Q3 2020 Kingsoft Cloud Holdings Ltd Earnings Call
And to the Kingsoft cloud Gordo.
2020 on these conference calls.
Oh Oh.
Only after the speaker system Beijing, she will be a question on competition.
Watching <unk> session, you will need to switch so one on your telephone.
Please be advised that this conference is being recorded today.
I did not like on the continent, what's your speaker today equaled <unk> Investor Relations manager all screenshots cloud.
Thank you. Please go ahead.
Thank you operator, Hello, everyone and thank you for joining us today.
I'll start and stop in 20 or what's.
Well distributed earlier today and is available on our IR website at <unk>.
Why you don't call as well as global needs to Barcelona.
I'm a cult like following folk well, we have all of the <unk>.
Yes, well.
It wont really deal.
<unk> and the company's highlights followed.
So who will discuss financials and.
Before we begin I would like to thank God, it's called the colt hub and spoke instead.
Neil <unk>, Oh, that's that couldn't judge Oh, my God before at the moment.
Yes, probably the good news litigation with Walmart.
He Nike spot its forward looking statements based upon the close of that patient.
<unk> market and operating conditions.
Thank you and then we'll know Oh no is it definitely.
Definitely and all those.
All of which are difficult to would be on the money off wage up beyond the company's control, which may cause the company's actual results fulfillment or too much deeper much relief from those in the forward looking statements well.
Well, there you information regarding babies and all those things.
Okay, Oh separately.
<unk> in the Companys filings with the U.S. <unk>.
Call me, but no undertake any obligation to update any forward looking statement as a result, we make sure I'm, sorry, oh, otherwise, except as required under applicable law.
Finally, please note that unless otherwise stated all figures mentioned during this conference call.
It's known by people I talk to introduce our deal, but do you know.
Please go ahead.
Oh I see that people.
Got you I got to tell you Rd Rd, yet decided to do both.
Some people well known culture since you didn't get the old Trafford, all you can go to.
<unk> full adulthood. She does so you got to really be.
Let them go back under chartered films.
With that he had the ball pretty jet.
Well. Thank you so much in 12 countries, we preach it. So if you want to follow up Joe who don't I talk to get both older. Presumably then people. She is old baby. It doesn't go back to food in fact, all study do you guys.
Gosh, she gets into the bike industry does come down sure by the artisan dark sheep.
Last week she issue the football rights you deeply important but you sure. What's the Delta is your single well <unk> fuel you can kind of go to you know to go by what you can do you find that sometimes you.
Thank you all for joining our so called her two children plenty earnings call. We're pleased to report another solid quarter as we effectively executed our strategy across our business segments. We generated RMB 1.73 billion in revenues represented 72.6.
The increase from the thing called her blockier outpacing the industry average.
Well I'm surprised to help her jugs, which had been delayed due to COVID-19, starting to get back on track and to be delivered step by step our revenues from enterprise cloud. So is it increased by 275.3% year over year to RMB 409.1, Neely It's got.
<unk>, 23.7% of our total revenues, which was up from 11.4% in a sense you are lucky here.
As we continue to capitalize on going each like vision and the rapid adoption of multi cloud strategy will further penetrate into like workflows across the insights publix always its financial sources as well as well as health care sector. We've recently expanded into.
Those who didn't do it holds up well, even though you didn't go so do you introduce a cool got it seems.
<unk> well go to cope with that.
Yeah, I didn't mean.
And you didn't stop when does seem could you give me tied to the boot and bootie <unk> well. So can you get these younger people don't use local books, yet, we'll do Ya truth, what you'll be Copel did you keep all bode well for.
Ooh, maybe shopping food, but she had told them keeping dry food.
Oh, the funny that lets you shouldn't <unk> Dr. <unk>.
<unk> <unk> <unk> told me should go good she there to both of them will do well in concert don't hold I Didnt do telling you.
So you can see wouldn't be material in Q4, though when you go into the <unk>.
You got to get the whole month by wire shouldn't then Colby bother people don't quite striking.
We're trying to teach a whole lot less huge.
No wait I also don't see issue gentry goldrick overcrowded shows you pour gold gold being poured into <unk> well in the Gulf War that can go to a couple of if you like but you can't go on forever, but didnt, probably but again.
ER or public cloud business, we continue to execute our from customers stretching well.
I see and rapidly increasing demand for multi cloud. So it's it's from current customers during the third quarter, a meaningful portion of our new customers how already use multi cloud providers.
Leveraging our fourth quarter technical capabilities and the strong underpriced. So would experience we continue to be our Korean customer base, including Nike shoot me there. So im sure I sort of top audio platform.
In computing storage nice work they have another platform at Starwood forgot.
Meanwhile, we successfully used to publish only its 10th anniversary Ladbroke pesky rent, which attract a total FFO were 60.9 million barrels.
Draw with Facebook, probably and technology capabilities and a wider range of body. So with this we.
We hope you're able to meet the computing and I working each of our customers.
Okay doing to millions of their own user with live streaming on like transaction and other services.
It's been an high conferencing environments going forward, we will continue to execute our plan customer strategy. These are all very experienced writings always its full heidrive hi, Tec Orange events. We believe are we looking to Chaucer mulkern customers and why don't we most secure and stable our skill.
Well so is it.
You know I heard she was on that she is going to your question why don't you address how.
I'll, let you do find themselves would actually show people well then two dogs I can give you a quick input on that you know how do you think well got you I can't get into how you did it.
Got it wouldn't you Patrick one issued how do people so for the <unk> shooting before your children you should be if you're just trying to be sure to Jim how about yourself.
Cool people that you don't keep inching gives ability I'm trying to be on the high school topic a decline.
I'll move on to other we're talking about the <unk> business will do I can let me know what they're doing is always with.
A couple of people locally, causing about you felt a little different.
To cope with the Oakland, who I think that goes out <unk> switching back to one thing for.
Oh sure do you thought you couldn't get the agenda in just one that maybe we could would you Fools would go with the switches will be Jim Jones with old She's wonderful Craig I'm sure you guys would also a bullet people I doubt you'll get stopped.
Welcome to <unk>.
Moving to the enterprise cloud sector, our enterprise cloud storage, it's growing rapidly the demand Spotify, that's retailer cloud solutions and other value added services continued to grow well.
At least folks on the public so with it and the financial services sector and the recently expanded into the house care market.
How large industry specific solutions got to cover flips back to use cases.
And the field of public so with this well always try and our overall investment you've restructured we have seem to be mindful of occurring. So it just continues to grow for example, <unk> Big data project, you know, who they probably it's required infrastructure and so we and lifelong right so with integrated solutions.
Including a hospital information system.
Wow salaried and are you actually medical record.
Total budget for the project is RMB 56.8 million.
We also successfully completed the National chart. He loved prequel project of the Ministry see all sorts of China.
Right highly reliable computing I've worked and resolve these and how has the customer take a key step in transforming from traditional IP architecture to cloud services.
The same time Roche fallbrook called computing could bill gates, but able to contribute to that each flight <unk> Oh public sectors.
During the third quarter, we call Brady with local governments in probably been such a jump on that Jim on the salary others compute big day half life loans.
Do you know how your phone man woman feeling about them before you got to you.
Greetings young Wando trucking food can be summed up so it won't be the divorce job well they do cool well transaction side are you able to do.
Well, then jumped come to a point where people wouldn't do I'm trying to firm before being Joplin toward action cohort.
Remote hold back you don't go through your homes will you do talk with somebody <unk>, Bob <unk>, <unk>, well nobody thought kind of the all digital.
You said <unk> <unk>.
Sure. Good morning show with that moved back in <unk> <unk> <unk>.
<unk> most of the time she why you on the CHMP working strongly with you people I'm sure, but given the stock will you come to.
Well the financial services sector, we pride in mobile Iraqis Doorbusters Ingrid the proportion of recurring revenues.
When you show cloud so its pride are we how benefited from having no potential conflicts of interest with Albert customers.
Quite stable and secure they'd have to with his wish how how close to getting their trust of our customers and overtime allow us to gain momentum large banks.
For example, large policy banks like us.
Okay, well I, just always solutions for massively parallel Poseidon database, which help the bank to significantly upgrade state how they could build he's well.
We have also received a Monday from one of the largest state owned bank follow a big state our project wider secure and the stable. So it's it's to a national commercial bank with nearly RMBS southern trailing Isis.
Football get home yet.
Colin can you a controversial how long coke. So people will go into actual food bungalow, Tom colors, what you're going to do during the year, we don't have them go shoot.
Sure It'll go do Cook will you wait until were bundled I T tell you lunch and you look what's cool cool that shooting for your Delaware wouldn't go.
Well see Podila fool your thoughts in oil you all know you actual food <unk> beverage and food.
Well the ones, who didnt food you quotes usual touching on either.
And the insurance sector, we successfully signed agreement to deliver high availability in smart connectivity project for a brief <unk> life insurance as a part of days would be to hybrid cloud cloud will have them respond to the spike in business that they have been since depend on mix was mauled financials.
Its customers moving from on Prem to the cloud recurring revenues from our enterprise customers, we will continue to grow it.
In addition, our partnership with Albert multi cloud Native enterprise data warehouse company Oh actually.
Well its customers include China large failing banks.
Back to strengthen our foothold in the application of cloud based database technologies in the financial services sector.
But importantly, you know <unk> home team. Good luck tell you who know ultimately choose usual no harm to the film would you go to <unk> Hook truth, you even though.
We closed without a hunger for Tom also you don't get to talk shows what comes you thought your publishing goals. How you choose what bothers me about what got you. So I'm sure you know you build cars how much actual.
Do you do hopefully you can give me just one question Paul you Saumil Chevelle hunger I, it's possible or thoughts about trend Gulf War, Nobody thoughtful you know you've all yet so I really I don't want to push your woman telco looks into each arm yourself based on what the quality you got sure no sure sure would you. There's some didn't tell you negotiate with you on your shelf football also.
Thoughts on food <unk> Babu reaffirmed all the troops you shouldn't you would as usual.
The health care sector, which we've recently expanded into the move to digital has become essential in Gulf Coast.
Perfect in the house car sector, a highly centralized easy to replicate and operate continuously.
In order to accelerate our expansion into this market, we entered into a multiyear strategic framework agreement, we see C. D E Commerce technology to the <unk> cloud protect for the health care market.
<unk> national provincial enemy and useful lives across the country during.
During the third Coulter Act to try in House car Park to park looks back so much capabilities Karim I pod candidate heightened silly stuff.
That come back I mean, great great across hospitals insurance companies and the pharmaceutical industry yeah.
In addition, we believe were a picture archiving and communication system or Pocs Intralinks. Yeah. This is the fourth largest skill real time tax that has been implemented.
So level in China.
And allows doctors to come mainly our cat Treaty and the show Beach told medical images across the house to do those so watch to meet the increasing need for continued operations among customers.
Sure well do at home the content you for the December quarter Blunt I woke lessons, you've you been cool stuff will know how you define it causes some shops European demand change.
Can you do that you thought you suddenly I thought okay, I see already Demoed bunker, such a joke I don't want you to think <unk> Papa John's he'd like one time, but you probably well know fabiola all food she when she is Rudy.
Uhhuh goal might be completed do you couldn't be algae <unk>, Cuba thought when what can you do it seemed like you finally monkey poop off on what she didn't you don't youre talking the cultural fit into Philadelphia, well double double <unk>, there and do something I've been told you brought down your little RTC Nutribullet <unk>.
I've already like woman Jones, Jim do you want to recruit we're trying to do but I wouldn't use one though quite a two parter on C.G.
<unk> do meet Unifill, which I'm not sure I'll do it being Twitter I should also.
Lastly, moving to our product and technology problems, we continue to stress Albert a cutting edge technologies to empower our industry specific solutions.
Sorry, Robert Redo cloud capabilities, we hope and strengthening our artery coding technology. For example, we do lab, we developed the coating technology.
C. Two six filing house to ensure that our customers can delever.
Streaming well, reducing these costs.
In terms of computing launch new so it's kinda <unk>. So is that allows customers to deploy container application directly we south were chasing the underlying infrastructure.
Dave surveys with Rightskill Bull and the flexible computing capabilities that meet customer can match.
Especially for mission critical situations, where we are there too is essential especially.
Actually that's when traffic surgeries well close back also special events.
<unk> edge computing, we continue to improve the functionality of our edge computing platform and to successfully acquire so we feel real time communications RTC holds true lifestyle cuts customers.
Looking forward.
Strengthen our work around customer strategy capture the many jumping around cloud computing expand our market share and further consolidate our position as a leading neutral cloud sewage provider.
I will now pass the call or I'm, sorry to go over our financials for the quarter. Thank you.
[laughter]. Thank you you need to add Nicole Hello, everyone I will now discuss our financial performance for the third quarter. Please be reminded that all the numbers colder here are in RMB. Please also refer to our earnings release for our detailed financial results.
To begin with I would like to highlight a falling points first of all our previous revenue guidance, what's from 1.67 billion to 1.74 be RMB.
We are pleased to report that our total revenue of 1.73 billion RMB off this quarter arrived at the top end of our guidance.
Importantly, it represents an acceleration of revenue growth at 72.6% on a year over year basis.
Which makes us one of the funniest deploying clears in the cloud industry in China.
But true enterprise cloud started to remain as one of the key drivers of our topline growth.
And of course also that this revenue this quarter. It was 400 zero 9.1 million RMB, representing an increase of 257.3% year over year, that's 6% to 6.2% sequentially.
That contributes 23.7% of the total revenue of this quarter.
So with the 11.4% in the same quarter last year.
Three we are seeing continuous margin improvement our adjusted EBITDA margin has now improved for nine consecutive quarters and our adjusted gross profit has been positive for five consecutive quarters.
To be specific.
Adjusted EBITDA margin increased to negative 1.5% this quarter.
Well not to 10.2% in the same period last year, representing an improvement of 8.7 percentage points.
Our net loss is also a narrow to 169.1 million RMB this quarter.
Oh from 241.9 million up to say last year.
Number four our business is sufficiently funded at this moment.
That's on September Thirtyth 20, funny, our cash position is 6.8 billion RMB, we raised 1.63 billion RMB off net proceeds our core offering in September.
Our public float is 22.2% of our total outstanding shares up from 14.8% immediately after the IPO.
We are happy with the higher public vote rates better liquidity and a strengthened high quality shareholder base.
And lastly, based on a recent announcements from MSC yacht well going to be included in the MSP I Kinda index, which will be implemented after market close of November Thirtyth 2020. We were also recently included adding a number of technology related entities by Dol and SMP.
No I won't go through the detailed financial results our public cloud services revenue increased by 48.1% to 1.3 billion RMB. Thanks to the fast revenue growth a premier customer usage from our public call customer continues to grow on both year over year on sequential basis, we have successfully attracted a several important.
Nursing education and diversified into that sub verticals.
Who have already used the Monte Carlo vendors.
For our call service revenue increased by 257.3% to 409.1 million RMB contributing 23.7% of our total revenue in the third quarter. This year increased significantly from 11.4% in the same period of last year.
With the fast growth of enterprise call service revenue, while improving our overall revenue mix and increasing the recurring portion of our revenue.
Cost of revenue increased by 40, 60, 64.4% year over year to 1.6 would be to RMB ITC cost increased by 51.2% year over year to 1.06 billion RMB, but as a percent of total revenue decreased from 70% of Q3 last year to 60.
1.3% this quarter.
We are achieving greater economic of scale and improving efficiency over his office.
Depreciation and amortization costs maintained relatively stable at 156.5 million RMB on a year over year basis, we reviewed the useful life of equipment on an ongoing basis and effectively to life for 2020, we change our estimates of useful life for our third and electronic equipment.
From three years to four years, which is common they adopted by the industry in general.
The lumber yourself alive is due to increasing purchase of high end equipments continuous improvement of our software and enhancements. They all come up at least up operations.
Other cost cost of a third party software purchase all coffee costs and travel costs associated with both public cloud and enterprise cloud as well as others.
Women costs cater to enterprise so it's just.
Costs were 388.2 million RMB kind of stuff costs were 11.2 million RMB. That's we continue to expand revenue scale and improving efficiency of our resources. We expect I do you see on the DNA costs as a percentage of total revenue will gradually decrease.
Adjusted gross profit was 114.8 admit out I'd be compared with 20.6 million RMB in Q3 last year.
The adjusted gross margin was 6.6% in the third quarter. This year, what is the fiscal third quarter with a positive to both models.
That's true that caught in a cup scale and operating leverage.
Total operating expenses increased to 355.7 million RMB up 19.1, aside I think you'll see losses.
Increasing was mainly due to the increase in share based compensation expenses legal accounting and the other I'm not traded at a compliance cost that's a public company.
Excluding share based compensation adjusted R&D expenses as a percentage of total revenue decreased from 50% excuse me last year to 8.9% this quarter.
Adjusted selling and marketing expenses as a percentage of revenue decreased from 7.9% in Q3.
Three last year to 4.8% this quarter.
I would say that your net expenses as a percentage of revenue decreased from 4.8% in Q3 last year. She was 3.7% this quarter.
Our adjusted EBITDA is next year 26.3 million RMB compared with negative 100 zero two point.
Zero million RMB in Q3 last year adjusted EBITDA margin also improved from.
Next you have 10.2% of Q3 last year to negative 1.5% of Q3 this year.
On September Thirtyth funny funny, we had cash cash equivalents and short term investments.
6.8 billion RMB.
During this quarter, our carpet expenditure was 473 million RMB, we have sufficient liquidity and it will continue to be prudent in managing capex measure into infrastructure and the technology research maintaining a healthy balance sheet.
Moving to the outlook were currently expecting net revenue for the fourth quarter of 20 point it would be between 1.88 billion RMB.
1.95 get out probably be however, this outlook is based on current market conditions and it reflects the company preliminary estimates, which are all subject to change.
This concludes our prepared remarks and thank you for your attention and we're now happy to take your questions. Operator. Please go ahead.
[laughter], ladies and gentlemen, we will now.
He can to question and answer session.
You ask a question. Please press star one on the telephone like finding to be.
When she comes in and that's what we're supposed to bomb attached.
He's asking questions Mike.
Much as possible.
So again, it's all one if it just wants consultants.
You do have a question from the line of teaching from Goldman Sachs. Please.
Thanks, a lot.
Hi, good internal hurdle and Nicola Shaw Hugo South and East you don't see it balances usually.
I will not go into kind of deals you drive when are you going to yield tragedy.
<unk>.
Since then.
He could be about what she don't call Centene, Glenn It's a couple things.
Applequist.
Completely cook achieved yet they still good trunking metastasis.
Stephen Lynch, yeah, but usually quite easy to be able to call me at Deutsche ago, because Ah yes.
Well the comment that you could you cannot just show you can't be talked about Josh is now a whole kind of hard to the gen <unk>, which classification derica.
Erika you sound good she's the whole genome <unk>, how much of the operating profit <unk> downtown team to do a deal again I switch patients.
Okay.
Chicago, <unk> DNA that you've been spending.
The job to the T. why did you Cogs kind of young people that I teach me she should be job either seen them and then she might suggest the young <unk> home.
A few minutes ago Vijay.
Hi, Jane costs out, Okay, what IOP, usually home <unk> not that sure.
No what you probably the thing Thank you management and congratulations again for the strong without I have three questions and the first one is about the biological performance in the public cloud.
Services for.
For example, the video gaming education vertical what kind of demand trend here looking out into the second half 2020, and can we expect similar kind of Q on Q pickup Christmas last year into the fourth quarter and second one is about the enterprise cloud well this quarter enterprise cloud contributed 24% of the Rabbie and kill expense somewhat kind of pickup.
Contribution.
Going forward for this month.
[laughter] to last one is just to understand a little bit more on the a strong result in operating profit, we see I actually faster than probably know putting up margin.
For the quarter and when we look into the details it looks like we are actually spending a little bit more in Cogs wise CV.
The.
And just to understand a little bit more is it more related to our enterprise cloud business development cost allocation that into fourth quarter. All of that next year. How can we look at the trend. Thank you. Thank you so much.
What's your sense.
Beyond this is oh your ability to deal with it you know to go.
The only other thing that I was doing well the shoot you do it all off although I think are all top opened the chambord homes, you're building for them.
Two woman, they're sold will you actually said look why people don't go from you you seem to have I, let's say comfortable then they do see well what about the other two units future unless you get bought really I should let see I don't believe so.
Let's see woman their surety that he or she would show you indicated some key to both hold the holiday actually bought should they go but you negotiate with them.
Well they are you gonna Hoosier avoid you know why do Libya.
This your night. So you choose you know, we'll leverage which relates you hope to do for the future Hydratight cultural.
And welcome you to include Florida, she'll come along so well.
Sure.
You want me to read you don't goods any chance you could be though wouldn't be hope to <unk>. That's usually should show you a lot of it was almost <unk> bulk will woman's Arnie the Golden Foods, you can call buildable after getting hold of them go Oh, you bought a John's question, I guess or something but being the streak of record to groom one deal Miuccia Hi, sure Joel do you want to.
Good to talk with you.
Yes, they've been they'll handle them kind of thoughts I agree with you. The mix. Your you talked about your goal for <unk> Dr. goods here, but let's see what people are you I guess you attribute your give it you shouldn't she gen five down but you're using the two the future has really been job kill you Hope you ought to look at all will do for you always hear some more thought you choose to use to hold you to it I got a job.
By people the year wouldn't go they go to a boost there sure honestly if you go back to Sandro Hot and a woman, though how bush I Wonder if you could go to the adult <unk>.
See the calculus, which you're going to drive cars to find out there to do that here, but no older woman. The Kindle Dart woman is it on the call with war.
Oh, well make sure be though.
Well that funeral home, you'll remember passing the your home or sell more mobile.
From Korea, Hong Wailea Hotel, and we'll probably see some well let me just go onto the bundled I see the <unk> woman Jay Good truck Lixilan soon though because we couldn't call even though it's probably going to go there, but we do not know we're going to get into it but I don't think you couldn't border you know even though they looked at how sleep you know is a hot Peterson like Google.
Sure. It was that she can hope that all either be on calls with BARDA.
A hole to the computer lets years, you're not looking at a whole tone wasn't gonna have anyone deal and they go Harris I get might look like but yet.
Oh, well all translate Oh.
Oh, no public cloud because of things like that he has been well control in China, and Oh I've returned to normal other revenues do grow warehouse <unk>.
It is now.
I mean has changed that money Oh habitual people at smaller mall optical to all my services for example, we do.
Do you use all at conferences and all that.
Good day, ladies Oh, we do cloud gaming.
Occasion cloud will keep growing.
<unk>.
The demands for cloud service has been growing long before that probably 19, we still strongly meant the price of a public cloud. It's stable, we know couldn't stage and due to the multi cloud technology requirements major player.
Putting us.
Also very healthy and Jos followed the enterprise cloud, we have seen very strong demand in the market as we mentioned earlier, we know he is.
Protect to helping delays due to the COVID-19 I know some of the project has failed and delivered in those circles. Her Oh I know, what you're the fourth quarter.
Oh, we're how also also mentioned the health care or a big day type or Jack in should be well, they probably have no. So real <unk> Oh.
Perfect for the banks for example, the policy update on banks to fail.
Well the large scale on the banks and the national wide to commercial banks I mean, the house pairs of experts Oh, we have seen that gerrard elastic demand after.
After the pandemic wheelhouse and contract we see you see E Commerce technology I mean, the village her we'll deliver more projects being bid sector Oh long leads our partnerships.
Thank you I had out there have you had to take on a third question asking regarding the old came out. So there are probably are thrilled for the point I want to mention Ah first of all definitely that's no change from the occasional cost perspective.
And the other has almost no impact regarding the enterprise cloud revenue growth. However, I want to mention the primary driver as you all know our company strategy is a pretty good customer and also we stay very focused on the key verticals and that actually can dramatically improve our efficiency to extending to our new technology and as you know because.
So we have extended and the penetrated here the relationship to a major crime and we actually June I don't understand what their needs and that we can actually make more efficient regarding how we deploy all R&D resources. So I said I think a pretty constant strategy and to stay very focused on the key verticals and a generating recurring revenue. The key reason youre seeing R&D costs become one.
Efficient and the third point, so you'll probably remember we did our IPO back in May and also get a following September [noise], saying earlier half of this year. So the R&D cost as you know we have over 60% off the personnel related R&D function, though there were actually part of STC cost as a part of R&D expenses as reported.
So these are the onetime off intact and after Q2 and Q3, it's more normalized the trend that you're seeing a normalized level off on expenses.
And Oh, the third reason I mentioned this we are happy to see all enterprise cloud revenue, increasing as a percent of code.
Total revenue and we do actually as we mentioned even with call. It enterprise revenue, but we do leverage our public cloud or related to fundamental technology to deploy it into a probably environment over time, so they do a great synergy across both segments to leverage the relatively similar and on a lie similar technology, we already have so I think.
We've got a few things sign like planning along the line driver of incremental okay. So looking forward as we mentioned these are the fundamental drivers off and the nature of that business model hopefully assuming having stayed the same and the market environment is stable, but I'm happy to see that the margin expansion is likely to improve going forward as well.
Kathy.
Got it thank you very clear thanks much.
Thank you.
Well I'm next question is from the line.
Credit spreads. Please go ahead.
[noise] kind of on the line is open you may ask your question.
It's kind of on your line is open from credit Suisse. You May proceed with your question.
Oh, Great threw me go to the next one and I will get back to Canada. Thank you.
Thank you.
The hot.
Next question from John.
I see.
Let's go to <unk>.
<unk> eating drawl Henry so what's your house, Okay, just willing to keep it Oh GB agenda than she was even then you should squishy Chico toll booth and definitely along I would you.
Oh, one shot down do you change. He did you do to change I should do quite a nod to.
So there should be little machine kind of I think you tied to it some downtime to Joe Munda, no wish him, which actually John is China.
Uh huh.
Keeping in mind to me about Schulman seen that al Qaeda do it sometime should hold younger than Keyshia sounds you can't Glenn Countdown shows hotels.
Hi, there even if.
The judge you currently do and then Oh, Gee with hotel yield going into <unk>.
Similarly, Lynn you she's out any Jan.
Well, one I know who's sitting a good to talk to the Oh solution you can call me and Oh Gee the coupons.
Are we likely to say Oh Gee the tool set up on so we do see chiming Sealy <unk>, who do and I mean, she's going into a cheap Oh no no I hope things down.
Hi, good evening, Thanks for taking my questions I have three questions from me.
First one is among the top <unk> <unk>. So these providers you notice that he achieved positive gross and you noted that isn't how sticky revenue rose it's relatively slow why there is such a difference and how can we maintain the gross momentum for now.
The quarter's a and second question is about like dance. We know this site Dan started their own cloud business and where these attach our revenue from some question and that question is related to our <unk>.
And it investments Oh, we noticed that the company Oh, he could keep a and so what will be the I don't view that we want it to investing in the future. Thank you.
Positive.
Do you go through the year, we'll take when they are talking about that one.
She doesn't know how woman solution she sure.
Let's go to if you're going to harm you drawn to the ultra cool Travelhawk sure, though woman for shows a shoulder sorry, how you get you through two should be taught called undiluted bitumen, yet so you're going to find enough I got cold roll call, Doug Schoen, the food side.
So they should go and then $2 to <unk> for the troops you seemed rather than them.
Well go to all the <unk> gone on to and I'll see you do a poor you food as usual well no.
Well done lets you shrunk or do you try to do it but to do it. If you go to what do you feel you can go through the people Youre sure, but it all comes down to thoughtfully Youre should that should open border cool. Yeah. You struggled woman toy comes up when you shop, Tricia will merely a woman the bigger films will alter that idea maybe agenda you book to go out to you.
The Darlington Pendleton go to your total number two days before that he looks you know Q1, okay. So just held all about deal flow do I have to go to the test or the euphoria that go with the Woodside, Google Dave will give you the challenger will Duncan a common dividends I do go clothes washer for you Tom did meet architecture is that it.
It was actually as you find out.
If you're talking about this is one of you told you. The hotspots you wouldn't know take effect Oh like them back up because your house.
Oh, that's translating Ah.
Oil for its classroom, we think we focus on the black or white coats and Oh companies I worked with one customer strategies.
Highly efficient on all other peers.
And we have been bad it's easier to put the customer has accelerated their deployment of public cloud services and also as we talk about the multi cloud strategy. As this is a technology capability requirements would thing Oh Oh.
Oh, leaving neutral cloud providers Lewis's call.
Also it's right.
All customers, Oh, I would like to see like us to be their second lender.
Well the second question.
That does too.
So our knowledge, though the cloud so it's provided by Ida is now the thing Oh from us.
Knowing those things Bill and though we still keep a very close and a healthy relationship with our customers and they'll keep a couple days really shouldn't be in the field.
And for the pleasure out like how are you thinking hey, thank a friend or having to take on the last question on so a US you know if you're seeing in the history of the automated global cloud provider I know, including Google cloud Amazon in history, or the organic growth and investment into R&D is it.
Important but also given the industry is growing very fast and if we do want to capture all the necessary opportunity for us so external partnership including minority investments controlling investments and then maybe the commercial partnership it's very important for us to allow the company like hospital wants to grow rapidly and I touched a mockup community.
That's why Oh sure has only one example, but also US we just closed in the health care space. We also had a partnership with a C.C. to expanding the house beautiful cloud.
And though we actively review or the potential opportunities from potential M&A and a minority investment perspective, and a the second point regarding this name in particular, so what I've tried to do what you can share as you probably saw the financial service S is actually very important vertical and all actually really.
Okay sure that in that vertical these are the big to be fine you have a great quality and always placebo for the high and the best in class technology. So we actually partner with our dumping investment invested a company to de lever that's stuck solution for the major banks in China to a certain projects and as you know we already seeing this trend.
A more mature markets such as the U.S. as you probably saw some of that name like a snowflake is also working on an enterprise level data warehouse technology as well. So we do think that it's going to goodwill community in that direction that for us to capture the relationship and a potential revenue opportunity on a going basis and that many of the opportunities.
Correct.
The last point I want to mention even though we look at opportunity actively we want to remain very prudent in terms of how we spend cash and to manage on capital expenditures. So we were not revised up and down regarding our cap expansion plan by the way also budget assumption it off the capital expenditure plan to capture the external investment opportunities. Thank you Brenda.
Thank you.
Thank you.
The next question coming from the line asking along some credit spreads.
Okay.
I don't have I shouldn't just.
No.
When she does.
[noise] Gosh is I think.
On the West Coast.
That business on your <unk>.
Uh huh.
Isn't it.
Yes. It does she think took one day.
On the education, leading <unk>.
Uh huh.
Yes.
So that gives you an idea home and she said she so.
Oh say video.
He seems like that yes.
Thank God.
So okay. He videos this anything because I mean, they got counseling.
Ah Woody you can milestones.
Oh gosh.
Yeah.
<unk> enterprise, Connie and health care to take effect till potential that's yet.
No.
Hi, Sheila.
Uh huh.
Oh, I should say they like the <unk>.
So just to make sure that the change from here.
Yeah.
No TD.
Uh huh.
Tony.
Okay, kinda healthcare so to speak.
Okay.
Yes.
[laughter] enterprise.
No well see on the first question that you're asking about.
Diversified into that [laughter], how much it will.
Huh.
Tobacco business.
In the long window it going for any like milestone took oh, we claim.
What about the health care so.
Well I think this is a.
We see definitely machine okay.
Sometimes that she has sufficient funding he competitive positions and decide how much we think Stan.
Subset.
That's right.
Right.
Yes.
[laughter] losses in the Eagle into human body pool. So we don't really do look cheap how to whats going on second selling digital although it's you'd have to do a Hollywood is a public liquidity rules groups in the <unk>, who could maybe you could talk to that.
She's are down the street hope one day, but you don't put them up but what you should assure to lead time people find us she's sure Gordon border Collie Futebol offensive, Joe you both would be in trouble with pension bumble public cloud and she'd she'd like a high school board, which im sure to missing from that shift so you see a woman.
Well on him another to how you know Cooper boy, that's a sure Qinprezo Todd English MACOM BBB, we see this I got you know I thought we were going to be there.
Box are you going colder people are to Seadrill call Nobody I would you welcome culture and troops in E. G. She'd hotter truck dealerships in the <unk> do you think would be deep enough with useful.
Doug Arthur Su Goldman Yeah, you should we model quite album can now do you she and the buttons are summed up and people that are for Sundar. She looked at because it puts you usually only meant you were trying to do as you talk about how many you want all the shipping you should be all shop.
<unk>.
Total gross <unk> like how should she lives that you were talking about a girl <unk>.
Computer showed up be easier to track them or not but do you do when she's reading shutdown all about do you.
I just heard that you've got the Eagle Twentys Yahr you go to harden logging. While you are two good knowledge and how you look at what you call, but more just <unk>, but just food, but doomed Waddell right. You know 10 call you noted that you actually.
And though.
Right and you do do is given by Sean will again be well costs, you've all the supply so 22 million Charlie can you ballpark on keeping all the whole doubled I tell Google <unk> you got to use those should all have to pull that you've got a slow you will most certainly be like sorry about.
Well, it's been called he will give you a million guidance culturally what made up you got to be totally shut the good to go to.
Im going to talk to you.
I do not offer a flipped classroom leads to I do commission grows very healthy and are we getting momentum again, a other than not we do customers Oh, we owe these deals thing, though videophone mine is still amazed drilling yeah, where customers.
Including education, and no office and E commerce debts due using video as a main formats in your products. So journal they think they'll contribution from our remote video cloud, though now who actually decreased you, especially in those neutrolin bouchie outcomes and the high definition I loaded.
Latency requirements of cloud leave you out of retail cloud. So we think the demand will still grow in the future.
Oh, that's all for our enterprise cloud it contributes from 1.2% in 2007, he had increased to 73.7% in this quarter I'll be doing its mouth very commonly use format <unk> in traditional enterprises. So our whole Dell total revenues, we think around he is.
I'll from retail cloud will keep decreasing as a person who should also total revenues in this quarter or the percentage has decreased to below 50%.
And second question Oh, the house car sector is one of our key folks who articles and the offer to cut that make you think about people go to the new normal and that started to.
Oh blindfold new filter, we have mentioned some project influencing the trial and also our cooperation with seizing a D E Commerce technologies, we're thinking we all make great perfect. In this project and that we believe will be a leading player in China into house car sector. Thank you.
Thank you.
See how our next question from the line of like Snow from JP Morgan.
Hi, Scott.
Sure. Let me tell you too much you'd want to be sure getting is only going to listen to all your balance sheet.
Your child.
Oh, you've been doing a shooting and do a when she's shopping.
Okay.
Concerning our union Assurex installed they didn't and sure somebody is going to be the children six years ago could you enjoy the Cogen do show <unk>, Jim Oh, no one really just couldn't even [noise].
On a bunch of how many people I just told you usually give you.
Sure one shouldn't shoes shoes will mean good submission cruel.
She knows something yesterday, good teaching diluted.
Sure team going says that they acquired she will feature phone call. Then began to go maybe would you only get useful fire Shergar gold you should probably between two somebody initial ginger we'd be Joe Jacobi.
So if you're sure we'll mention to you know Sean then second Shinji being you know somebody rushing to and she pool in the junior I'm teaching [noise] choosing the Golden don't shoot should mean, you don't create but surely something you get younger poop off a rule when implemented thing seem to be on the tree Paul.
Rumanian that trigger sure John one of the hottest on your question. It's usually one of the Valeant Ziggo Bowman Ziggo, Jennifer Beese year things seem that you choose your friends shot.
No IDR gerster wish on she joined shot.
Good morning.
June certainly on the phone Josh on senior.
Yes, we brought him home unit that Chuck good sure sure should some good she crop she showed no signs show.
My first question is regarding 2021 and revenue almost.
I understand you've got some pretty have not finished or your 2021 financial budget, but if you're not.
Able to talk about the qualitative outlook for 2020 quantity of all look for 2021.
Some of the key trends that can you help us or rationalize a.
20.
How many tons you one trends for example, or is the Corvisa Inc.
Caused me to lead to the revenue highlights <unk> first half this year, which will make the first half stupid too difficult to grow for your public cloud business.
Another example is that given the success you guys have made it's a more progress into health care and the press call Mark to to what extent would that help the hard part of gross often occurrence enterprise or cloud business. Thank you.
And the second question is about industry pricing for both public call and enterprise crops or can you talk about a year to date trends for these two markets in terms of pricing. Thank you.
Ah system.
Are you going to do for sogou onto a synthesizer or something.
Oh, you're talking more like anything dramatically available I guess you could put it seems you know you could show that youre talking about pressure [laughter] futures on collateral.
Well maybe to you on that set aside the cohorts you cool due to cope with it if we do one of them will check the Tim could you know the films a woman's also that he sold it seems a little bit of a high jump. All true you are going to work on that we can do for them. So.
You don't lose your golf season.
Garda Mahatma there's a wonderful oil nickel lets you thought I'd jump all true cultural though trimmed out yesterday you draw Dol you isn't doing what each even just a woman kind of awesome.
Who knows what else encoder should show up you may well see what you've seen so far.
Sure Todd data.
Sorry, Yeah, you're talking about you're just use your older ships in the jobs that almost all that you can drill hole global dollar Paul I'm not sure. If you call that comes out well be one of the hot side. She you should.
So that you can really go to U.S. <unk>, you know probably ongoing what do you say to them.
The shoe show doses are you, hoping Obama but.
I have not seen posh or a teacher will them food. She just awesome gets you. What are you seeing again don't want to give it the ones you I'm sure a woman no gold buttons, you would be able to let them go bottoms. What gives you a couple as usual I'm sure I'm going back to Dave.
But then they don't goal. She was your who don't quite do look industrial Maam you have the luxury of appeal by the telecom.
Dr. <unk> River. They did go to deal with that summed up the <unk>.
Let's see if I can go to <unk> gone through a new people that do the tablets, you sort of look into along with us.
Anyways I'm trying to do is to make sure I'm conscious not only are we didn't even get the hostile usual oh, you seem drawn the cloud you'd be don't but the whole blood and the huge fuel our future you take a good idea to measure of Oklahoma future oil.
Oh, you're doing.
John That's for sure did you have you know I sure what things look like your Union and you're doing whether it's yours, you industry talk going job talking about.
Our sleeves, you sure taunting gumbo telephone I feel bullish, but I'd say that those are two months will cook as usual my beautiful she doesn't know them. So it's your job, but you can go through you have made that although obviously sounds like your ship you got what do I see it.
Thank you all right.
All they were still working on the budget for next year. So it's still too early to come into all the folks themselves and so he buffalo the trends I'd like to share. Some color first we expect our total revenues to make hay, a higher growth rate compared with the China, probably cloud Marc hitting journal.
In the public cloud, we still see an upturn up had then make a public cloud usage I feel increasing menil they'll habits have been keep after it up and then make and Dovidio education and the gaming sector is they are all growing very healthy.
Oh and for the enterprise cloud sectors are not only the health care sector. We also held public so expect her financial Secretary.
Secretary, they all experience hi.
Hi girls in this year and are looking forward to the 2020 with thing how to build the strong demand from these markets I'll Oh first class.
Target Oh, we think they'll enterprise cloud market is a very huge market.
There are still many opportunities opportunities lie.
<unk>.
Oh, well, yes Echo question Oh, the thing so public cloud the price is a comparatively stable as well.
Reed, how most stable market environment.
And actually talk about multi cloud technology prominence 13 asphalt cloud so it's increasing there's a in this sector.
For the enterprise called the market is much much larger than that probably a public call. So is that so we haven't seen very up there's consolidation in this field than the that's that price is completely stable.
[music].
Mm Hmm.
Okay.
Thank you.
Next question comes in line off line Gong from Citi Group.
Okay.
Hey.
Oh, gosh, I just will Oh.
Hi, Mark.
Marketing.
Sure.
I'm showing something.
No.
So the trends have been seen yet.
Yes.
Hi, Shannon.
Kind of.
Yes.
Yeah.
[music].
Just one.
Okay.
Okay.
<unk>.
Uh huh.
Problem and so forth.
Yeah.
Yes.
I mean, I will try to stay as myself on my first question is.
Regardless of market.
Okay.
Yes.
So I'm wondering from managements.
Our market informant phase four countries and be one.
On my second question is a follow on the loans from.
For centuries, and it falls into somebody's right now.
What sort of growth.
I'm sorry.
On their price.
I was computing storage and also well what's your view for so they do.
Right.
Thank you.
Yeah. Thank you Brian.
How to address that question. So first of all regarding the margin.
I think you are definitely right that seems to be our nature of the business I seen the benefit of a comic scale has gradually forward edge and that reflects to our.
The fundamental nature of the reason for the improvement so I actually don't know our adjusted.
Margin, especially the EBITDA margin.
As demonstrating upward trend in general right and we also achieved a continuing improvement of the parts need for the module in the past nine quarters.
We you know, we we basically expecting our EBITDA margin will continue to expand.
And as you all know that there are fewer drivers right. So in the short term, it's really about the improvement of the operating efficiencies and how we make sure you know the or the efficiency of the Iraqi resources and R&D resources deployed it and however for the long term. They are also more factors to be able to push all modern units saw the exam.
Hello, there will be a continuous increase in off the number up the premium customers as we're adding and European customers every quarter.
And also the scale effect to be carried out and we also expanding the value, adding product offerings sort about adding part it will be more as a part of the total revenue and also we see a trend up the more recurring revenue streams coming from enterprise cloud clients that actually made effective off our lodging and that the penetration.
The financial services and health care also important because those are high quality. The crime said always carry and a less price sensitive so.
So I think because of the backdrop offset their alamo cloud industry in general are confident to ride on the trends of the long term profitability improvement along with other major cloud providers in China as well so to your second question regarding the revenue mix I think you know, let's say in 2023 or 2024.
I think our view is as we see the increasing portion of the enterprise revenue I think we are likely to reach that say around one third of the revenue roughly speaking.
Of that total revenue will be coming from enterprise cloud.
And that the remaining two thirds will be at a public cloud revenue and out of the public cloud revenue by 23 or 24, we do think Oh, no roughly speaking maybe a less than 50% will be coming from the cloud of delivery and of the remaining let's say 30, 40%.
I mean from a comp.
Okay.
And the remaining piece will be at a storage and the others.
So one more example, I also want to mention so you didn't go into us measure that's well.
No we don't caught a C.D. because all the bad adding part of the video cloud related technology. We also are charged and to report it out or the cloud to deliver a product segments. So that's also including the recurring and about adding products and services.
And we also happy to report that approximately.
Approximately this quarter, a cloud of delivery revenue and a video related as others. This is already dropped below 50% of the total revenue demonstrating a better mix of the revenue streams and also the better quality.
Thank you Brett.
Yeah.
Thank you.
Well I'm excited about from the line of Thompson from you'd be as please go ahead.
[noise], She's I Gotta slugging, along zone Henry zone the cool.
Secondly, hum.
She wants to get you shouldn't see it shouldn't go into <unk>.
<unk>.
Now the issue so I just shown on a treaty challenges ecom, whose only present.
Asian shouldn't be in talent, you don't have to put towards that she was in shambles.
Obviously on treating city, she chunghwas shouldn't use I'll send you to Robby.
Angie to solicit equaling <unk> dealing with these claims the opic sales, we didn't consign Q school. So she is shopping.
These compensation expense auction quarter on quarter.
Thank you.
Say revvy CPQ the chunky ones.
We also saw operational operating leverage I see e. cheese, and possibly she is because of the.
Greetings Peter solution marketing can cobble sales.
Some of the whole teachers are great Skousen CEQP guidance.
And religious roaming charges.
Just a little we can do to achieve.
Nice Q schools that she is really she seasonal.
People Im assuming schonbraun, who fly shootings equine limits on calls all you. She is she's sharply in 2000.
I mean, it sounds as though.
Sure.
Sure.
[noise] [noise] [noise] [noise] [laughter], yeah, I could send this is Henry I think I will take the first the first and second question at all or CLL sand on the last question I got enough, Okay got it and the color.
So first of all regarding the project so.
So whatever the notice that we do make a major milestone and to keep the momentum for the important project size, we imagine it in the prepared remarks, so honest on the other hand as also you also know we do apply a very conservative revenue recognition policy, which means we book for revenue at the completion of the fall project.
So some of the projects we mentioned in the prepared remarks, we already have hit our work and the S. So you mentioned that it would definitely make the effort to deliver on time and it would only be booking over revenue a a full completion of the sort of project. So there's some of their projects. We mentioned we have been completed in Q3 and the summer.
It's hard to actually make a enough efforts and that will be on track to be delivered in a falling or does the quanta to come and it is actually pretty a natural for most often cloud company to keep track on the progress of the enterprise cloud projects and Oh, that's actually one thing and another thing I want to mention that.
When we look at all or no backlog, even though we have not disclosed that but we do feel there is a strong demand from defense kinda body off the crimes in at a restaurant space and that we are having already working on some of them, even though we cannot disclose the names as you've probably noticed savvy, we cannot see all the name of trying to but we do have a strong backlog to support.
Potential revenue streams to come in the following quarters and into the second question regarding share based compensation or SBC cost Oh, Okay. So as you know typically for a company to prepare for the listing.
Booking all for the cost of SBC typically happened a quarter on a quarter of the IPO. So that's why I'm you know, we do observe a relatively middle spike of SBC cost back in Q1 and Q2 this year before IPO and that it's actually declined gradually in Q3 that actually reflect.
On the line.
A challenge of stuff you know about the expenses too soon.
Although I operations.
Ongoing basis. So we do not think that the FTC costs in Q1, and Q2 will be let's say at the same level for the following quarters come and that actually is going to be one of the driver to continuous improvement of the adjusted EBITDA and the old T. margin going forward in the next few quarters.
Thank you for a third question I will pass it on to our field.
[noise], but no. It's always when do you guys Oh Milton pitching Canadian dollar should they go pure food she <unk> Lucia a dream about at some cost pressure, but no t. aloha cheese or thoughts were about $18 million Hubert Chen Mindell Gokul. The usage you know shamble awesome shouldn't you know if I missed what all is a yahoo not yourself.
Okay. So how much is real and it's up about one in fact.
So on the take off your shoes, a little push out but how much of it to the quantities are women and go back to Q2, and then go right on the day go shop multiple uses by teaching boom the sound, what I'll say to somebody or somebody pipe for the U.S. seems to go into one didn't then you'll see some wonderful time Big City, Michigan, Hey until that's all.
And that's on the books you can see you can almost double.
So you will know what each one with a big some utility when he took one do some would do I don't see I guess your lunch, but I'm told well, it's almost have a <unk> or a male cheap hobby lobby and retail, but what you should come down to two volumes sold on a future high sure when we get to the high sure.
Okay. It would be helpful.
Oh, yes.
Oh thanks.
That's quite Oh, we think due to the COVID-19, some of our enterprise cloud projects, how being delayed in the first two called Hertz and the Lee improving average efficiency to deliver these projects in the second half or for the full two focus on this week.
During most of the enterprise cloud they have already started to deliver in this quarter. So we can add to company in the next quarter and the press release that of how we can only book the revenue upon the completion of those projects I know so as this.
Thanks, Despite a large I'm certain he is a we we are very confident.
Where it get us in the fourth quarter. Thank you.
[noise] [noise]. Thank you operator.
Thank you.
Ladies and gentlemen, I would now like to hand, the conference back to your presenters today they continue.
Thank you operator, thank you again for joining US today, if you have any further questions. Please feel free to accompany that.
Forward to speaking with you again last quarter, how and that's it. Thank you.
Thank you ladies and gentlemen, this comes with the conference for today. Thank you for your participation you may all disconnect your lines now.
[music].