On June 17, with the permission of the Shenzhen Stock Exchange, YaoWang Technology (stock code: 002291) officially responded to the "Annual Report Inquiry Letter" and explained and responded to multiple aspects of its operations.

In its response, YaoWang Technology predicted a gross margin of 14.4% for 2024, a significant improvement compared to the 2.05% gross margin in 2023. In terms of revenue and expenditure in 2024, the gross profit margin of internet advertising agency - agency placement is expected to remain the same as that of 2023; the cost ratio of various parts of social e-commerce refers to the average level of the company's historical years; considering a certain increase in labor costs based on the 2023 cost, the overall operating cost is predicted to be 4.783 billion yuan, and the overall operating revenue is predicted to be 5.588 billion yuan, indicating an overall positive revenue trend.

The response showed that in the first quarter of 2024, YaoWang Technology's operating revenue was 1.581 billion yuan, a year-on-year increase of 43.44%. Among them, the gross profit margin of social e-commerce businesses represented by live broadcasts and short videos has reached 12.34%, a significant improvement compared to the -0.38% gross profit margin for the full year of 2023. The main reason for this increase lies in the increase in the number of live broadcast accounts and schedules of artists. By the end of 2023, YaoWang's live broadcast accounts exceeded 450, reaching over 750 by the end of the first quarter of 2024. There were approximately 6,000 live broadcasts in the first quarter of 2024, representing a year-on-year increase of approximately 60%, further increasing revenue and diluting fixed costs such as labor, promoting revenue growth and gross margin improvement.

Regarding the "TikTok platform procurement of 2.3 billion yuan" mentioned in the inquiry letter, the response showed that YaoWang Technology became a first-tier agent of TikTok in May 2022. With more platform benefits and professional team advantages, it attracted other second-tier agents to cooperate with the company, resulting in significant growth in business scale. In 2023, through multi-platform procurement, including TikTok, the total cost of YaoWang Technology's internet advertising agency business was 2.223 billion yuan. Industry insiders estimate that most of the 2.3 billion yuan procurement scale was used for internet advertising agency services rather than live broadcast investments.

Regarding the summary of phased operations, YaoWang Technology responded that "2023 was a challenging year for the company." Since last year, YaoWang Technology has chosen to try and break through existing business models, proposing a business strategy of integrating offline and online development and expanding new consumer businesses such as YaoWang X27. At the same time, through YaoWang AIOS, the company has improved efficiency and optimized labor costs, established overseas live broadcast teams, and further expanded its business scale.

For YaoWang Technology's response to the "Annual Report Inquiry Letter," the audit institution believes that there were signs of impairment in YaoWang Technology's goodwill in 2023. However, through the adjustment of business strategies, the company's post-period operating conditions have improved significantly. The impairment test conducted based on post-period operating conditions and performance trends indicates that there has been no impairment of goodwill.