Q1 2021 Kingsoft Cloud Holdings Ltd Earnings Call

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Yes.

Good morning, ladies and gentlemen, and thank you for standing by for King for a cloud first.

2021 earnings conference call at this time, all participants are in listen only mode.

Management's prepared remarks, there'll be a question and answer session. As a reminder, today's conference call is being recorded I would now I'm trying to think through to your host for today's call Mr Coal sheds.

Relations manager of Kings of cloud. Please proceed Nichols.

Thank you operator, or one and thank you for joining us today can sell cloud supposed to call. Her 21 earnings release was distributed earlier today and is available on our I always like I R. Adult Kate why you Lynda com as well as on global Newswire services on the call today from <unk>.

Well see how our CEO, Mr who didn't want and therefore, if there had been horrible Mr. Wang will review our business operations and company highlights followed by Mr. Ho, who will discuss the financials and the guidance it will be a little though to answer your question doing a Q&A session that follows or become decorating interpretation or even for.

He shuts off all your old colonies, and reference purposes, only and cause of I need as much of a statement in the orange not languish reel to reel before we begin I'd like to remind you that this conference call contains forward looking statements within the meaning of section 21 E of the Security Exchange Act COVID-19 sort of fall as amended and as before.

The U S prowess the acuity of the litigation Reform Act of 1995. These forward looking statements are based upon management's current expectation and our current market and operating conditions and are related to events that involve known and unknown risks uncertainties and other factors all of which are difficult to predict and many of which.

Beyond the company's control, which may cause the company's actual results performance or achievements to differ materially from those in the forward looking statements further information regarding these and other risks uncertainties or factors are included in the company's filings with the U S. SEC the company not undertake any obligation to update.

Any forward looking statement as a result of new information future events or otherwise, except as required under applicable law. Please.

Unless otherwise stated all financial figures mentioned during this conference call as denominated in RMB.

It's my pleasure to introduce our CEO Mr. Eating law. Please go ahead.

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Nicole and welcome you all for joining our first quarter 2021 earnings call.

This quarter, we generated RMB 1.81 billion in total revenues, among which public cloud and enterprise cloud accounted for RMB 139 billion and RMB appointment 20 million respectively.

In addition to successfully executing our strategy of serving the premium customers. We continue to improve our large scale high highly stable and a high performance enterprise level products and solutions that cater to growing demand across verticals, including the Intouch health care financial services and public services sectors.

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The public cloud for many years, we have secure stable with comprehensive solutions to safeguard our customers Spring Festival Gala campaign, providing the massive viewership globally with smoke high definition and interactive experience.

Offered solutions, including live streaming on demand streaming and electronic Rev packet campaigns, where our value added products, such as smart HD and KFC 265, and coda, we're fully utilized on new customer acquisition from one of the big data hybrid cloud project for certain mobile Internet Unicorn company, providing the customer with the products and services include.

[noise] Bama to service it alleviates, the Kosmos burden on operation and maintenance of chiefs elastic capacity expansion as far as multi civil room hybrid cloud deployment and a photo reduces costs in this quarter. We also signed letters of intent with several large scale internet companies, which laid a solid foundation to our medium to long term revenue growth in <unk>.

On the gaming front, we're pleased to see revenue generation from cloud gaming, we signed an agreement with <unk> to provide top level cloud gaming platform with blockbuster games tension.

Together with Noel with dedicated to providing brand new cloud gaming experience to gamers.

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We also published our cloud native product portfolio and launched two containers that enable customers to fully leverage the vintages of elastic and distributed cloud circle three problem underlying ratios have come down.

In addition, we officially launched the Kubrick's a unified data platform for the public cloud it helps customers significantly improved data agility reduce development and maintenance costs and build a data ecosystem in combination with other big data cloud products.

While we have been strengthening our value added product capabilities, including audio and video edge computing and other cloud native technologies.

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Moving to enterprise cloud market demand remains strong we continue to dig deeper into select verticals and develop outstanding industry solutions.

Montreal The enterprise Cloud services is project based we proactively seek to build and maintain a long term cooperation and continued to obtain business opportunities in health care sector. During the quarter. We were selected to be the exclusive supplier for phase two of the Shantou municipalities Smart Health care project, we will continue to provide services based on phase one conductor.

Capacity expansion and the function up rate, while in the meantime, ensuring technical continuing consistency and stability all of which will help to further improve the digital health care capabilities operation.

In addition, we efficiently delivered a Sichuan Chancellor health care cloud and the second phase of the Changzhou health care, which include deploying and testing of our galaxy platform at Essex.

Spending the capacity out there existing cloud platforms.

These offer critical guarantee to the official launch of Tam for health care cloud business and the construction of Johnson's province image cloud.

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In the financial services sector, we continue to strengthen our data management solutions capabilities.

According to the 'twenty 'twenty, China data management solutions market reports published by third Party industry Research Institute.

Among key market players we are positioned in the first quadrant leader quadrant together with top tier global cloud computing competitors.

Our financial services companies increasingly focus on data security and stability, we proactively seize market opportunities leveraging our position as the leading neutral cloud service provider during the quarter. We provided comprehensive cloud based data services to the pension fund system of one of China's a major state owned banks. The project consists of data ingestion standardized.

And that could triple and profitable at the same time, we also successfully engaged with a leading Chinese Internet financial platform company, where we provide cloud delivery and security services to help reduce operating and maintenance costs.

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In the public services sector, our flagship projects are helping us attract more business at the latest we have signed strategic cooperation agreements with 35 regions to facilitate their digitalization process. During the first quarter was successfully completed a cloud project what information Center, the Beijing Municipal Commission of housing and urban Rural development.

Helping the customer improve their digital capabilities and achieve secure and stable operation of their systems. We also wanted to be for Jounce with provinces Big data cloud projects, which aim to realize integrated management capabilities across multiple cloud platforms, including big data cloud that's all at the provincial and municipal level government Cloud. In addition, we are.

Also wanted to build a cloud platform for the Chengdu industrial Internet public service system. The system will provide a full range of smart cloud services to industrial enterprises in Chengdu and the surrounding areas.

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Finally in April we published at both our first annual reports and I was supposed to yes, you report post our IPO at the leading neutral cloud service provider, we attach great importance to corporate governance, environmental and social responsibilities as well as our sustainable development. The elements. We took the initiative to disclose our ESG program.

In less than a year. After we went public even though it is not a mandatory disclosure requirement in the U S. The report focuses on topics such as corporate governance privacy and data security human capital and other progress we made throughout 2020 on a path to address the sustainable development of our business. This speaks to our commitment to integrate ESG practices.

This into our day to day business operation and to constantly improve the management of our business.

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I will now pass over to our CFO Henry to go through our financial performance for the first quarter thinking.

Thank you.

Hi, everyone I will now discuss our financial performance for the first quarter of 2020, what they used to be reminded that all numbers quoted here are in RMB.

He's also refer to our earning release for a detailed financial results to begin with I would like to highlight the following points.

First of all our total revenue or 1.81 billion RMB this quarter revenue from public cloud services, while 139 billion RMB due to our high quality of services and a robust relationships with all our premium customers revenue from public cloud services has been increasing four five call Sir.

Quarters.

One of our cloud revenue or 420 million RMB, representing an increase of 131, 3% year over year.

Second we achieved record high quarterly adjusted gross profit of 122 million RMB in Q1.

Our adjusted gross margin for this quarter increased from four 9% last quarter to six 7% this quarter.

The margin improvement was mainly due to the benefits received from investments into major enterprises cloud vertical last quarter, such as health care financial services and a stable contributions.

I'll probably call revenue in a market.

We expect our total revenue to be between 2.13 billion RMB and two point to 3 billion RMB for the second quarter of 2021, representing a year over year increase of 39% to 45% implying a reacceleration.

Q2, 'twenty to 'twenty one it reflects our success I think agents, new customers and expanding our scope of services with existing customers.

By December last year, our backlog of annualized cloud revenue was $2 8 billion.

The balancing of customers' procurement process after Chinese new year holidays, our background the number keeps increasing certain new projects such as projects in health care financial services has been the additions to the backlog number mentioned.

Above.

Lastly, our business is sufficiently funded at the moment as of March 31, 'twenty 'twenty 2021 our cash position was 5.46 billion RMB.

Now I will go through the financial results in greater detail, our public cloud services revenue reached 1.39 billion RMB beautiful high quality services and robust relationships with our print customers.

Usage of our premium customers has been increasing steadily and our revenue was from public cloud services has been increasing four five times a quarters during the first quarter compared with a faster growth rate in the same period of last year, one daily Internet usage jumped significantly during the COVID-19 outbreak last year, we saw a moderate year over year increase of Internet usage.

And the industry in general.

The recent happenings in the internet industry email and hunting general, particularly in streaming education E Commerce and other verticals.

And many of those companies I've taken cautious stance on promotional efforts than the previous industry expectation.

The tightening regulations weighing on our growth and our public cloud segments in Q1.

During the quarter enterprise cloud revenue increased by 131, 3% to 420 million RMB, mainly reflecting the rapid growth in demand for our enterprise cloud services and are partially offset by the impact of Chinese new year holiday season in this year and also the late timing of procurement timetable compare with the previous year.

Cost of revenue increased by 28, 5% year over year to $1 7 billion RMB.

How do you see cost increased by 21% year over year to 1.11 billion in R&D as a percentage of total revenues or is it cost decreased from six two to six 2% in Q1 last year to 61, 4% in this quarter.

Overall, we are achieving greater economies of scale and improving resource efficiency depreciation and amortization costs were 173 to $174 8 million RMB. Other cost consist of third party software purchases and often cost associated with both public cloud and enterprise cloud.

That's why other equipment costs related to our enterprise services.

Costs were 394.0 million RMB in our staffing costs were 15 million RMB.

We achieved a record high quarterly adjusted gross profit in Q1 and increased by 64, 4% from $74 2 million RMB in the same period of last year to 122 million RMB. This quarter, our adjusted gross margin for this quarter increased from $4.

9% last quarter to 6.7% this quarter.

The improvement was mainly attribute to the benefits received from investment into other major.

And I've kind of verticals, such as health care financial services last quarter, and a stable contribution of public cloud ran and got a module.

Total operating expenses were $468 6 million RMB up 33% from colonoscopy, mainly due to increase in share based compensation staffing salary adjustments and fading of adjustments of social insurance favorable policy expenses hiring talent.

Excluding share based compensation adjusted R&D expenses were 200 zero 2.0 million RMB.

As a percentage of revenue R&D expenses decreased from 13, 3% in Q1 last year to 11, 1% this quarter.

Adjusted selling and marketing expenses were 83.5 million RMB.

As a percentage of revenue adjusted selling and marketing expenses decreased from five 6% in Q1 last year to 4.6% this quarter.

Our adjusted G&A expenses were 65.6 minute R&D as a percentage of revenue they decreased from four 2% in Q1 last year to 3.6.

6% this quarter.

Our adjusted net loss was $218 4 million RMB compared with an adjusted net loss of $243 4 million in Q1 last year adjusted net margin improved from negative 17, 5% in Q1 of last year to a negative 12% this quarter or.

Adjusted EBITDA was negative $48 6 million RMB compared with negative $39 4 million RMB in Q1 last year, our adjusted EBITDA margin slightly improved from negative two 8% in Q1 last year to inactive two 7% this quarter.

As of March 31, 2021 we had cash and cash equivalents at 5.4.

<unk> 6 billion RMB.

This quarter kind of expenditure or $213 4 million RMB capex as a percentage of total revenue a decrease from 33% in Q1 last year to 11, 8% this quarter.

Moving to the outlook.

We mentioned earlier for the second quarter of <unk>.

2020, one we expect our total revenue to be between 2.13 billion RMB and a two point to 3 billion RMB, representing a reacceleration on a year over year basis of 39% to 45% compared with the first quarter.

This is a based our current and preliminary views on the market and operational conditions, which are subject to change.

This concludes our prepared remarks sounds fly out attention well now happy to take that question. Please ask questions and vote matter of any English as possible. Operator. Please go ahead. Thank you.

Yes, Nathan Jones.

This session if you wish to ask a question.

One on your telephone.

We need to be announced.

Who canceled.

That's the key.

And yes. Please ask your question.

Okay.

Once again, thanks for.

Two questions.

Thank you. Our first question comes from the line of Ryan on Citigroup.

Please go ahead.

Thanks management for taking my question.

First question is regarding the public policy. So the gross things slow down in the fourth quarter and I understand that.

There was a high base and if there was some records for reuse.

Sure.

Two minutes.

That's the whole public cloud industry is slowing down and for us where our trust that we have you know.

We have just signed some contracts or partner with.

With some big Internet companies.

He knows what verticals are those new customers are you.

And this is my first question on the my second question is.

Sure.

Order, a mall or onto protocols.

And do you think you know we slowed down on public cloud the industry.

Our competitors become more aggressive on their pricing.

Restaurant sector.

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And what's in guidance.

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Yeah.

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I think it'd be linked so I think a Brian question. So on the first question.

Probably arrived you're right that.

The high base off the public cloud revenue last year was primarily one of the reason why we look at a year over year growth of the public cloud revenue in Q1. This year. However, what do we all highlighted that is our revenue from our core base of our premium customer, especially on the top spending customers has been very solid and robust.

In addition, we also made some good progress engaging with our new eight new customers in a public cloud a settlement. So that's why as a result, our public cloud revenue has expanded and grown sequentially for five consecutive quarters. As we have mentioned however, as you probably also noticed that in the industry in general you Man I'm trying.

The regulatory environment, especially in tier one has been quiet.

Quite a volatile anyhow, so the impact to that revenue.

So all of the segments, especially a few examples for example.

The content.

You are certainly kind of as a crime regulatory perspective has some impact to our streaming clients, which actually indirectly what effect. They use it all public Solitaire IV office and also as you know the policies in the education vertical is also made of many of our customers pretty much very cautious and prudent in adopting new from a promotional.

All efforts, which actually should have increase our demand from end user perspective, but we do believe those empower won't be a short term and we do see that as ive taken all of that in Q2.

Public cloud revenue and usage will see a kind of acceleration in Q2 coming forward as many of the factors. We mentioned were short term and a seasonal impact.

Speaking about enterprise cloud.

We delivered over 130% on a year over year growth, which we do believe it's kind of highest level compare even compared with our peers in the industry.

The demand from that it is a leisure across different verticals has been has been solid and a very strong including the public services health care and financial services I think speaking about our competitive strength and a unique kind of stress in Nevada at Kingsville car perspective.

It's about a client engagement.

I believe you have to deliver deployment and implementation, it's not really about itself compact, it's not really about the pricing competition, especially in the basketball segments. So that's why given the demand is very robust and I don't we don't think that the competition has been kind of head to head in the enterprise cloud segments.

And as you know by December Lafayette, we have $2 8 billion backlog in enterprise cloud alone and this number has not included any new engagement in the buildings. We have won in Q1. This year for example, as we mentioned in our bigger healthcare cloud projects in Hubei Province, Hubei show.

Jim hoping for.

That project alone based on the public data, which we kind of saw the public announcement recently that probably that alone will deliver over 70 million RMB revenue along with that is not being included in the background number however.

Want to say that Houghton basis going forward, we will not disclose a detailed bedrock number given that the sensitivity around the pipeline and the cloud competition, but I think we can assure that our backlog has been growing and also with the ongoing implementation of the existing backlog has been well.

We're on track.

Some of that's come through with a few colors. So hopefully helpful. Thank you Brett.

Thank you.

Cool.

Thank you.

Next question is from the line shallow Dan Chang C I T.

Your line is open.

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Thank you Tanya.

TV.

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Gosh.

Oh yeah.

So my first question is regarding the public cloud business.

We can see that the acquisition of new customers in the first quarter. It wasn't a it was undergoing a headwind from a regulatory change in the interest of Internet industry. So what will be our major focus for product diversification for the public cloud business. My second cloud is regarding the enterprise cloud business. So the anticline.

Enterprise cloud business recorded solid growth in the first quarter. So what can we think of the growth potentials for three main segments for enterprise cloud on I E. The health care financial services and public sector, and what would be an ideal business dropped your gross margin profile.

And my third question is regarding regarding the gross margin. So what will be our expectation for the gross margin going onwards for the next few quarters. Thank you.

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You have to change a little bit on time, okay. Thank you Sean.

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Yeah.

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As usual unless you tell me that you've got the holidays.

With the economy.

When people need a whole new element.

Okay, well, let's see how the T phone table put it so let me come on they.

Some of them with the people with without telling you since I became CEO.

Do you think you'll get some you know in terms of the Juno.

Archie.

Now that comes with it.

Okay got it.

Thank you Qi <unk>.

Uh huh.

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Sure.

You can give us kind of understand needless to say that.

So you'd have to do with demand.

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Would you say.

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Mr.

Henry.

You can go right David.

Oh yeah.

I think we're getting a central resource for those three questions I'll translate for the first two and I'll take on the last one and the first one regarding our public cloud I think you probably have already mentioned that there were seasonal kind of regulatory impact on Q1, but we want to highlight that oh engagements and to progress to the new customers even.

Some of them are starting with a low and a small volume.

But there are actually a strategically important for our new customer strategy, we are making those programs on track in Q1, even though.

As we mentioned the initial the first phase of the testing or the initial trial version of volume that's being a small ball, we're seeing a great progress in connecting with a new and important customer with us. So speaking about the diversification of the product lines and our services are just wanted to use a few examples right. So at some point in the Chinese new year launch.

Performance of events as you all know it is not only capture the live show video content, but also there's a lot more interaction components and both events such as the wrap.

There are pockets events, such as kind of a massive and a scalable.

Multiline connections direct connections.

The Chinese new year events in a maximum peak time, we do see over 15000 lives with direct connections in those video services and those end user scenarios has helped us to a diversified part of our service just because these are the end demand from our customers so to add one more.

To your point. In addition, as you all know our cloud delivery revenue last year. The first two quarters last year was over 50% and we do see as a percentage of total revenue our cloud.

Delivered revenue has dropped below 50% and we do see that trend will further training them, which was actually going to be a part of it is a factor to have better diversification across delivery computing storage.

And speaking about a second point on the enterprise cloud I'll go one by one on the financial services vertical. It is all about technology, so by extending our knowhow and experience in certain core technology capabilities to the major banks in China and help us grow.

Strengthen our forte in most areas for example for those major benefits of Victor analytical platform.

Based on our cloud native technology has been very important for them and it is a must have technology for those big dancing, China and bye.

Our proven experience in those areas, but they're living with the probability is to the clients. We can engaging and also enjoy incremental demand and revenue opportunity from those types. So this all technology and a demand driven business.

On the health care as you'll know we do believe that we do have a first mover advantage in the health care and given our real experience.

Many important cases in important areas such as the city allowed one publishing level house kind of cloud.

And also in Hubei Province, we do have accumulated enough resources and the capability and the firsthand experience in those areas and by pioneering those experiencing one or two area and extending that into other provinces in China, such as train Xi'an chancel provinces, we can replicate all experience.

And the C in group benefits like economic scale.

And had recurring revenue from those clients given the solution itself is highly leverage able and the third part on the public sector and as you know we do focus a few areas such as Beijing will be challenged through pass through and that those provinces.

Kind of strategy and the play part of the playbook for the business over there is we do want to establish a complete and.

Troy are high quality projects for the client and make sure the most important areas and important client where it can be done.

Are they the pioneer also the top tier vendor for them, who can be trusted to deliver high quality projects and execution.

Mobility is so for the mid to long term I think we feel confident that those experience and execution quality asking for cloud carrying all over 30 off up to the DNA well gain enough and further trust, sometimes and expanding more business over there and Oh, you got it right that the gross margin.

From Animas cloud.

<unk> has been a very positive factor to improving the company's gross margin overall and.

And we do see the repeating on recurring revenues and also the high quality of our solutions, we having a service at a time that also can serve.

So about a positive factor for us as well so on the third point regarding the gross margin and I think I'm right unless we just causing Q4 last year, our strategic investment in a fun and southern Pos in Q4, whilst the reason, but we do see the public results as you can see that in a way it successively waning a bit of a few major projects I think our.

Investment and upfront path last year was worthwhile doing that and have seen improving also the skus that we're picking the right trying to work out even.

The cut off the first stage with US we always carry a with a certain testing version and kind of front end services. So as a result, I think we do keep a kind of same and unchanged views regarding this year's gross margin on the company level over at all and I think over the next few.

Maybe on a quarterly basis, our gross margin either on a percentage point or the value of dollar perspective, we also don't want agility over on a full year basis, we do believe hopefully when it came to a 5% to 6% off the gross margin compared with last year compared to any kind of wanted to trying to 'twenty and I think for the long term the gross margin.

Plotting all fundamental efficiency and improving product diversification the diversification as well. Thank you so much.

I think generically.

Thank you next.

Our next question is from the line of children of Nomura.

Hum.

Oh, Hey, everybody time, Oh, no I was just wondering how much I'm gonna to your own expectation on bringing charges, our merchandisers and.

And found out Coca Cola zero sugar, so we're telling them that they can be sold at PV on the whole our CDN to go to quite aside from car T is unusual because you talked about the only thing I'm on the beach you can imagine we had some chunky from Washington on Nickelodeon.

So we really cant fault blocks without COVID-19 junk in the hydrogen budget.

Hi, Buck or who they want maybe above courtyard Nashville could you, which is only going to go.

She couldn't be what type of thing.

Uh huh.

I think what you have for either single mode.

So that's for sure.

All of them and figure out where this will go crazy Crazy Crazy that you've been doing.

Got you.

Yeah, good tenure and what doesn't.

Let's just talk about what you said it came out of nowhere near research of course will pave the way without.

Charles Young Boy does you've got computing storage, but yeah.

So my first question is what is the current are the contribution from the <unk> biggest customer.

From a public cloud sector, and what about the C D and contribution.

For the for the company in one Q and because of where you think the overall Chinese coal market is going to slow down a little bit down the road here.

Oh pardon me, one so Uh huh.

Any potential.

Changers or structure strategy, we have to help us to gain better gross from public cloud, especially in 2021.

I don't want to talk about.

I think I just heard you would be the margin I'll cut it all did well.

The EBITDA margin.

Adjusted EBIT margin for sure.

The lithia well, that's how should she cannot goldman to her.

Turning to the T V.

Despite the challenging.

But potentially not.

You went to tell them the truth.

Could you draw your attention to tell you what options might not work and of course, the largest oh gosh.

Gotcha, So there's a kind of controversial because that's really true for my second question is about just so you can imagine a I think the yeah definitely but the margin has been broken even in one months.

Married to somebody in 2020, so, but I still go back there for <unk> 'twenty. One so I guess, you've got about next but when I saw something related to personnel expenses and what should we expect for full year and for second quarter 2021.

Our total question, but why wouldn't you just require you to call us just how much of a courtyard will come about junior engineer, but they'll call. You missed was how are you Huawei.

The housing acquired shopping or something how should we be Yahoo, Japan.

I'm going to push us towards a challenge out there.

Well, it's on which I'm going Oh, My God, you got some device or you can pick.

These are just some retrofit yards.

The hypertrophy started it's just been a wholesale nutritional answers here.

Alright talked language. So my third question is about the.

Market competition dynamics, I think Huawei removed about quickly in public cloud market last year in China are gaining market share. So those companies that will be a major competitor a major threat to the cloud market to the public cloud market I'll call.

Oh, my gosh, well for Huawei concerning programs.

Major comparison on strike to the to the peers. Thank you.

Oh, I didn't know us right.

This is simply a boon.

I'll take the political political Olympics she'd like to eat at home kind of on the poll will close with the email.

Oh sure sure beat the old ones.

I'm now starting to see the woman.

For the Donkey, though.

He comes with its own gasoline she's a woman that whole copel to kind of be the hunter QE I sure etcetera.

That's what I forgot to answer you always hear that they shut down for a.

But those are kind of two of them at home and Oh, okay. Okay. Thank.

Thank you Sean.

Our coworkers in the time you actually show.

Not well not just recipients or does it kind of be looking around the future interest rate on her cookbook dual continent Doyle.

See the in the year with that one of them and are doing their shoulders. When you factor in Brooklyn.

I guess at that table Youll Menlo downloading cool.

And nothing would be equal on pizza hut anyway, but this is a.

We'll find out.

When you look at the commercial account T shirt woman I'm kind of looking for everything.

Yeah.

Whether you ordered a cookie, which I don't want to like.

Oh man can eat or drink with TJ can only ship with whom the unusual she put out her home and it will come out this week, who are first of all the tonnage.

We'll go to a home center I hope I'm listening.

Well, it's in the sample size.

So people don't have to hold until you do you don't go through I'm, not able to still do I sure.

Yeah.

Cause I know Derek.

Jeremy.

The world doesn't they go simple paradigm.

Oh, if they're not able to look at it.

And you're going to get all your particular.

These are challenging.

No there shouldn't be even higher to what other people are you suddenly.

Just to understand.

I'm not sure I should say I'm quite sure.

You don't have that Ive never seen dumping boosters.

Cook with it even though we're talking to you.

And most of the decision and Oh cool. Okay. So did you find them and meet ushers yourself would've normally.

I'll see the floor.

Well look I don't know either Tommy.

Our attrition with young people and this is not good.

Hum.

Can you just tell them.

5000 of them on kind of what I do know well email pressure feed them gilenya. The table's set up a couple of things.

If you can just let people. So that's a lot to you a couple of the junior Julian go Oh got it understood.

On the passenger Dude that's useful.

That you'd actually you'll feel comfortable to go.

So does that give you an extra women's isn't on the hydro launch.

In fact, the Eagle Ford.

Sure well tuned into the Bluetooth market.

It will fit on Shang okay.

Okay.

Sure.

Some of the local element.

Well I think that's absolutely not interesting to us.

Thanks for telling you how are you doing Frank when you measure because of some sort they don't quite.

You don't need them.

Gotcha.

Thank you Joe for the question I'll go through what our first or a crusher and Sunshine.

I'll take the question on the EBITDA margin.

So far the project customers.

You mentioned the usage of our top premium customers has been stable in Q1.

Given our public cloud revenue sequentially, you will see some growth so as a percentage of total revenue off public cloud those pop premium costumers as a percentage we'll see.

Slowly decline as a percentage point so on the stadium perspective.

And as you know the more and more customers are actually diversifying that demand across the different business lines, including storage computing and the delivery.

And the CPM revenue as a percentage of total revenue I also see them gradually decline as well. So I think that's one data point I did want to highlight is some cool Alaska to Q1. This year the CDN revenue as a percentage of total revenue.

It has declined around about 10 to 8% to 10% on a percentage point.

Second point on their growth.

So as you know we are making progress after new apartments that are engaging with them and given the.

The value of our independence and neutrality, we're engaging with new customers that actually a cool value of our position as an independent copper lighter and if a Q2, we are seeing confidence that those conversations and initial engagement with a new customers well gradually ammonium highs and a graduate to become a revenue.

Cloud sector and I think these are the major assets that we are making in tier one.

Carrying for the readout for the following quarters and the third point regarding the competitive landscape I think the key Oh.

And I want to mention that if it's really about a kind of a strengthening and improving the probability not only from our technology solutions, but also about implementation execution and services and maintenance for Atlanta.

Business and that's no doubt that Oh Foundation.

<unk> market in China across all traditional sectors has been very strong.

And the key play part is really improving our profitability and especially in the financial services and healthcare. These are the two verticals required industry know, how and the house and it will require specialized.

Experience and and and then the firsthand experiences so that's why.

Probably kind of stand out.

Have a good client sales relationship doesn't always equal to a monetization of the cloud revenue and the know how and outstanding client demands and knowing that challengers and it can help them resolve their questions will it be more important to engaging with the trusted client relationships.

And for the public sector services, Oh actually I mentioned that we do have some a.

Great advantage in a few areas.

I'm, just gonna cities F N I shouldn't but our key is to really get about a kind of paper by paper based on phase by phase of the project without yet hence.

And I think the execution and implementation are the keys for all of them have cloud appears including us and the other piece as well, but I think all of those areas. We are remain confident given that we're already working with them and some of the China. We're already working on that phase II phase III I think we do have a robust pipeline for the owner.

The backlog, but also the implementation timetable.

Alright, so for the last question regarding EBITDA I think one of the highlight for three or four major reasons. The first reason is regarding certain adjustments regarding the social tax and.

China's a K a.

And you kind of shove off a policy matter in China. So as you probably know in COVID-19 locking kilowatt.

The government in certain cities has announced they will make for a return or partial therefore, a favorable policy all of social security taxes for 'twenty, and 2020 one for certain.

Industry and certain companies however for Q1 this year.

Given the new policy actually revised back to the normal status. So basically well how does that impact that have to pay our normal rate of certain us over the past and and sort of a robot is back to the normal tax policy. So those will have around about a one 5% to 2% of the total revenue will be have additional impact.

On the part of the human capital.

And the second reason is actually right now as we're expanding our revenue base and expanding the call of our client base. We are engaged in a hiring more talent across different product lines, especially for the important strategical verticals.

And then the new hiring talents many of them are adequate and most and moisture is people and those who are reflecting Ohio.

Efficient level 4000 employees. So as a result of the human capital related at Pos were adding to the impact that you mentioned, so gradually see a drop on the EBITDA margin, but those impact will be on a onetime basis, which means that as we are seeing a higher revenue base going forward and have more dollar value of it.

Profitability will have a better impact to our EBITDA margin. So I think it's really about a timing impact and will.

We will stay the same unchanged that hopefully for 'twenty or 'twenty, one on a full year basis, our non-GAAP EBITDA margin will be profitable, but it's all about the timing while they work out there. So hopefully as we are seeing better on high quality projects to be implemented and executed and the EBITDA margin, which I'm probably hitting certain quarter in this year. Thank you.

Thank you every much calling for my question.

Thank you next question is from the line Kyna Wong of credit Suisse.

Please go ahead.

Yeah.

So I'm not trying to sell them yeah.

So as it comes Hypersound I think you'd say you know what one cool that he cannot just Dai ichi.

All public cloud.

They've got some sort of correlate nothing like Coca Cola zero sugar alcohol peer just said.

Ah, Yes, I said sits on us that you've got a question like that something that you could do that.

Public cloud.

So that should that show up yet.

So you have to start out there so I think that's it yeah.

Yes.

Uh Huh, yeah. That's it had I think payout he talked I think huh.

What type of time it comes out that he got sounds really that's not a new one eco what she should buy a sudden got just the internet of course by my son.

Okay cool.

A couple of them anyway.

I can't seem to accomplish that.

That definitely should not cause.

Of course, you don't come about.

I mean, sometimes I saw you know something I made that same cohort. He doesn't want you guys to myself Wow.

And that then sell them and then they'll.

It'll come down a ton of data I think I'd pick up momentum not some thoughts I E.

A man named Cascade of cocoa and.

She got no part D plan.

So I don't think Oh didn't want that yes, sure so without make up.

Hey, so recreation data in summer.

No I'm sorry, so just.

It sounds that way now.

And that's all it got it got it.

So I think a top half the total quite quite so about it but uh huh.

I think I'm not sure if all goes down but it wasn't behind.

At this time.

First one is that you wanted to look at the Oh part trying to call the cloud growth in the first quarter and given that the company has been outgrowing. Their P is a major player in the market just wanted to see if this trend, but like I say that pharma will continue in the first quarter and second question is about new customers.

In the first quarter.

The company I see share with us about some new customer names and so I'll be quick check the momentum on the new customer contribution and the third thing is about because different that.

The regulatory.

Tightening in the Internet sector.

That truck in China.

I mean like impact to long time in last month for the company.

Except in the Capex side.

Yeah.

Hum.

If you look at how much.

Got it okay.

People shop, not to him, but I'll do it.

Good through either one is you're talking about one or two years old school milk instead of something that's even on top of it.

I'll, just your timing actually jumping junior and the acuity is actually a really cool TJ shouldn't look on in school children, I'll say, well since you're doing more with that one.

Okay. When you meet them at home that social hardship in fiscal.

Sure.

I know you guys sure.

For sure a vehicle if they are not doing enough yard who don't cohorts. If you will not see the acuity if all of that.

Sunoco with general Jalapeno meal.

And I'm sure you'll pick up is it sounds like you're not going out even a different picture.

Do you do a cohort either.

Create an untold seafood I thought people show up at all.

Some frictions I'll tell me with all their drop off in D C.

There's a high hurdle.

Due to the cool pool table count with Tonight.

Decided to go with that kind of after the polls are.

Schieffer ones in that country.

I sure do some hail from a fabric of Omega.

Having a few dollars of securities that type of a total debt to.

He did an interview in women's that union people thoughtful choices about teacher and smaller easier to use.

But in general the cycle Okay.

So as your Oh, mainly and a tumultuous timing until sometime kill something more close to the proposals.

Absolutely.

I do though.

People could you.

So it sounded I will kill you either by email.

Okay. So that he couldn't get yesterday tutor pool.

Okay book to Bill Thomas.

Thomas Russell Goodman golf with Telenor should keep.

Don't tell me, it's union, that's I'm going to pass.

Hunter Chen Qi nicer mail promoting okay.

Okay.

Thank you. Okay. So those are questions just asked on the first one I think the Oh, Yeah. You are right you know it had been growing faster compared with our peers in the other cloud segments for Q1, given the reasons I already mentioned, we think that our AR business.

Progression have been in line with the industry after public cloud market in China in general.

And I think for certain peers I think we are achieving Q1, I think we're doing growing marginally faster than them.

And looking forward I think we do want to position ourselves as one of the player in the public cloud market, we can grow relatively faster than the select if our peers are as well.

So for the second question is related to that point as well as.

Probably if I understand it for certain confidentiality of necessity of reasons, we may not disclose the names but.

The search for new accounts, we're talking to have spending from the live streaming they do.

The localized services.

Comma and education.

We are making certain progress with them, even though the revenue opportunity and usage in Q1, given those clients are relatively prudent and cautious. So it has not fully convert it into our four revenue opportunity, but given we already have the floods and commercial relationships.

For some of them, we already have the technology testing completed hopefully for the following quarters, you will see a re acceleration of the public cloud revenue going forward.

On the third question regarding the Capex.

You probably noticed that in Q1 on a dollar value perspective, our capex was lower than Q4 last year that was our pre judgment.

About a certain impacts in Q1, including the holiday seasons, but also including potentially about logistics and the supply chain issues. We have the pre judgment call that we actually purchased enough sufficient hardware equipments of us back in Q4, primarily last year. So that's why if you will.

Remember in Q4 last year, our Capex was about $4 billion, so that will be basically per pass or enough inventory for this year as a public cloud infrastructure, and Florida, leading self opportunities after public child clients as well. So these are actually reflecting a together and.

The plan for this year as for Capex, We think that there is also the same level as we previously communicated.

We think around $1 5 billion in Capex will be a reasonable level to expect for this year okay.

Yeah, that's right.

Thank you. Our next question is from the line of.

UBS. Please go ahead your line is open.

Oh My God.

Got you outlined them.

Yes.

When she says as long term.

Those are in good shape, some T win I'm, sorry in our Q2 guidance Oh man.

They only had two T to tick and tie Golden week, achieving sends out.

The first question is in your <unk> guidance can you give us a.

Affirm or range for the growth in your.

Premium and enterprise cloud revenue growth.

Do you have a two way Joseph Southern teach you how here and how do you get yields swimming del Carmen died who.

<unk> achieved that are.

No.

Got it.

CT system now.

Which is a shame reshuffling they'll say they go to site coordinators.

Hopefully they each of them.

Last week on he talked about a.

Large customer loss in their public cloud business in the international markets.

Is there any impact a four piece off cloud.

In your domestic public cloud business and he's done a T wave Jos is saying no to football you'll get into Asia.

Hi, Felicia.

On board with the CDN.

Okay, Oh, Madhu reallocating shakeel.

Yes, I mean, so your high school jobs.

Consider that in New York since attack somebody from.

Third question is there's been a recent development in China's I got a reseller or a system integration or distribution that CDN.

Business can you talk about piece off cloud.

Capabilities from a competitive perspective.

Okay.

Not just yet.

I'm sure you see the heartbeat of Henry for some people who are kind of on the go get on it yet.

How do you know what.

We're working hard to pull them in to eat out.

You don't have the what's he you know the fidelity because within himself.

No.

Well not really don't do the quarter yielded three feet.

Okay.

Uh huh.

Oh do you want to just a little better attachment Athena women's I wasn't sure what would kind of be doing retrofits.

The terrible Q.

Do you want it and that's what the teacher to include all of it.

What did you should look for that continental stable. Besides will opinion that you signed this rule.

Keep in the year when the season wasn't the mail about the news article they book all your dog in the public filings.

So, but I don't know.

On top of you.

<unk>.

So I'm kind of us in cloud will.

Loyalty is just so that we don't do them.

Sure sure Okay.

Without.

And poultry in children and adults with I'll just for everyone's kind of across the board on the sales went up one of the timberland it off that's for sure.

Yes, sure don't want you know, it's a cold winter cold.

Central yellow tape or some kind of a trade off with them.

Almost all of them at Wilkinson.

So you should take them they'll come up with the whole shoot.

But you know what it was on that.

With that I don't want it.

You do over the phone and tightened up a way to build that.

I thought with timeshare.

What's your thought about it.

No destocking when do you kind of a mill to not to be cynical different if you don't get to see.

Got it.

Uh huh.

Uh huh.

Thank you for your attention when it takes union I'm not.

Sure sure.

Chicago.

You can see that our film a cheap exercise.

Michelle womens the toll of the take or.

And I think the two shirt upon the young Guy sorry Junior High School.

Yes.

Well I just want people to have a powerful things that he's going to run them.

As it all apart.

What did you want me to go into meeting Okay best comedy with some other time and make sure that I could call them to either yes.

Yes again.

Yeah.

Take the essentially and for the first two questions and also answer the question regarding the guidance on the breakdown <unk>. So for the international business as you probably know that even backing late part of 2019.

Have some views even at that time that will be a certain volatility in terms of the global geopolitical situation. So that's why we made a very prudent approach that regarding our internal budgeting and regarding the way, we engage them with our customers et cetera. So that's why even though we already in early time.

Certain planning for.

For search and regional business.

Business exposure and footprint 14th top of the actual revenue for our international business has been very very small at this moment. So that's why those geopolitical impact to our international revenue and the total company revenue will be very very limited and two a question are we also noticed that for.

Our peers they were affected by their major customer for their global business.

But as you probably know to add one more point as you well know that the ice level and infrastructure resources for the international business and domestic business in China has two different setup and a different network different capacity in different licenses requirements. So that's why the redundancy or the Idaho.

So first from the global infrastructure will not be translate directly into the kind of oversupply of any potential kind of the capacity for the mainland China business from a cloud player perspective, if the if it is a push out all of the concern you may want to ask so.

So for the second question.

In our view I think we are seeing they're trying to that given the cloud is a scalable business and is a natural if one of the benefits of that kind of scale. The concentration of the top tier players are still keep the same trends and there's no major changes and for the top tier of cloud provider and are giving people providing the full stack.

Of the services covering from both ice passing a soft capabilities.

I don't think that's trying to be reversed and not by positioning ourself at one of the major top tier cloud provider in China, I think we can enjoy that benefit small so on the last question regarding the breakdown as you know we are probably the only provide a verbal guidance, earning hawken and we have almost about one and more that way.

Last month towards the end of this quarter and as we mentioned we also have a good engagement with a certain internet to public cloud clients. So probably we will not be able to give a very priced at a precious guidance that you have a breakdown, but what we can mention is I think for the public cloud revenue and enterprise revenue Youll see.

Both as a decent sequential quarter over quarter growth and on a year over year basis, and going forward for Q3, and Q4, especially the second half of this year you will see probably it is likely that our year over year growth rate for the remaining three quarters of this year, hopefully you will see acceleration quarter over.

Quarter as well.

At the bottom line I think for the Q2 public cloud the revenue will be at least in line.

Both our major peers in Q2 as well I think that's probably a good southern comfort for the public cloud we may see a put a kind of acceleration go to photos business and we do have certain.

Contracts and opportunities in the real opportunities off the revenue that kind of fit outside are hopefully are going to be deliberate and outside this quarter. Thank you Thomas.

Yeah.

Thank you.

Our next question comes from the line of LTE.

Goldman Sachs.

Yeah.

Hey, Glenn.

So quite a challenge.

Yeah.

Joel I was in China.

Huh.

Uh huh.

Uh huh.

Sure.

What should come public cloud.

That's exactly what she don't eat fish.

Do it.

Okay.

Sure.

Alex.

Yeah.

So I just have a small question here the public cloud growth in the second half I saw as a sort of directional color on food.

I guess, we do see some of the headwinds into the first half of the public cloud space. Just wondering if we can provide some additional color into second half and how should we think about the fundamental drivers as long as some of the directional expectations on the numbers. Thank you.

Okay.

If he wanted to be sure of that.

Hum.

Oh and your views if a woman named Tim.

I'm not.

Sure but.

Oh, yeah yeah.

The woman that when nickel with the Christmas season, electrical repeat your cool cool you down a box you're not part of your opinions on this.

I'm on the.

Your phone.

I T T. The quadrant.

Yeah, well schindler compete more isolated from interest we want to tell my room, let's put it out and you look at social it's usual.

Alright, well when he was hit harder.

I don't think lutetium, Remington, but taking place yet.

Sure Latif will go to the D. T S refunds, what have you seen the sell more coupon almost 19 electrical.

Right people cost with the hotel somebody signs when crude lucky.

Sure, so which room enough somewhere around the 200 to go.

Adobe decided upon the differences Schindler, China people leave the cool factor.

Oh, No you went out in the field to Sundar turnkey it seem to you with that.

These are people, who come out and do anything yet.

That'd be the only kind of music.

If you can go from one to another.

QE traction behind the seafood season.

Country.

But we must do.

I'm going to tell him on kind of our if you want to.

With an eye on at least the jamba yield with one of them.

Yeah, that's okay I say other Christa on his question are there are three major reasons are the major drivers first of all it is for our top tier paying customers are there existing usage are seeing a trend of growing historically and for this year.

We not only focus on new customers, but also the existing printer customers the uhm.

Usage and their revenue has been increasing that actually form a solid base for our total public cloud services revenue for this year.

And given those out of premium customers. So they are actually making the investments with their own business. For example, adding a new features and the new product lines and new applications for their business, so their demand and their growth and investment into their own business and end users.

Well basically the foundation for our growth opportunity from those existing premium passengers. The second point is regarding the new cosmetics.

Expansion.

So I think from both commercial sales relationship.

Diana technology compatible testing and also the both engagement I think as we mentioned, we're making some progress.

And taking certain kind of initiatives to engaging with the new customers, that's actually going to be the second driver.

And many of those areas and efforts will be basically ammonium highs and are gradually pushed down to the kind of revenue and realized a revenue opportunity and the third part is really about the new product feature and the requirement. So that means that not only for the new but also existing customers.

The new area of the usage such as cloud gaming as we mentioned in the prepared remarks that starting from Q1 as a leading pioneer in the cloud gaming areas and gaming industry in general we are seeing a good traction that's some of the leading gaming company already.

Deploy their gaming product suite of cloud companies and those are already bringing us a meaningful level of the cloud gaming revenue in Q1, and then we think that that those revenue will see a good level of expansion for the remaining months to go for this year I think this is only one of the example, I think.

In the area of B I R and other Iot auto cloud related areas will be also the important areas, where you'll see the new demand and new technology can generate and translate it to the revenue opportunity.

Thank you.

Thank you.

I'd now like to hand, the Congress.

Dennis.

Yeah.

Thank you all for Harrison, who will join us today.

Other questions. Please feel free to come back so forward to speaking with you again, that's Potter Hello, Vanessa Thank you.

Yeah.

Thank you. This concludes today's conference call.

Anticipating.

All this going on.

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Good morning, ladies and gentlemen, and thank you for standing by for King Salt crowds first quarter 2021 earnings conference call. At this time also depends on listen only mode. After management's prepared remarks there'll be a question and answer session. As a reminder, today's conference call is being recorded I would now I'm trying to speak with you at whole foods.

Today's call Mr. Cole sheds.

Rescue relations manager of Kings of class He says he Nichols.

Thank you operator for one and thank you for joining us today can sell cloud supposed to call. Her I mean, when you wanted earnings release was distributed earlier today and is available on our IR website at IR adult Kate I, why you bundle com as well as on global Newswire services on the call today from <unk>.

So cloud we have our CEO, Mr who didn't want and therefore, if there had been Lori Hock, Mr. Wang will review our business operations and the company highlights followed by Mr. Ho, who will discuss the financials and the guidance it will be a little though to answer your question. During the Q&A session that follows or become decorating interpretation. All you can do.

Rotations awful you all khomeini's any reference purposes, only and cause of I needed to produce a much in a statement in the orange not languish wheel for wheel, you've always begin I'd like to remind you that this conference call contains forward looking statements within the meaning of section 21 E of the Securities Exchange Act of 19 sort of fall as amended and as before.

Buying in the U S private security litigation reform ex COVID-19 1995. These forward looking statements are based upon management's current expectation and current market operating conditions and they relate to events that involve known and unknown risks uncertainties and other factors all of which are difficult to predict and many of which.

Beyond the company's control, which may cause the company's actual results performance or achievements to differ materially from those in the forward looking statements further information regarding these and other risks uncertainties or factors are included in the company's filings with the U S. S E T.

Nothing undertake any obligation to update any forward looking statement as a result of new information future events or otherwise except as required under applicable law. Please note unless otherwise stated all financial figures mentioned during this conference call as you know what I mean 19 in RMB.

My pleasure to introduce our CEO Mr eating off these go ahead.

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Once again through June who don't recoup what drove it.

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You know Jerome Powell with wouldn't trigger some drums I forgot your choice.

Nicole and welcome you all for joining our first quarter 2021 earnings call in this quarter, we generated RMB 1.81 billion in total revenues I'm on which public cloud and enterprise cloud accounted for RMB 1.39 billion and RMB appointment 20 million respectively.

In addition to successfully executing our strategy of serving premium customers. We continue to improve our large scale high highly stable and a high performance enterprise novel products and solutions that cater to growing demand across verticals, including the Internet health care financial services and public services sectors.

So.

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They'll move will probably triple what didn't work and blah blah blah.

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So I shouldn't go who's looking for a minute or two and go mode. You don't bring on fruit, you're talking three or what have you shown what we call. What you want with your food food in China people tend to tune Kool, who want relief without trying to quote them towards even uncompleted.

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Penetration of your Etfs.

In terms of the public cloud for many years, we have ultra secure stable when the comprehensive solution to safeguard our customers Spring Festival gala campaigns, providing the massive viewership globally with smoke high definition and interactive experience, we offer solutions, including live streaming on demand streaming and electronic Rev packet campaigns where are.

Value added products, such as smart HD and KFC two six parking quota were fully utilized on new customer acquisition from one of the big data hybrid cloud project for certain the mobile Internet Unicorn company, providing the customer with the products and services, including Bama to service. It alleviates, the kosmos burden on operation and maintenance of Chiefs elastic.

Profit expansion as far as multi civil room hybrid cloud deployment and photo reduces Iot Paul.

And this quarter. We also signed letters of intent with several large scale internet companies, which laid a solid foundation to our medium to long term revenue growth. In addition on gaming front. We're pleased to see revenue generation from cloud gaming, we signed an agreement with <unk> to provide past level cloud gaming platform for blockbuster games Ghansham.

Together with Noel with dedicated to providing brand new cloud gaming experience to gamers.

So I couldn't slip off will you assume trend into it you don't want me to go to Shin Oak Who's you called it even sooner.

And by the time, she simple solution to ensure the tune truth-function only weird.

When you talk from two two times coverage Penghu, Kotaku pizza Fuji musician, shampoo, Junkie, Python and uhm, but people on the outskirts you've heard that from Dupont and trying to fully cooked cogent shoot you, sometimes when they need it yeah sure sure John Chandler, There's some truth in what have you done the bulk of your ships had been.

Yeah.

We also published our cloud native product portfolio and launched two containers that enable customers to fully leverage the advantages of elastic and distributed cloud circle free from underlying resource here and there.

Additionally, we officially launched our Cooper.

Unified data platform for the public cloud it helps customers significantly improved data agility reduce development and maintenance costs and build a data ecosystem in combination with other big data path product. Meanwhile, we have been strengthening our value added product capabilities, including audio and video edge computing and other cloud native technologies.

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You won't be able to see and how should trickle into our system. When we're done that you'd see something that people were not sure.

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Foucault shelter and food culture, all the 20th Tim Hogan.

Our changzhou throughput in front of me Archie one kind of unusual you can harness this week I'm sure you've seen them.

And accordingly.

Yes.

Uh Huh John solution, you can tell me if you want a onetime order.

Moving to enterprise cloud market demand remains strong we continue to dig deeper into select verticals and develop outstanding industry solutions, while mushroom enterprise cloud services is project based we proactively seek to build and maintain a long term cooperation and continue to obtain business opportunities in the health care sector during.

The quarter, we were selected to be the exclusive supplier for phase II of the Shantou municipalities Smart Health care project. We will continue to provide services based on phase one conducting capacity expansion and a function up rate while in the meantime, ensuring technical continuing consistency and stability all of which will help to further improve the digital health care capabilities out there.

Richard.

In addition, we efficiently delivered a Sichuan Chancellor health care cloud and the second phase of the Changzhou health care cloud, which includes deploying and testing of our galaxy platform as well as expanding the capacity of their existing cloud platforms.

These offer a critical guarantee to the official launch of Tam for health care cloud business and the construction of Johnson Province image cloud.

So to conclude two shoes downtown Fuji quantity to define them, we can do and do what you call accounting, we probably aren't hard in this room with Fuji quantity does if Ofcom will call.

So Patrick on the dwell time, you do it I mean, how did you change anything game that you sometimes see.

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Yeah.

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With food your insurance people might think she so any extended to me what you can trust honesty Isabella.

It's more of a passing the dog food reunions humble people in bulk or should you should you be able to talk to your food you tell them tremendously well.

When I come home children with asking what else you don't even have the wound meal. When you quote you won't give it some thought.

So I think a couple of the union for that.

In the financial services sector, we continue to strengthen our data management solutions capabilities. According to the 2020 of China data management solutions market report published by third Party industry Research Institute Proppant Sullivan among key market players. We are positioned in the first quadrant leaders quadrant together with top tier global cloud computing competitors.

Our financial services companies increasingly focus on data security and stability, we proactively seize market opportunities leveraging our position as the leading neutral cloud service provider during the COVID-19. We provided comprehensive cloud based data services to the pension fund system of one of China's a major state owned banks. The project consists of data ingestion.

The addition of retrieval and profitable at the same time, we also successfully engaged with a leading Chinese Internet financial platform company, where we provide cloud delivery and security services to help reduce operating and maintenance costs.

So if we move forward.

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Closer to home can be able to tell us what are some thoughts with you can see the central Soma Cogent fashion shows so I'm sure that you're doing on the roofing kind of blew up on it.

With you soon.

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And finally the triggers.

In the public services sector, our flagship projects are helping us attract more business at all.

Latest we have signed strategic cooperation agreements with 35 regions to facilitate the digitalization process.

During the first quarter, we successfully completed a cloud project what information center of the Beijing Municipal Commission of housing and urban rural development, helping the customer improve their digital capabilities and achieve secure and stable operation of their systems. We also won the bid for Jounce with provinces Big data Cloud project, which aims to realize integrated management capabilities across them.

Multiple cloud platforms, including Big data cloud, that's all at the provincial and municipal level government Cloud. In addition, we also won a bid to build a cloud platform for the industrial Internet public service system. The system will provide a full range of smart cloud services to industrial enterprises in Shandong and the surrounding areas.

So that's really a fabulous comfortable that even in bulk.

Real quick so you put people on call.

Adding 10 to 20 units.

Hum.

I'm not going to sugarcoat it.

We're pushing hard to see what they will tell you something with challenger to appeal.

For Union doing people, yes, if you didn't see much evidence of that.

Yes, you should.

It didn't have to pay out the appointment of a.

Women's out yes.

The issue with it yet.

Yes.

Finally in April we published at both our first annual reports and I was supposed to yes, you report post our IPO at the leading neutral cloud service provider, we attach great importance to corporate governance, environmental and social responsibilities as well as our sustainable develop development. We took the initiative to disclose our ESG program.

In less than a year. After we went public even though it is not a mandatory disclosure requirement in the U S. The report focuses on topics such as corporate governance privacy and data security and human capital and other progress we made throughout 2020 on a path to address the sustainable development of our business. This speaks to our commitment to integrate ESG practices.

This into our day to day business operation and to constantly improve the management of our business.

Oh, Gee I don't see them to staff all hungry man.

Uh huh.

I will now pass over to our CFO hammer it to go through our financial performance for the first quarter thinking.

Thank you.

Hey, everyone I will now discuss our financial performance for the first quarter of 2021.

Be reminded that all numbers quoted here I RMB. Please also refer to our earning release for a detailed financial results to begin with I would like to highlight the following points.

First of all our total revenue or 1.81 billion RMB. This quarter revenue from public cloud services were $1 39 billion RMB due to our high quality of services and a robust relationships with all our premium customers revenue from public cloud services has been increasing four five car.

Quarters.

Enterprise cloud revenue or 420 million RMB, representing an increase of 131, 3% year over year.

Second we achieved record high quarterly adjusted gross profit of 122 million RMB in Q1, our adjusted gross margin for this quarter increased from four 9% last quarter to 6.7% this quarter.

The margin improvement was mainly due to the benefits received from investments into major enterprises cloud vertical last quarter, such as health care financial services and a stable contributions.

Our public cloud revenue on a market.

We expect our total revenue to be between 2.13 billion RMB and two point to 3 billion RMB for the second quarter of 2021, representing a year over year increase of 39% to 45%, implying a re acceleration.

Q2, 2021 and reflects our success at engaging new customers and expanding our scope of services with existing customers.

December last year, our backlog of annualized cloud revenue was $2 8 billion was at the balancing of customers' procurement process after Chinese new year holidays, our background remember if he keeps increasing.

New projects such as projects in health care financial services has been the additions to the backlog number mentioned mentioned above.

Lastly, our business is sufficiently funded as at the moment as of March 31, 'twenty 'twenty 2021 our cash position was 5.46 billion RMB.

Now I will go through the financial results in greater detail our product cost services revenue reached 1.39 billion RMB beautiful high quality services and robust relationship because I'll bring kosmos the usage of our printer customers has been increasing steadily and our revenue was from public cloud services has been increasing four five quarters.

In the first quarter compared with a faster growth rate in the same period of last year when daily Internet usage jumped significantly during the COVID-19 outbreak last year, we saw a moderate year over year increase of Internet usage in the industry in general and Eurasia, There isn't that brings in the internet industry email in China in general, particularly in Australia Education E Commerce.

Other verticals.

And many of those companies I've taken cautious stance on promotional efforts than the previous industry expectation.

Aimed tightening regulations weighing on our growth in a public cloud segments in Q1.

During the quarter enterprise cloud revenue increased by 131, 3% to 420 million RMB, mainly reflecting the rapid growth in demand for our enterprise cloud services and are partially offset by the impact of Chinese new year holiday season in this year and also the late timing of procurement timetable compare with the previous year.

Cost of revenue increased by 28, 5% year over year to $1 7 billion RMB.

How do you see cost increased by 21% year over year to 1.11 billion in R&D as a percentage of total revenues, obviously cost decreased from six two to six 2% in Q1 last year to 61, 4% in this quarter.

Overall, we are achieving greater economic scale and improving resource efficiency.

Depreciation and amortization costs were 173 to $174 8 million RMB. Other cost consist of third party software purchases and often costs associated with both public cloud and enterprise cloud as well as other equipment costs related to our enterprise services.

Costs were 394.0 million RMB in our staffing costs were 15 million RMB.

We achieved a record high quarterly adjusted gross profit in Q1 and increased by 64, 4% from $74 2 million RMB in the same period of last year to 122 million RMB this quarter.

Our adjusted gross margin for this quarter increased from four 9% last quarter to six 7%. This quarter. The margin improvement was mainly attribute to the benefits received from investments into other major.

And I've kind of verticals, such as health care financial services last quarter, and a stable contribution of public cloud ran and got a module.

Total operating expenses were 406 to $8 6 million RMB <unk> 33 per cent from Cuba, nausea, mainly due to increase in share based compensation staffing salary adjustments and fading of adjustments of social insurance favorable policy expenses hiring talent is hard.

Excluding share based compensation adjusted R&D expenses were 202.0 million RMB.

As a percentage of revenue R&D expenses decreased from 13, 3% in Q1 last year to 11, 1% this quarter.

Adjusted selling and marketing expenses were 83.5 million RMB.

As a percentage of revenue adjusted selling and marketing expenses decreased from five 6% in Q1 last year to 4.6% this quarter.

G&A expenses were 65 6 million RMB.

As a percentage revenue they decreased from four 2% in Q1 last year to 3.6% this quarter.

Our adjusted net loss was $218 4 million RMB compared with an adjusted net loss of $243 4 million in Q1 last year adjusted net margin improved from negative 17, 5% in Q1 last year to inactive 12% this quarter.

Our adjusted EBITDA was negative $48 6 million RMB compared with negative 39 4 million RMB in Q1 last year.

Adjusted EBITDA margin slightly improved from negative two 8% in Q1 last year to inactive two 7% this quarter.

As of March 31, 'twenty or 'twenty, one we had cash and cash equivalents at five point.

<unk> 6 billion RMB during this quarter kind of expenditure or $213 4 million RMB cutbacks as a percentage of total revenue a decrease from 33% in Q1 last year to 11, 8% this quarter.

Moving to the outlook.

And earnings for the second quarter of.

2020, one we expect our total revenue to be between 2.13 billion RMB, two 2 billion RMB, representing a reacceleration on the year over year basis of 39% to 45% compared with the first quarter.

This is a based our current and preliminary views on the market and operational conditions, which are subject to change.

This concludes our prepared remarks sounds fly out attention well now happy to take that question. Please ask that all questions in Vogue magazine any English as possible. Operator. Please go ahead. Thank you.

Thank you ladies and gentlemen.

This session if you wish to ask a question.

One on your telephone.

We need to be announced if you wish to cancel.

And yes.

Sure.

Okay.

Okay.

Once again, thanks for that.

Two questions.

Thank you first question comes from the line of Brian Johnson on Citigroup.

Please go ahead.

Yeah, Thanks management for taking my question.

My first question is regarding the public cloud as a sort of gross things slow down in fourth quarter and I understand that.

The year was a high base and that there was some records for reuse.

Sure.

Two months.

That's the whole public cloud industry.

Is slowing down.

And for Us where our trusted her and so we have you know.

Uh huh.

Just find it from contracts of all partner ship with some big Internet companies.

No.

What are.

Are those new customers are you.

This is my first question on the my second question is can management share the older a malls or entre protocols.

And do you think you know, we slow down a property called the industry.

Our competitors become more aggressive on their pricing on the public sector.

Did you finance charges.

Alright gotcha.

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[laughter] Centurylink, so I think as Brian a question so on the first question.

Probably right you are right that the.

The high base off the public cloud with revenue last year was primarily one of the reason why we look at a year over year growth of the public cloud revenue in Q1. This year, however, or whatever you all highlighted that is our revenue from our core base of our premium customers, especially on the top spending customers has been very solid and robust.

And in addition, we also made some good progress engaging with new customers in a public cloud a settlement. So that's why as a result, our public cloud revenue has expanded and have grown sequentially for five consecutive quarters. As we have mentioned however, as you probably also noticed that in the industry in general.

China, the regulatory environment, especially in Q1 has been quite.

Quite a volatile and has sort of impact to that revenue in a public cloud of segments, especially a few examples for example.

The content the view certainly kind of at home regulatory perspective has some impact to our streaming clients, which actually indirectly affect I use it on public cloud resources and also as you know the policy is in the education vertical is also made of many of our customers pretty much very cautious and prudent and adopting.

New from a promotional efforts, which actually should have increase our demand from end user perspective, but we do believe those impact won't be a short term and we do see that they're taking all of that in Q2 for.

Hybrid cloud revenue and usage will see a kind of acceleration in Q2 coming forward.

Many of the factors, we mentioned, where our short term and seasonal impact and speaking about enterprise cloud. So in Q1, we delivered over 130% on a year over year growth, which we do believe it's kind of highest level compare even compared with our peers in the industry.

The demand from the DTA valuation across different verticals has been has been kind of solid and a very strong including the public services health care and financial services I think speaking about our competitive strength and a unique kind of stress in a value add from all came from a comp perspective.

It's about a client engagement.

Capability to deliver deployment and implementation and it's not really about herself compound, it's not really about the pricing competition, especially in the basketball segments. So that's why given that demand is very robust and I don't we don't think that the competition is has been kind of head to head in the enterprise cloud segments.

And as you well know by December last year, we have $2 8 billion backlog in enterprise cloud alone and this number has not included any new engagement in the buildings. We have won in Q1 of this year for example, as we mentioned in our bigger our healthcare cloud projects in Hubei Province Hubei.

Tim Hogan.

For that project alone based on the public data, which we kind of saw the public announcement recently that probably that alone will deliver over 70 million RMB revenue, along which has not being included in the background. Remember however, we wanted to say that Houghton basis going forward, we will not disclose detailed bedrock number given that the sensitivity around the pipeline.

And that's plenty of competition, but I think we can assure that our backlog.

Backlog has been growing and also with the ongoing implementation of the existing backlog has been well on track.

I think that's come through with a few colors. So hopefully helpful. Thank you Brett.

Furniture was very helpful.

Thank you.

Our next question is from the line of shallow Dan Chang TICC.

Uh huh.

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That sentiment.

If you need them in Houston when you go out you can get right now.

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Onshore woman she seems to me I don't think I'm a little quicker.

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John did you say that.

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Davidson.

Judy.

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Thank you J P and I know how long do you think we've hit a molecule and killed.

No. Thank you Tanya.

Thompson.

Oh yeah.

So my first question is regarding the public cloud business. So as we can see that the acquisition of new customers in the first quarter wasn't what has undergone a headwind from a regulatory change in the interest internet industry, but what will be our major focus for product diversification for the public.

Cloud My second cloud is regarding the enterprise cloud business. So the anticline.

It's a private cloud that sensor quite a solid growth in the first quarter. So what can we think of the growth potential for the three main segments for enterprise cloud on I E. The health care financial services and public sector and what would be an ideal business dropped you have gross margin profiles right that's pretty exactly.

And my third question is regarding the regarding the gross margin. So what will be our expectation for the gross margin going onwards for the next few quarters. Thank you.

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Henry there's something you can garner ideas.

Yeah.

Thank you that's out there for those three questions I'll translate for the first two and I'll take on the last one and the first one regarding the public cloud I think you probably have already mentioned that there were seasonal kind of regulatory impact on Q1, but we want to highlight that oh engagements had progressed to the new customers, even if some of them.

Starting with a low and a small volume, but but there actually is strategically important for our new Kuzma strategy, we are making those progress on tracking to your wife, even though.

And the initial the first phase of the testing or the initial trial version of water and that's being a small ball, we're seeing a great progress in connecting with a new and important customer with us. So speaking about the diversification of the product lines and our services.

Just wanted to use a few examples since I'm pulling the Chinese new year live show performance of events as you know it is not only capture the live show video contents, but also there's a lot more interaction components and both events such as the.

Got pockets events, such as kind of a massive and a scalable multi.

Multiline connections direct connections.

The Chinese new year events I E. In a maximum peak time would you see over 15000 lives with direct connections in those video services and those end user scenarios has help us to diversify our product services. Because these are the end demand from our customers so to add one more.

To your point addition, AR actually went up a lot of cloud delivery revenue last year. The first quarter of last year was over 50% and we do see as a percentage of total revenue our.

Deliberate revenue has dropped below 50% and we do see that trend will further training done which was actually going to be a part of it is a factor to have better diversification across delivery computing storage.

And speaking about on the second point on the enterprise Cloud I'll go one by one on the financial services vertical. It is all about technology, so by extending our knowhow and experience in certain core technology capabilities two of the major banks in China to help us too.

Strengthen our forte in both areas for example for those major banks, they've got analytical platform.

Based on our cloud native technology has been very important for them and it is a must have technology for those big dancing, China and bye.

Our proven experience in those areas, but still even with the probability is to the clients. We can engaging and also enjoy incremental demand and revenue opportunity from those times. So there's all technology and a demand driven business.

On the health care as you know, we do believe that we do have a fed move.

<unk> advantage in health care and given our real experience in many important cases.

Important areas, such as the city allowable and publishing level health care cloud.

And also in Hubei Province, we do have accumulated enough resources and the capability and a firsthand experience in those areas and by pioneering those experiencing the one or two areas and extending that into other provinces in China, such as <unk> chancel provinces, we can won't take care of all experience.

And seeing great anecdotes about atomic scale and how the recurring revenue from those clients given the solution itself is highly leverage able and the third part on the public sector and as you know we do focus a few areas such as Beijing, Hubei, John Stroup and SKU in those provinces.

Kind of strategy and the play part of the playbook for the business over there is we do want to establish that complete and.

Troy the high quality of projects sort of trying to make sure. The most important areas and important client we can be about there.

The pioneer also the top tier vendor for them, who can be trusted to deliver high quality projects and execution capabilities. So for the mid to long term I think we feel confident that those experience and execution quality asking for cloud carrying all over 30 off up to be DNA well gain enough.

And further I trust from client and expanding more business over there and Oh, you got it right that the gross margin from Animas cloud has been a very positive factor to improving the company's gross margin overall and.

And we do see that repeating in recurring revenues and also the high quality of our solutions. We have been serviced out of time, but also can serve.

The positive factor for us as well so on the third point regarding the gross margin and I think a lot unless we just causing T O for the half year, our strategic investment in a phone and southern Pos in Q4, whilst the reason, but we do see the positive results as you can see that in a way it successively wane a bit a few major projects I think our.

Investment and upfront passed last year was worthwhile doing that and have seen improving also the skus that we're picking the right trying to work out even.

The cut off the first stage was off.

All of this carrier with a certain testing a version and are kind of front end services. So as a result, I think we do keep a kind of same and unchanged views regarding this years gross margin on the company level at all and I think over the next few quarters, maybe on a quarterly basis.

Gross margin on a percentage point or the value of a dollar perspective. We also don't want agility is over on a full year basis. We do believe hopefully we came through a 5% to 6% off the gross margin compared with last year compared to any kind of one to 2020 and I think for the long term the basmati, reflecting all fundamental efficiency and a.

Moving products diversification the diversification as well thank you so much.

Thank you very clear.

Thank you.

Next question is from the line of children of Nomura.

Hum.

Oh, Hey, everybody Tim T right now it just works how much I'm going to.

Charters our merchandisers.

And found out Coca Cola zero sugar, so we're telling them that they can really show that.

So see began to go to quiet tied to encourage anybody unusual because you talked about you put me on United Kingdom or the D. J.

Joseph from Washington that accordingly.

So we really didn't talk about COVID-19, and junk in Ohio to them, but then again, a buck or who do you want maybe at the courtyard Nashville, So deal, which is only going to go quick on chicken I mean, what type of a thing that.

You know what what I say, what do you see a woman a year so.

That's for sure.

All of them are in Chicago, and then this would be crazy Crazy talk quite that you've been doing.

And then it turns out good tenure.

Let's just talk about what you say came out of nowhere near research of course, you're a pretty big way, where not only charged young boy those who've got computing storage, but yeah.

So my first question is what is the current are the contribution from the three biggest customer.

From our public cloud sector, and what about the C D and contribution.

For the Florida, Florida for our company in one Q and because of where you think the overall Chinese coal market is going to slow down a little bit down the road.

Oh pardon pardon me one so.

And any potential.

Changers.

Structure strategy, we have to to help us to gain better gross from public cloud, especially in 2021.

Oh yeah.

So I think I, just heard you'd be the margin I'll cut it all digital.

EBITDA margin adjusted EBIT margin for sure.

The Lithia well that's how since you cannot go on Linda just said.

Turning to the T V or they're supposed to do.

Despite the challenging myself, but potentially not.

You went to two children credentials.

Sure.

I can't tell you what options might not work well.

Are you doing training in Gaza. So it was a kind of controversial because that's really true.

So my second question is about just so you can imagine a I think the yeah definitely but the margin has been broken even in one months Ah Ah.

Maybe to somebody in 2020, so but I still go back there for one care 21, So I guess, if you've gotten about next but when I saw something related to personnel expenses and what should we expect for full year and for second quarter 2021.

Oh, what Tony a question, but why wouldn't you just require you to call us just how much of a courtyard will come about junior engineer, but they'll call you.

This was how are you Huawei are convinced that the housing acquired shopping or something I shouldn't be Yahoo, Japan.

I'm going to push us towards a challenge out there.

Well, it's on which I'm going Oh my God.

You've got some doors or you.

P J O P R.

Sounds like you don't.

I was hoping to just put a wholesale routing and attritional losses.

Alright talked language. So my third question is about the.

Market competition dynamics, I think Huawei removed about quickly in public cloud market last year in China.

The market share so those companies that will be a major competitor a major threat to the cloud market or public cloud market will come.

Oh, my gosh, well for Huawei concerning programs.

Major comparison of a threat to the to the peers. Thank you.

Oh, I didn't know us right.

Legal and displayed a boon to budge.

The political political liberties. She said that you eat at home kind of on the poll will close with the email social washer beat the old ones.

This is a woman.

Cool cool the donkey, though.

He comes with its own gasoline she's a woman the total cohort. The time, you don't want that QE I sure do.

That's what I figured we hear that they shut down for a month as we kind of throw them at home and coupled with docker.

Our coworkers in the time you actually show.

No well not just recipients or does it kind of be I'm sure it'll come out in the future to oversee the cookie under the door.

Uh huh.

Did you end the year with that one of them and to make sure you're not going to go up and the children look on I guess at that table Youll, none no downtown.

Does that Doctor and nothing would be Eagle Ford or how do I go to society.

Year with other you'll find out.

When you look at the films without a teacher woman I'm kind of looking for everything.

Florida, Georgia to Cook with Javelin Taylor Street.

Great.

Oh, okay. Okay.

Secondly, hip with whom the unusual she put out her home and it will come out when you are first of all because of the yields on those.

Those will go to heat homes, and the I hope I'm listen well seem to sound the same.

So it takes a lot to them until you do you can go through them.

Sure.

Okay.

Cause I know Derek.

Carolyn.

The World doesn't examples every life only in particularly that Oh, if they're not able to look at it that way.

And you're going to get all your particular.

I think the challenge.

Well no there shouldn't be even higher to what other people are you didn't do something that they were just kind of as usual.

Sure I can say is I'm quite.

Sure.

It seemed dumping boosters will do a.

A couple of dozen Doe.

So we're talking to you.

Most of the decisions on the bulk will Oh did you find them and meet ushers yourself would've normally.

Holds either people.

Well look I don't know either Tommy what occasions with you here.

I think it was stopped due to COVID-19.

Can you just tell them to do that.

5000 ton miles I too well email crusher feed them to any of the people set up on a couple of things.

And if you can just lumpy with oil.

Let's see a couple of the Union Julian go Oh got it understood.

On the parties or do the seafood that mutual due diligence that you've actually you'll see it on the water could go.

So does that give you an idea of a woman's isn't in the hydro launch.

In fact, even if what do you mean.

Sure women tune that.

She actually fit onto something okay.

Sure. This is something that looks at all of them.

Okay.

That attrition number.

Oh Gosh, Virginia, how are you doing in fact, a major cause of some sort they don't quite seem to meet them.

I'll see you soon.

Thank you Joe for the question I'll go through the first of a pushout of Suntrust.

I'll take the question on the EBITDA margin.

So for the top tier customers.

You mentioned the usage of our top premium customers has been stable in Q1.

Given our public cloud revenue sequentially, you will see some growth so as a percentage of total revenue off public cloud those pop premium customers as a percentage we'll see.

Slowly decline as a percentage points so on the stadium perspective.

And as you know the more and more customers are actually diversifying that demand across the different business lines, including storage computing and the delivery.

And the C D and revenue as a percentage of total revenue I also see them gradually decline as well. So I think that's one data point I did want to highlight is some cure Alaska to Q1. This year the C D and revenue as a percent of total revenue.

It has declined around about 10 to 8% to 10% on a percentage point.

Second point on our growth.

So as you know we.

We are making progress after new a pessimist and engaging with them and given the.

The value of our independency of neutrality, we're engaging with new customers that actually I think the value of our position as an independent copper lighter and for Q2, we are seeing confidence that those conversations and initial engagement with the new customers well gradually ammonium highs and graduate to become a revenue.

Cloud sector and I think these are the major assets that we are making in tier one.

Carrying for the results for the following quarters and a fair point regarding the competitive landscape I think the key online and we want to mention that if it's really about a kind of a strengthening and improving the probability not only from our technology solutions, but also about implementation.

Execution and services and maintenance for Atlanta.

Business and that's no doubt that Oh Foundation, a market in China across all traditional sectors has been very strong.

And the key play part is really improving our profitability and especially in the financial services and health care. These are the two verticals required industry, knowhow and half, but and it will require specialized.

<unk> and Hum and and then the firsthand experiences. So that's why you'll probably kind of stand out.

Have a good client sales relationship doesn't always equal to a monetization of the cloud revenue and the know how and outstanding client demands and knowing that challengers and it can help them resolve their questions will it be more important to engaging with the trustee of the client relationship with them.

With that and for the public sector services, Oh actually I mentioned that we do have some a great advantage in a few areas and problems.

Problems just in the city's ethane I shouldn't but our key is to really get about a kind of picking up the pace.

Please by phase of the project.

And I think the execution and implementation are the keys for all enterprise cloud appears including Alpha and other peers as well, but I think all of those areas.

We remain confident given that we're already working with them and some of the China. We're already working on that phase two okay. Three I think we do have a robust pipeline for not only the backlog, but also the implementation timetable.

So for the last question regarding EBITDA I think one of the highlight for three or four major reasons. The first reason is regarding certain adjustments regarding the social tax and in Chinese.

Caught up with as you know in a shoebox how policy man in China. So as you probably know in COVID-19 loss in Q1, our government in certain cities has at that time announced they will make either for a return or partial.

A favorable policy on the social security taxes for plenty of plenty and plenty of it one for our industry and certain companies. However for Q1 this year given.

Given the new policy actually we bounce back to the normal status. So basically well how does that impact that <unk> have to pay our normal rate of certain sort of attached and and set up a real nice back to the normal tax policy. So those will have around about a one 5% to 2% of the total revenue will do you have additional impact.

On the past after human capital.

And the second reason Theres, absolutely no athlete, Danny our revenue base and expanding the core of our client base, we are engaging and hiring more talent across different product lines, especially for the important strategic verticals.

And then the new hiring talents many of them are adequate and more and more people and those grow reflecting Ohio.

Amortization level 4000 employees. So as a result of the human capital related at Pos were adding to the impact that you mentioned, so gradually see a drop off on the EBITDA margin, but those impact will be on a onetime basis, which means that as we are seeing a higher revenue base going forward and have more dollar value of it.

Profitability will have that better impact to our EBITDA margin. So I think it's really about a timing impact and we.

We will stay the same unchanged that hopefully for 'twenty or 'twenty, one on a full year basis.

Non-GAAP EBITDA margin will be profitable, but it's all about the timing when they will get there. So hopefully our paths we are seeing better in high quality projects to be implemented and executed and the EBITDA margin, which I'm poverty and southern quarter industrial Thank you Joe.

Thank you every much calling for my question.

Hum.

Thank you next question is from the line.

Kyna Wong of credit Suisse. Please go ahead.

Yeah.

Is that funding from once they are trying to sell into the atmosphere.

Hi, a question on I think you'd say they don't want cool like nickel not just so that's I think that's like a public cloud.

They got essentially nothing.

Nothing like Coca Cola zero sugar alcohol peer just said.

You made a point, yes, I said, a few times that you've got some questions like that.

If you do that took us public cloud going on there's not a whole bunch of things that should that show up.

Yeah. So yeah. So you have to start out there so I think that's it.

Yeah. That's it had I think payers he talked I think.

Oh, what's that.

It comes out that he got sensibility.

We wanted echo what she should buy a sudden got a just a into like the cusp on Sunday.

So of course, I mean anyway.

Sometimes it gets in the coalition that you keep it at that.

Nothing should not cause.

Of course, you don't come about.

I mean, sometimes I saw something I made mention of course is gathering, which I'm quite sure that to myself Wow and so forth.

Maybe it'll come down a ton of that yeah, I think I'd pick up momentum.

So it's I don't know.

<unk> seen a couple of chairs setting should that no part D plan.

So it does take Oh do you want Oh, yeah sure. So I would think oh, okay. So recognition data in summer.

Oh, no I'm sorry, so it's just the signs that we're not you know again that's all.

Got it got it.

So I think our capex the total quiet for quite some time, but Uh huh.

Hum.

Oh did I pick a hunger and stuff like that.

It's hard to find out why.

The first one is that you wanted to look at the Oh part China public cloud growth in the first quarter and given that the company has been outgrowing. Their P is a major player in the market just wanted to see if it's a trend, but like I say that pharma will continue in the first quarter. The second question is about new customers.

And in the first quarter, given the company I think share with.

Some new customer names and so we could track the momentum on our new customer contribution and the third thing is about because different that cause.

But the other three.

Tightening in the Internet sector.

Turkey and China.

I mean like impact to a long time in last month.

For me.

Except that I, even have kept pad site.

Yeah.

Hum.

How much are you going to you about Q U E.

Oh sure so I'm not sure on that.

Good Oh.

One is you're trying to handle it's yeah. It's all good.

Okay. That's helpful.

Your timing I sure shall be junior no QE.

T J shouldn't look on it or I'll.

I'll say, one since you're doing in women's that boom, Okay. When you eat it at home, but social hardship and Cisco.

I'm really not sure Ken.

For sure there are going to do.

If you don't know who don't cohorts for several months.

I forgot QE blah blah blah.

The hotel will do that in the mail.

And I'm sure you'll pick up can you.

Because it sounds like you're not doing different things.

But you did a couple of those to either create an untold twofold I thought people show up at all.

So I'm sure he'd tell me with all that drop off a deep pool.

Do you have a high hurdle.

A couple people generally tonight.

Deciding to do without kind of off the table from an Ohio cheaper ones in that country that you know as I sure do from them from a sounds like it'll be a lot not only of having a few dollars of securities up that type of a hurdle.

Women patch Union Keele staff with most of them are teaching smaller this year.

Agenda Tycho Lucky.

So as your Oh, maybe end up Jim Walter jumped a little back I mean until sometime kill something works well suited for wholesale.

Yeah, absolutely so I'll do the.

People who'd you sounded I thought Q either.

Emmanuel.

You'll take the cat he couldn't get yesterday tutor pool physical occupancy to go.

Sometime ago, Hogan golf with tissue or cheap, especially if people don't travel Muses Union Castle Hunter Chen.

Extra emails about.

Gotcha.

Thank you came out with a sort of questions. Just asked on the first one I think the Oh you are right you know what had been growing faster compared with our peers in the public cloud segments for Q1, given the reasons already mentioned, we think that our business.

Progression have been in line with the industry of the public cloud market in China in general.

And I think for certain peers I think we are achieving pure ones that seem to go after it and growing marginally faster than them and.

And looking forward I think with do you want to position ourselves as one of the player in a public cloud market, we can grow relatively faster than our the selective peers as well.

So for the second question is related to this point as well as.

Probably if I understand it for certain confidentiality and a sensitive reasons, we may not disclose the names.

The search for a new account, we're talking to have spending from the live streaming they do.

Hum.

Localized services.

Comma and education, and we are making certain progress with that even though the revenue opportunity and usage in Q1, given those clients are relatively prudent and cautious. So it has not fully convert it into our forward revenue opportunity, but given we already have the.

Slides commercial relationships and for some of them we already have the technology testing completed hopefully for the following quarters, you will see a re acceleration off of the public cloud revenue going forward.

On the third question regarding the Capex.

You'll probably notice that in Q1 on a dollar value perspective, our capex was lower than Q4 last year that was our pre judgment.

About a certain impacts in Q1, including the holiday seasons, but also including potentially about logistics and supply chain issues. We have the pre judgment call that we actually purchased enough N. A sufficient hardware equipments of us back in Q4, primarily last year. So that's why if you will.

Remember in Q4 last year, our Capex was about $4 billion, so that will be basically per pass or enough inventory for this year as a public cloud infrastructure, and Florida, leading sales opportunities off the public cloud our clients as well. So these are actually reflecting a together and.

For the plan for this year. So capex, we think that there is also the same level as we previously communicated we think around $1 5 billion in Capex will be a reasonable level to expect for this year.

Exactly right.

Thank you. The next question is from the line.

UBS.

Go ahead your line is open.

Excuse me at Boddington.

Hum.

When she says.

Towards the end of the Chin Tung T. When setting our Q2 guidance Cubo maybe.

They only get too cheap at Sitka.

Golden week and T V.

The first question is in your <unk> guidance can you give us a firmer range for the growth in your.

Premium and enterprise cloud revenue growth.

Yeah, but you wouldn't you'll see kind of teach you how can hardly get yields swimming del Carmen died of.

To achieve that.

I couldnt, even though it's not a cookie cutter.

Ecosystem.

Now where does this young wish I said they'll say they go to the site coordinators.

Hopefully it's in the channel.

Last week on he talked about a.

Large customer loss in there.

The cloud business in their international.

Markets is there any impact a four piece off cloud in your domestic public cloud business.

A key win jokes is saving those things slow down you'll get into Asia.

Hi, Felicia because I'm bored with the C D and E M.

Oh, Madhu I'll reallocating shackles, so just timing.

Ice creams gels.

Okay.

In New York since is that somebody from the third question is theres been a recent developments in China.

That's a reseller or a system integration or distribution that CDN.

Business can you talk about a few soft clouds alike.

Capabilities from that.

This perspective.

Thank you.

Not just yet.

Charlie you see the hard thing about how many horizontals.

And kind of on the go get all next year.

I think look I noticed you were working hard to eat out.

You don't have the what's he you know with fidelity marketing themselves.

No.

Well, it's really those are the what are you able to cause issues.

Sure Yeah.

Okay, Oh well no.

What keeps you at a point, where you want to first of all the beta version of it.

Women's I wasn't sure what can be done.

The terrible.

Do you want it and that's what the teacher to include all of it.

What did you should look for that continental civil Besides the opinion or your son, Israel Jeep in the year when the season when the mail about the news article, but Oh your dog towards autonomy.

But I just want them out at Oklahoma.

We will be handled.

And so I'm kind of looking for a well.

Well. Thank you for that and then I'll do my best.

Sure.

Without.

Unfortunately, it's usually in the world without the fear.

But on the sales went up one in his involvement at all that's for sure because look what he said.

Yes, you don't go into the so called royalties or coal.

It's a year or so.

Sometimes it's just.

He says you almost at Wilkinson.

So if you take them they'll come up with the whole shoot.

There are times, when they'll come up with that nitrogen.

Oh, you do over the phone comes out and that's the way to go about that I don't.

Over time, Jeff.

What's your father loved it.

Not at all what you call the milken low to mid single different if you don't get to see the annoy people.

Okay.

Continental Hotel.

This particular year with them and share them when they say yeah I'm not sure.

Sure sure She's a Chicago.

You can see that our phone, let's see Berkshire.

Michelle Women's you could pull the tape or choose not to accuse shirt upon the young Guy sorry junior.

Yeah sure my elephant.

Yeah honestly.

Well, just a woman without a pulpwood opening since he's gonna one Don.

As with all the talk on what did you want me to become the leading desktop mobile phone mother, Nature's I think all of them.

So either.

Yes again.

Yeah.

Yeah, I think I kind of thought I'd take a potentially even for the first two questions. So eating and also answer the question regarding our guidance on the breakdown.

For the international business.

We know that even backing in late part of 2019, we have some views even at that time that will be a certain volatility in terms of the global geopolitical situation. So that's why we made a very prudent approach that are guiding our internal budgeting and regarding the way, we engage with our customers et cetera. So that's why.

You know, even though we already in early time have certain planning.

For search and regional business.

Business exposure outside footprint four can you talk about the actual revenue for our international business has been very very small at this moment. So that's why those geopolitical impact to our international revenue and the total company revenue will be very very limited and no question. We also noticed that for.

Our peers they were affected by a major customer for their global business.

But as you probably know to add on one more point as you all know that the ice level and infrastructure resources for the international business and domestic business in China has two different setup and a different network different capacity in different licenses requirements. So that's why the redundancy or the Idaho.

So first from the global infrastructure will not be translate directly into the kind of oversupply of any potential kind of the capacity for the mainland China business from a cloud player perspective, if the if it is a partial hold upon starting may one ask.

So for the second question a in our view I think we are seeing a trend about given a cloud is a scalable business and as a Nashville is one of the benefits of that kind of scale that pump penetration of the top tier players are still keep the same terms and there's no major changes and for the top tier of cloud provider and.

Given people, providing the full stack of the services covering from both ice passing a soft capabilities. We don't think that's trying to be reversed.

By positioning ourselves as one of the major top tier cloud provider in China, I think we're to enjoy that benefit us. So on the last question regarding the breakdown as you know we are probably only provide a verbal guidance, earning hawk in or we have almost about one and more that way and a half months towards the end of.

This quarter and as we mentioned we also have a good engagement with a certain internet public cloud clients. So probably we will not be able to give a very priced at a precious guidance that you have a breakdown, but what we can mention is I think for the public cloud revenue and enterprise revenue Youll see both as a decent.

Sequential quarter over quarter growth and on a year over year basis, and going forward for Q3, and Q4, especially the second half of this year you would see probably it is likely that our year over year growth rate for the remaining three quarters of this year, hopefully you will see acceleration quarter over quarter as well as a bottler.

I think for the Q2 public cloud the revenue will be at least in line or above our major peers in Q2 as well I think that's probably a good southern comfort that are for the public cloud we may see a blip.

Kind of acceleration go to photos business and we do have certain contracts and opportunities in the real opportunities off the revenue that kind of fit inside a hopefully it tends to be delivered this quarter.

Thompson.

Yeah.

Thank you.

Our next question comes from the line of Elsie Cheng of Goldman Sachs.

Okay.

Hey, Quentin.

Uh huh.

She mileage, we enjoy quite a challenge.

Yeah.

Joe I was in China.

Oh yeah.

Uh huh.

Sure.

Uh huh.

Johnny to tissue.

What should come public cloud.

But you don't eat fish.

Okay.

Sure.

So I just have a small a tough question here the public cloud growth in the second half as well as a sort of directional color on the full year I guess, we do see some of the headwinds to the first half of the public cloud space. Just wondering if we can prevent some of that.

Color into second half and how should we think about the fundamental drivers as long as some of the directional expectations on the number. Thank you.

Okay.

Does he want to disagree with that.

He was he was a fool me Tim.

I'm not going to go.

Sure Budd.

Sometimes.

Have a darn good woman the woman Nicole for sports in the electrical switches you cool you down a box or not.

Our opinions on this.

Come on.

If your phone.

With ITT to Toyota.

Well Schindler trumpite more isolated.

Awesome.

Let's put it out and you look at social it's usual.

Okay, all right, but when you see it had a huge thing.

Teaching Remington, but you can only use yet after the shovels and seafood.

What are you seeing the sell.

Selling more coupon longtime 19 electrical.

Right people cost with a hotel somebody who signs when crude ducky little sure. So do you know, which one of them, but for now the 200 to go.

If you go to meet well defined with 100 different physicians are trying people leave a pretty cool.

Oh, No you went out in the field, which is a similar trend in the you know what that what time all of these are people who come out of it.

And if you don't listen to music on the timing of interest.

And also important to note that Q E texture behind the teeter, you'll see them.

In country.

But we must assume that he should.

Tell him on kind of which are going to happen.

We found that at least the jamba yield actually with one of them yet.

Yeah, that's okay I see your other question on this.

Question are there are three major reasons are the major drivers first of all is for our top tier paying customers are there existing usage Uh huh seeing a trend of growing historically and for this year are we not only focus on new customers, but.

Also the existing printer customers there uhm their usage and their revenue has been increasing that actually form a solid base for our portal public cloud services revenue for this year.

And given those out of premium customers. So they are actually making the investments where the AUM business. For example, adding a new features and the new product lines and new applications for their business, so their demand and their growth and investment into their own business and end users in the area.

Well basically the foundation for our growth opportunity from those existing premium passengers. The second point is regarding the new cosmetics.

Expansion.

So I think from both commercial sales relationship.

I'm Diana technology compatible testing and also the both engagement I think as we mentioned, we're making some progress.

Taking certain kind of initiatives to engaging with the new customers, that's actually going to be the second driver.

And many of those areas and efforts will be basically.

Ammonium highs and are gradually pushed down to the kind of revenue and realized the revenue opportunity and the third part is really about the new product feature and a requirement. So that means that not only for the new but also existing customers. There is a new area of the usage such as cloud gaming.

We mentioned in the prepared remarks that starting from Q1 as a leading pioneer in the cloud gaming areas and gaming industry. In general we are seeing a good traction that's some of the leading gaming company are already deployed our gaming product suite with our cloud companies and those are already.

They are bringing us a meaningful level of the cloud gaming revenue in Q1, and we think that that those revenue will see a good level of expansion for the remaining months to go for this year I think this is only one of the example, I think in the area of <unk>.

And other Iot all the cloud that you related areas will be also the important areas you will see the new demand and new technology can generate and translate it to the revenue opportunity.

Yeah.

Thank you.

Thank you.

I'd now like to hand.

Congress.

Please continue.

Danielle Marathon you once again for joining US today you have any further questions. Please feel free to come back. So far just speaking to you again next quarter how long that's it. Thank you.

Thank you. This concludes today's conference call.

Participating.

Come on.