36Kr Holdings Inc
NASDAQ:KRKR
Earnings Call Analysis
Q3-2023 Analysis
36Kr Holdings Inc
The third quarter of 2023 brought a blend of encouraging growth and strategic shifts for the company. With a total revenue increase of 2.5% year-over-year to RMB 97 million, the standout performers were the advertising and subscription services sectors. The advertising business saw an 11% growth over the previous year, benefiting from high-quality content and a deep understanding of user preferences. Strategic collaborations with leading platforms like Bilibili and media efforts such as 'Foreseeing 2033' boosted visibility and engagement, driving the subscriber base up by 41% year-over-year. Indeed, the push on short video content was pivotal, resonating with diverse audiences and attracting a wider advertiser base.
On the other side of the spectrum, the revenue from subscription services impressively surged by 62% year-over-year to RMB 11.51 million. The company's resolute expansion into high-value degree-based programs, such as the postdoctoral research program with Keble College, University of Oxford, has been a significant revenue driver. Furthermore, the emphasis on artificial intelligence (AI) in training programs to meet the market's growing demand for AI experts reflects acute market foresight. The company's initiatives to grow with the training sector, deemed resilient against macroeconomic uncertainties, exemplifies its strategic positioning for continued success.
The financial health of the company showed a dichotomy of resilience and the impacts of economic challenge—while gross margin remained at a commendable 56%, there was a net loss of RMB 18.9 million attributable to shareholders, with a net loss per ADS of $0.45. These results were affected by one-off expenses related to organizational optimization and office lease termination. However, it's important to note the company mustered effective cost control strategies leading to potential annual savings of RMB 30 million. Reflecting on liquidity, the company reported cash and equivalents of RMB 116 million, a decrease primarily attributed to strategic investments and the aforementioned one-off expenses.
Looking into the final quarter and the upcoming year, the management maintains a cautiously optimistic stance for advertising revenues, banking on their successful branding and one-stop advertising solutions. With AI technology enhancing efficiency and innovations in marketing, the company is poised to tackle challenges and capitalize on its diverse content. The mantra of self-improvement guiding the training sector signifies not just an ethos but a strategic direction for growth, as the company leverages AI partnerships to enhance course offerings. The subscription services sector is laden with growth potential, predicted to blossom from the introduction of high-value degree programs and AI-focused training—a testament to the company's adaptability and vision.
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Hello, ladies and gentlemen. Thank you for standing by for 36Kr Holdings Inc.'s Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded.I will now turn the call over to your host, Jianan Ding, IR Manager of the company. Please go ahead, Jianan.
Thank you very much. Hello everyone, and welcome to 36Kr Holdings Inc.'s third quarter 2023 earnings conference call. The company's financial and operational results were released earlier today and have been made available online. You can also view the earnings press release by visiting the IR section of our website at ir.36kr.com.Participants on today's call will include our Co-Chairman and CEO, Mr. Dagang Feng; and our Chief Financial Officer, Ms. Lin Wei. Mr. Feng will start the call by providing an overview of the company and performance highlights of the quarter in Chinese, followed by an English interpretation. Ms. Wei will then provide details on the company's financial results before opening the call for your questions.Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform 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 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 unauthorized non-GAAP financial measures. 36Kr's earnings 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 CEO, Mr. Dagang Feng. Pal, please go ahead.
[Interpreted] Thank you. Hello, everyone. Thank you for joining our third quarter 2023 earnings conference call. During the third quarter of 2023, we achieved solid progress across all of our business segments, propelling a year-over-year increase of 2.5% in total revenue, as we consistently enriched our content ecosystem and sought to diversify and expand our product and service offerings. We also deepened integration of AI applications across our business [ and the ] evolution of generative AI and large language models. These synchronized endeavors have empowered great strides in our commercialization and further elevated our operating efficacy, effectively reducing overall costs to improve efficiency company-wide.I'd like to begin with a discussion of this quarter's content initiatives and advancements, followed by a more detailed look at our commercialization progress across each of our business segments. 36Kr's core competitive edge lies in our exceptional content creation partners. Through years of dedicated effort, we have cultivated an extensive portfolio of premium sub-vertical media. Our multidimensional content matrix covers a broad array of trending topics and fields to connect with diverse user demographics, offering deep insights into industry trends and market dynamics for new economy participants. During the third quarter, we maintained a continuous flow of high-quality content with blockbuster articles emerging back to back. More than 110 articles achieved over 100,000 page views. We also continue to expand our footprint across various channels, crafting a multi-platform across media circulation matrix. As of the end of the September, the number of our followers surpassed 32 million, rising 20% year-over-year. This achievement reflects 36Kr's substantial market influence and sets the stage for greater business development.In addition to the solid performance of our text and image-based content portfolio, we also achieved new breakthroughs in content variety during the third quarter, spanning short videos, long videos and podcasts. Let me start with short videos. We have consistently enhanced the value of our short video lineup, creating trend-setting and pioneering content that drives development industry-wide. This quarter, we launched an all-new short video series, The Pioneers. The debut episode, which recounts the rise, fall and potent comeback of the [indiscernible] industry giant [indiscernible], garnered numerous shares and likes by users. Our sub-vertical medium, 36Kr Auto, also continued to thrive, gaining momentum in content quality and engagement with growth in the number of both likes and followers. Overall, short video is pivotal for broadening our customer reach and enhancing user engagement and stickiness. As of the end of the third quarter, we had over 8.5 million short video followers, among which more than [ 2.50 million ] were Bilibili users.Moving on to long videos, our first long video show, Foreseeing 2033, returned for its second season. This season, we extended each episode from 30 to 40 minutes and elaborated the narrative with greater detail across 5 segments, including a deep dive into the [indiscernible] profile, a review of the historical backdrop, a thought-provoking analysis of the [ arrow shaping ] their business success, key takeaways and insights, and an engaging Q&A session. We hosted stimulating conversations with Charles Li Xiaojia, the former Chief Executive of Hong Kong Exchange and founder of Micro Connect; William Li Bin, founder of NIO; James Liang, founder of Trip.com Group; and Chen Yanshun, Chairman of BOE. We also had the privilege of [indiscernible] Kevin Kelly, the Founding Executive Editor of Wired magazine, who is widely recognized as the father of Silicon Valley Spirit, for an inspiring session. This flagship initiative was live streamed across various platforms, including WeChat Channels, Youku and Beijing Radio and Television Station. It not only cemented our standing as an innovator in long video production, but also showcased 36Kr's robust brand influence across the industry.In addition, we continue to broaden the horizons of our innovative audio content lineup. Our first live podcast, Get Off Work, Have Fun, fully leveraged our high-quality content assets and delighted our listeners with a more diverse and personal audio experience. Additionally, several of our audio content programs were featured on Ximalaya's [ SPAC ] channel, including news flash briefing, business intelligence [indiscernible] breaking news. By driving user growth thorough an enriched content experience, we made solid progress in crafting our comprehensive closed-loop content ecosystem.The vibrant innovation in AI technology is creating intriguing growth opportunities for 36Kr as we diligently integrate AIGC technologies throughout our ecosystem. We further enhanced our content production efficiency through AI applications of [indiscernible] image generation, video creation, script editing and data collection. Additionally, we launched the 36Kr Media Lab in Silicon Valley, our first unmanned initiative to further explore the innovative application and development of large language models in the financial industry.Furthermore, we joined hands with top tier industry players, including Baidu, SenseTime and iFlytek to deepen AIGC applications, including AI-powered deep dive into financial reports and the dynamics of the primary market. Harnessing AI-powered technical tools, we have delivered more comprehensive, more agile, higher-quality offerings to a broader spectrum of companies, while optimizing our reports' value for money. Similarly, we also implemented a comprehensive AI-driven transformation company-wide, launching AI-driven upgrades for a wide array of services and products such as 36Kr [indiscernible] platform and our venture capital platform, further reducing operating costs and elevating efficiencies.I'd also like to specifically highlight our foray into AI empowerment during the quarter. [ Followed ] our pioneering AI-powered e-commerce store earlier this year, this quarter, we applied AI technology to create a virtual blogger for the Asia Games on Xiaohongshu, which garnered significant visibility and engagement in just 1 month. Initiatives like this stand as a resounding testament to our leadership and consistent [ excellency ] in AI innovation and application.Thanks to our enriched content ecosystem and AI empowerment, our content and product matrix remained robust with an ever-broadening array of offerings. Furthermore, we continue to diversify our customer dynamics. Our stable, high-quality customer base not only reflected the company's substantial market influence, but also laid the groundwork for consistent [indiscernible] key performance metrics.Next, I'd like to share a more detailed [indiscernible] the role of AI application [indiscernible] business innovation across various scenarios. First, let's look at advertising, where our revenue increased by 11% year-over-year, fully leveraging our strengths in content and distribution channels [ to efficiently ] engage target audiences and achieve the high marketing conversion rate. Furthermore, our continuous service innovation drove our ARPU up by 20% year-over-year during the quarter. Through years of development, 36Kr has [indiscernible] extensive advertising service experience, spanning multiple industries, including TMT, consumer goods, automotive, real estate, advanced manufacturing and new energy. As such, we are well positioned to accommodate the distinct market preference of advertisers across a broad spectrum of industries. For example, we provided a full-service integrated marketing campaign for the launch event of Haier's wet/dry space smart robot vacuum cleaner from pre-event teaser posters and [indiscernible] to customize offerings and live broadcast during the event. [ Our choreography ] of omni-channel content [ destination ] and curated products resulted in total online exposure of over 7.94 million views. We also crafted a variety of marketing materials of Baidu AI Cloud, utilizing infographics and videos of onsite tours to vividly present its capabilities. We broadcasted this content across our new media matrix to efficiently reach the target audience, receiving widespread acclaim. Given our premium content, profound insights into user space and preferences, and the high conversion rate of commercialized content, we expect it to attract an increasing number of advertisers for content promotion going forward, as well as achieve sustained revenue growth in advertising.In terms of short video advertising, as our content continues to gain traction on platforms like Bilibili and Xiaohongshu, we have attracted a more diverse range of advertisers, spanning intelligent technology, consumer lifestyle, culture and entertainment, and other sectors. This quarter, we built on our track record of producing premium content by crafting a compelling video in collaboration with Alibaba Cloud for our AI-driven Asia Games programs on Xiaohongshu. Infused with unique perspectives, the video garnered 1.62 million views on Bilibili and ranked 30th on Weibo's trending topics list. Also, as I mentioned previously, our sub-vertical medium services, [ 3Kr Auto ], continued to amplify brand influence, fostering new partnerships with renowned auto manufacturers, including BMW and Mercedes-Benz. Furthermore, we attended the 2023 IAA MOBILITY event in Munich, and auto shows spanning major cities, including Guangzhou and Chengdu, delighting users with firsthand insights into the latest auto market dynamics through the wide variety of content display formats, including images, texts, short videos, live streaming and more, while further expanding our reach and partnerships in the auto market.Meanwhile, empowered by AI technology, we set trends in digital human marketing by pioneering live streaming sales sessions featuring digital humans in our Taobao store, an innovative initiative that has attracted the interest of many clients in addition -- corporation. In addition, we continue to expand and deepen AI applications across diverse scenarios, capitalizing on our underlying technology's advantages in real-time interaction, visual effects, creative graphics and other features to offer our users diversified AI mapping solutions, propelling the company's efficiency and sustainable growth.With respect to enterprise value-added services, in the third quarter, we remained committed to providing high-quality services, leading to collaborations with additional corporate clients and government institutions. We hosted several industry-specific summits during the quarter, including 36Kr Carbon Summit, Sustainable Value for Green Horizons, and [ the data ] digital innovation tour, deepening our engagement in these sub-verticals. Noteworthy are our 36Kr Carbon Summit, Sustainable Value for Green Horizons, experts, scholars and stakeholders representing professional institutions, top tier platforms, and leading consumer group companies from China and around the globe gathered together to dive into the latest trends shaping low carbon consumption, [ housing ] dynamics and the pioneering practices. The summit achieved total online exposure exceeding 80 million views, underscoring 36Kr's pivotal role in fostering valuable connections among stakeholders in the new economic sectors.Another recent highlight was our annual flagship WISE conference, which successfully concluded last week in Beijing. This year's theme centered on commercialization and cutting-edge AI technologies. Whilst WISE was previously focused solely on new economic participants, this year, we broadened the conference range to cover the entire business sector and updated its title accordingly to WISE 2023 Kings of Business. We hosted over 300 distinguished commercial and economic experts, scholars, business elites and investors, including [indiscernible], sparking ideas through thought-provoking discussions. Quite a few of China's traditional industry icons also joined us at WISE 2023, including [indiscernible], enriching the event's diversity and offering fresh industry perspectives. WISE 2023 amassed over 1.03 billion views, further showcasing 36Kr's brand influence.Beyond our offline events, our consulting services and other enterprise value-added services continued to gain momentum during the quarter. 36Kr Research Institute further deepened its industry insights, elevating our reputation through the publication of industry research reports. On the commercialization front, we forged collaborative consulting partnerships with government institutions in prominent cities such as Guangzhou, Chongqing, Hangzhou and Huizhou, among others, as well as with industry giants including Lenovo, [Indiscernible] Holdings Inc., [ UniContacts and Pacific Insurance ], among others.Furthermore, we have made consistent, meaningful progress in our regional business expansion. We co-hosted an AI industry development summit titled AI Westlake with the government of Xihu District, Hangzhou at the [indiscernible] Conference 2023 to further explore innovative AI applications. Additionally, we launched Connecting the Dots Along Investment Trails, a strategic initiative, capitalizing on our extensive resources across large-scale traditional and innovative companies. This program aimed to strengthen regional industry chains, address relevant shortfalls and [ expand ] the integration of industry ecosystems. Our production of high-quality content for this program has significantly increased user attention and engagement.It's also worth mentioning that with the rise of RMB funds and the evolution of guided funds, stakeholders in the new economic sector enjoying a plethora of investment options, maximizing the benefits of our robust brand advantages and adapt resource alignment capabilities. We forged partnership with funds of funds, extending our reach into regional markets to identify optimal financing channels and approaches for a broader spectrum of enterprises. In addition, I'd like to highlight that our fund management subsidiary was recently successfully registered as a fund manager. This strategic move unleashed fresh opportunities for us to facilitate deeper connections among industry stakeholders and investment institutions, while exploring evolving possibilities for industry-wide cooperation, steering the company towards a new phase of growth.Regarding subscription services, revenue from subscription services increased by 62% year-over-year to [ RMB 11.51 million ] during the quarter, bolstering our diversified course offerings and efficiencies, customer acquisition strategies. In addition to upgrades across our traditional training courses such as [ funding acceleration cap ], we forged ahead with the development and expansion of high-quality degree-based programs. For example, we made great progress on the postdoctoral research program we rolled out in collaboration with Keble College of the University of Oxford, further driving our revenue growth. In the meanwhile, we continue to add new courses to our portfolio and with a can-do spirit, partnered with top universities worldwide to cultivate a high value-added training ecosystem, providing China-based senior executives with avenues to expand their careers globally.Moreover, with the widespread application of AI and outstanding innovation in product intelligence, market demand for AI expert is growing increasingly urgent. We are actively embracing the business opportunities arising from this trend in collaboration with more AI-focused partners to expand and enrich our course offerings and training system with AI-related courses. Our strategic partnerships cover AI cloud training and innovative talent development, as well as industry-specific large language model solutions. Together with our partners, we are setting a new benchmark for talent development in artificial intelligence, propelling the digital transformation of a wide range of enterprises.In the macroeconomic uncertainties, there has been a sustained increase in user demand for self enrichment. Consequently, the training sector outperformed market trends in a counter-cycling fashion, aligned with the wisdom of the old saying, to do a good job, one must first sharpen his tools. Our user self improvement has translated into overall enhancement of their performance and efficiency in corporate workplaces. We are confident that as the company continues to invest in the training field, we will further enrich our course offerings, constantly enhance our training system and continuously expand our consumer base. We expect a significant growth potential for our subscription services as we move forward.In short, we maintained encouraging growth momentum in the third quarter of 2023. Our total revenue increased by 2.5% year-over-year to RMB 97 million, with revenue from our advertising business up 11% year-over-year, outpacing market trends. Notably, revenue from our subscription services surged 62% year-over-year, and our gross margin remained high at 56%, a compelling testament to the resilience and the vibrancy of our business as we adeptly navigate the macro challenges. In the meantime, we redoubled our efforts across content formats, including images, texts, short and long videos, audio, podcasts and live streaming, among others, fostering a sophisticated full spectrum content matrix. The number of our followers surpassed 32 billion (sic) [ 32 million ], extending its growth stake for a 10th straight quarter. Looking ahead, building on our peerless content, formidable brand influence and keen sense of innovation, we will actively forge new partnerships with global industry leaders, while resiliently exploring innovative AI applications, propelling the company's [ enduring excellency ] and sustainable growth.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. Now, I'd like to walk you through more details of our third quarter 2023 financial results. Please note, all amount numbers are in RMB, unless otherwise stated.Total revenues increased by 2.5% year-over-year to RMB 97 million in the third quarter of 2023, up from RMB 94.6 million in the same period of last year. Online advertising services revenues increased by 11% to RMB 71.2 million in the third quarter of 2023, compared to RMB 63.9 million in the same period of last year. The increase was primarily attributable to more innovative marketing solutions we provided to our customers. Enterprise value-added services revenues were RMB 14.2 million in the third quarter of 2023, compared to RMB 23.6 million in same period of last year. The decrease was mainly due to the negative impact of macroeconomic uncertainties. Also, our offline events are not scheduled evenly throughout the year, and it turned out there were relatively fewer events during the third quarter.Subscription services revenues increased by 62% to RMB 11.5 million in the third quarter of 2023, compared to RMB 7.1 million in the same period of last year. The increase was primarily attributable to our continuous efforts to offer high-quality subscription products and training programs to our subscribers. For example, in the third quarter, we rolled out the postdoctoral research program that we collaborated with the University of Oxford, which was well received by our high-end subscribers and helped boost our subscription revenues growth during the quarter.Cost of revenues was RMB 42.3 million in the third quarter of 2023, compared to RMB 35.5 million in the same period of last year. The increase was primarily due to higher fulfillment costs and content costs. Gross profit was RMB 54.6 million in the third quarter of 2023, compared to RMB 59.1 million in the same period of last year. Gross profit margin was 56% in the third quarter of 2023, compared to 62% in the same period of last year.Operating expenses were RMB 77.5 million in the third quarter of 2023, compared to RMB 62.1 million in the same period of last year. Sales and marketing expenses were RMB 32.4 million in the third quarter of 2023, an increase of 1% from RMB 32.2 million in the same period of last year. The slight increase was largely due to the increase in payroll-related expenses, partially offset by the decrease in marketing-related expenses. G&A expenses were RMB 36.9 million in the third quarter of 2023, a 123% increase compared to RMB 16.6 million in the same period of last year. The fluctuation was primarily attributable to certain one-off expenses, including severance payments as we optimized our organization and office lease termination fees incurred in the quarter, as well as an increase in allowance for credit losses. Research and development expenses were RMB 8.3 million in the third quarter of 2023, a decrease of 38% from RMB 13.4 million in the same period of last year, as we continued to proactively embrace AI technology and streamlined our research and development teams, resulting in a decrease in payroll-related expenses. 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 1.4 million in the third quarter of 2023 compared to RMB 2.6 million in the same period of last year.Other income was RMB 4 million in the third quarter of 2023 compared to RMB 5.7 million in the same period of last year. Net loss was RMB 18.9 million in the third quarter of 2023 compared to net income of RMB 2.5 million in the same period of last year. Non-GAAP adjusted net loss was RMB 17.5 million in the third quarter of 2023 compared to non-GAAP adjusted net income of RMB 5.1 million in the same period of last year. Net loss attributable to 36Kr's ordinary shareholders was RMB 18.9 million in the third quarter of 2023 compared to net income attributable to 36Kr's owner shareholders of RMB 1.7 million in the same period of last year. Basic and diluted net loss per ADS were both $0.45 in the third quarter of 2023 compared to basic and diluted net income per ADS of $0.04 in the same period of last year.As of September 30, 2023, the Company had cash, cash equivalents, restricted cash and short-term investments of RMB 116 million compared to RMB 136.5 million as of June 30, 2023. The increase (sic) [ decrease ] was mainly attributable to small-sized long-term investments in certain new economic entities we made in the third quarter of 2023, as well as net cash outflow from operating activities. If we exclude the previously-mentioned one-off payments relating to the optimization of our organization and moving our headquarters office, which altogether amounted to over RMB 25 million during the third quarter, our cash position actually would have increased quarter-over-quarter.This concludes all of our prepared remarks today. We will now open the call to questions. Operator, please go ahead.
[Operator Instructions] Today's first question comes from Shan Jiao with CICC.
[Foreign Language] Congratulations to the solid performance in the third quarter. And how does the management view the fourth quarter and next year's advertising revenue trend?
[Interpreted] The third quarter brought sustained and robust growth momentum in our advertising business with year-over-year revenue growth of 11%. As the market gradually stabilized, we noticed an encouraging rebound in demand for advertising compared with previous months. Our branding and performance-based one-stop advertising solutions have earned substantial trust and support from clients, sparking steady growth. Our advertising consumer base includes internet giants and Fortune Global 500 companies, as well as China's traditional industrial icons such as [indiscernible]. Steady growth of advertisement placement by these companies propelled a year-over-year increase in our ARPU of 20%. Meanwhile, we also offered flexible and versatile services to emerging industry players, catering to their diverse advertising and marketing needs with graphics, texts and long/short videos, among other formats. For the fourth quarter, we maintain a cautiously optimistic outlook for our advertising business. To drive continuous growth in our advertising business, we will further enhance our content influence, strengthen our in-depth cooperation with advertisers, and actively explore AI marketing and other new marketing channels to create more growth opportunities for advertising.
[Operator Instructions] Our next question comes from Lingyi Zhao with SWS Research.
[Foreign Language] Congrats with good results. And I have 2 questions. The first one was, both long and short video segments recorded robust growth on a sustained basis. What plan do you have in place to unlock further growth potential? And my second question is, the company's gross margin remained fairly high in Q3. What has the company achieved in cost reduction and efficiency enhancement?
[Interpreted] We have consistently prioritized content innovation and diversification for short videos. Our lineup already covers diverse topics, ranging from technology, innovation and business insights to lifestyle, posted across popular short video medium platforms, including Bilibili, Douyin and Kuaishou.Our sub-vertical medium, 36Kr Auto, is also worth highlighting. Since its launch during the first half of 2023, 36Kr Auto has made great progress in terms of content quality and user engagement with a surging number of likes and followers. We have also initiated partnerships with top tier automakers such as BMW and Mercedes-Benz. As of the end of this quarter, we had over 8.5 million short video followers, up 41% year-over-year, among which more than [ 2.50 million ] were Bilibili users.In the swiftly evolving landscape of social media platforms, short videos have emerged as a crucial channel for user interaction and social engagement, earning widespread favor among advertisers. Short video ads also boasted a higher ARPU compared to other advertising formats, further propelling the company's overall advertising revenue.Regarding long videos, this year, I hosted a long video show, Foreseeing 2033. The show featured enlightening conversations with visionaries including [ Wong Shu ], Robin Li, Charles Li Xiaojia, James Liang and Kevin Kelly, which deeply engaged a diverse audience. The first season has successfully concluded with a total online exposure of over 250 million views, and the second season is currently arriving on Youku and Beijing Radio and Television Station.Looking ahead at 2024, we will continue to expand our footprint in long videos. We have 3 to 4 new programs in our long video pipeline, which are set to further enrich our content ecosystem.
Hi, Lingyi. Thank you for your question on gross margin and the financials. This is Lin. I will take your question. So, first of all, we continue to take rigorous cost control measures and optimize our cost structure. That's why we were able to maintain our gross margin at a relatively high level, which is 56% level in the third quarter. And on top of gross margin, actually, I want to highlight further that we are also taking initiatives to improve our operating margin as well. So, to cut our spending, actually in the third quarter, we have taken several measures. For example, we moved our headquarter office to a relatively lower rental building in the third quarter. And secondly, we continue to embrace AI technology, which enables us to streamline our R&D team, and which resulted in some cost savings in the payroll side as well. So, if you take a look at our operating expenses in Q3, although there were temporarily some one-off impact in Q3 because we have to pay some severance compensation, as well as terminating the old lease contract, we need to pay some compensation expenses. So, that hit our third quarter, but that's temporary and that's only a one-off issue. And if you take a long-term view at these initiatives, those 2 measures altogether will give us spending cut of at least RMB 30 million on an annual basis. So that's quite an improvement on our operating margin. And going forward, on one hand, we will continue to grow our revenues, and on the other hand, we will continue to embrace AI technology to more diversify the business scenarios, so to cut our cost and further cut our spending. So, also overall, we will improve our gross margin as well as operating leverage.
And our next question comes from Peipei Qiu with Industrial Securities.
[Foreign Language] As you already explained how AI played a very important role in improving efficiency, but could you share more details about how eventually AI helped make money? So, could you share your monetization attempts in this area?
[Interpreted] 36Kr has clearly demonstrated its vision and keen [indiscernible] with respect to generative AI. Following last quarter's pioneering AI-powered live streaming sales sessions, featuring digital humans in our Taobao store, during the third quarter, we collaborated with Alibaba Cloud and leveraged its large AI model, Tongyi, to create our Asia Games blogger on Xiaohongshu, garnering significant visibility and engagement. On the advertising front, we are actively exploring and applying AI technology to enhance marketing effectiveness and craft innovative strategies. This includes personal advertising content generation and advertising placement, as well as intelligent decision making based on data analyticals. By consistently extending our footprint in AI marketing, we seek to provide our clients with marketing solutions that are smarter, more efficient and more innovative. Additionally, we joined hands with top tier investor players, including Baidu, SenseTime and iFlytek to deepen AIGC applications in analyzing financial statements, as well as reporting on the primary market, delivering more comprehensive, more agile, higher-quality offerings to a broad spectrum of companies at exceptional cost to benefit ratio.
And our next question comes from [ Ruiqi Lu ] with Sealand Securities.
[Foreign Language] What specific factors contributed to the rapid growth in the company's subscription services? Any new growth strategies in plan for this segment?
[Interpreted] The rapid growth in our subscription services was primarily propelled by the launch of our high-value degree-based programs. This quarter, we joined hands with Keble College of the University of Oxford and co-launched a new degree-based program, vastly boosting our ARPU to over RMB 68,000. Meanwhile, we continue to enrich the high-quality training courses offered through our venture capital class and [ funding acceleration cap ]. Our diverse and engaging course offerings brought top tier learning experiences to users, drawing extensive [ queries ]. Looking ahead, we aim for additional partnership with top universities worldwide on more international MBA programs such as University of Oxford, University of Leeds, Queen Mary University of London, Anglia Ruskin University in the UK and INSEEC Business School in France, providing China-based senior executives with avenues to expand their careers globally. Moreover, with the vibrant advancement of AI innovation, we noticed an increase in people's demand for learning and harnessing AI technology. To address this demand, we are actively working with leading AI companies based in China to jointly develop AI-focused training programs, enabling participants to have a better grasp of AI technology and practical skills.
As there are no further questions, I'd now like to turn the call back over to the company for closing remarks.
Thank you once again for joining us today. If you have further questions, please feel free to contact the 36Kr Investor Relations through the contact information provided on our website. Thank you.
Thank you. This concludes this conference call. You may now disconnect your lines, and have a wonderful day.