of 1 million of its American depository shares, each representing 25 Class A ordinary shares. As of December 31, 2021, the company had repurchased approximately 786,000 ADSs for approximately RMB 17.5 million under this program.

This concludes our prepared remarks. We will now open to questions.

(Operator Instructions) The first question comes from the line of Jing Tang from CICC.

(foreign language) I have 2 questions. The first is under the current macro environment, how do you view the advertising business in 2022? And my second question is, how did COVID-19 in March affect the company's off-line business in the first quarter?

(foreign language)

[Interpreted] Thanks for your question. For your first question, I would like to say in 2021, advertising revenue grew 24% year-over-year, a relatively high growth rate compared to our peers. As the pandemic comes under control, I believe the economy will -- as the pandemic come under control and the economy will gradually recover and we believe the advertising industry will trend upward as well. From our perspective, our advertising growth mainly comes from 2 source: the increasing number of advertisers and the steady growth of ARPU. Our 36Kr distribution channels became more diversified and target more niche markets and new forms like short-form videos, we're expecting both number of advertisers and ARPU will grow. We specialized the branding advertising, which is currently by stronger leverage and less susceptibility to economic cycles. Therefore, our advertising business were less affected by the inflections in the economy.

From the industry side, and it's more depend on the pandemic situation. I believe the new media [performance] (added by the company after the call) will be better than the traditional media. That's my opinion about the industry.

(foreign language)

[Interpreted] About your second question, the pandemic will indeed impact our off-line events. However, we are planning to communicate with customers about moving certain events online or adding a live streaming component, which will help alleviate the pandemic impact. From historical perspective, Q1 is not the peak season for off-line events in any cases. So the pandemic should not have too great an impact on revenue. And we also may communicate with our customer about postponing their events. So that even if our Q1 revenue is affected by postponements, full year revenue will remain intact.

The next question comes from the line of Peipei Qiu from Industrial Securities.

(foreign language) I will translate my question. We know that companies start with New Economy content recently making a lot of assets to expand the content boundaries. Could you give us more color of what you've achieved? And how would you maintain your competitive advantage in [content providing]?

Thank you for the question, Peipei. Yes, you asked a very good question. Yes, in terms of content innovation and production, we have been doing a lot of initiatives. First of all, we have been expanding our presentation format. For example, we previously only have text flash information/news and pictures. Now we are expanding to more rich format, including short videos, audio formats as well as live streaming formats. That's #1 on the presentation formats. And #2, on our columns and content productions, we have mentioned in our prepared remarks that we now have many, many WeChat account metrics, including our 36Kr official account and [36Kr Pro] and [36 Finance] and the 36 -- the secondary market WeChat accounts and 36Kr Research Institute, [36Kr Carbon] and the Wave, which target at the institution as well as Oh!Youth which targeting at the younger generation lifestyle content as well as super review. For example, we provide real name reviews for the 3C products as well as new consumption products.

So overall, our presentation format as well as the coverage of the channels and the verticals are both expanding. That turns out into our commercialization. First of all, our short-form video contributed a lot to our commercialization. We are more -- have more C end customers before than we -- before, we only have a lot of B end customers, for example, Intel. Now we are expanding into IGE, Zhihu, Nike, P&G, a lot of in the beverage brands, that's our expanding category of customers. So that helped us to increase our advertising customers as well as our ARPU. That's why we are very confident, as Mr. Feng just mentioned, that we expect in 2022, both our advertising revenue as well as our enterprise value-added services revenue will both grow. And we expect we will achieve a full year profitability in 2022. I hope that answers your question, Peipei.

The next question comes from the line of [Dawn Tang] from TH Capital.

(foreign language) I have a small question regarding margin. So the overall gross margin was a record high at 65%, up about 23 percentage points year-over-year and 9 percentage points quarter-over-quarter. So I wonder what's the reason for this trend. And how should we look at margin outlook in 2022?

Thank you for your question, Dawn. That's a very good question. Yes, our -- for fourth quarter, gross margin of 65% is a record high actually in our history. That's a very amazing gross margin level. The -- actually, the year-over-year increase of gross margin, mainly because we recognize certain revenues on net basis. That gives us almost a 20 percentage point raise for gross margin. If you compare every quarter compared to the first 3 quarters of last year, we basically increased gross margin by almost 20 percentage point. That's the main reason for year on -- year-over-year improvement on gross margin.

The quarter-over-quarter gross margin improvement mainly comes on the economy of scale, which, in other words, if you look at our revenue for the fourth quarter, due to seasonality, the fourth quarter is the strongest quarter for the entire year. So we achieved almost RMB 120 million revenue, that's a very high level. And our cost remain on a relatively stable level. That's why you will have a leverage here, which we call it the economy of scale. That's why, sequentially, our Q4 gross margin also increased a lot.

And to a smaller extent, because some of our revenues, we recognize revenue on a cash basis out of prudential accounting policy. And due to our efforts in collecting account receivables, we have improved a lot in the fourth quarter. So before year-end, we collected some revenues on a cash basis. That also were recognized in Q4, which we couldn't recognize in the previous quarters. That also resulted in a higher gross margin in the fourth quarter. I hope that answers your question, Dawn.

The next question comes from the line of (inaudible) from SWS Research.

(foreign language) I have 2 questions. One is Mr. Feng said that never to be a company that lives by advertisement. Currently, the ad business is still the core business of the company. How do we see the potential of advertising business and other new business in the future? (foreign language)

(foreign language)

(foreign language)

(foreign language)

[Interpreted] Thanks for following my interview. I would like to say, I'm not a very big fan of the advertising business because no matter from the revenue scale or the gross margin, they have the limitation there. Of course, from our advertising business perspective, we are confident that in the future, we have at least 30% or 40% growth [space] (added by the company after the call) in the future. But I would like to say this, we would like to put more attention on our new business, like Enterprise Service Review Platform.

Actually, in 2021, our advertising business and the value-add enterprise service accounted for 60 -- 46.6% and 47.2% comparable of the [GTV], respectively, which indicating a very healthy revenue mix. In the future, We'll continue to build our second growth curve enterprise service -- enterprise -- in the short -- hope this revenue will be the important part of future revenue. And I -- and we believe that driven by the Enterprise Service Review Platform, 36Kr growth will continue upwards along the new curve. Thanks.

(foreign language) As a true provider in the enterprise service industry, what is the advantages of [36Kr's] enterprise service platform?

(foreign language)

[Interpreted] Thanks for your second question. 36 provide Enterprise Service Review Platform with 3 advantages. First, I would like to say is the -- it's the fairness and the objectivity our Enterprise Service Review Platform. And as independent platform, we especially valued authentic user reviews, which not be distorted by commercial purpose. Compare with other large Internet companies with their own SaaS and cloud products, our Enterprise Service Review Platform can display user feedback on software application fairly and impartially, enhancing decision made efficient for both the sellers and the buyers. The second one is about ability and the willingness to serve customers. Then the third one, the last advantage is our completed product system. We originally saw the pain point for both seller and buyer in enterprise service market and start to build our presence earlier. Contents such as a software product library, user review library, key person database and knowledge maps contain the magical quadrants in our enterprise service software selection platform. I hope my answer is enough for you. Thanks.

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

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

Thank you.

That does conclude our conference for today. Thank you for participating. You may all disconnect. Have a nice day.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]