Q3 2021 Kingsoft Cloud Holdings Ltd Earnings Call

Good day, Thank you for standing by and welcome to the King soft clouds third quarter 2021 earnings conference call. At this time all participants are in a listen only mode. There will be a presentation followed by a question and answer session at which time if you wish to ask a question you will need to press.

Star one on your telephone I must advice you that this conference is being recorded I would now like to hand, the conference over to your first speaker today, Nicole Shan IR manager of King soft cloud. Thank you. Please go ahead.

Thank you operator, Hello, everyone and thank you for joining us today, so clubs are closer or something funny one.

Distributed earlier today and is available on our IR website.

Okay. That's why you wouldn't go com as well as on global Newswire services on the call today from T cell cloud, we have our CEO interpreting their whole history.

Mr. Hudson, It's very cool Mr. Wang will review, our business operations and company highlights followed by Mr. Ho, who will discuss the financials and the guidance there a little bit with Altria Israel question. During the Q&A session that follows there will it be consecutively integration all each versions of oil companies and the reference, but we're the only NK cells.

I need as Christine mentioned in the statement you know original language vocal wheel before we begin I'd like to remember that this conference call contains forward looking statements within the meaning of section on the heels of security exchange ex Covid 1934, as amended and as the funding in the U S. Pro is acuity litigation Reform Act of 1995.

These forward looking statements are based upon management's current expectations and current market and operating conditions and relate to you once that even more.

Unknown risks uncertainties and other factors all of which are difficult to predict and the money we shall be all of the company's control, which may cause the company's actual results performance or achievements to differ materially from dosing in the forward looking statements whether information regarding these and other risks uncertainties or factors are included.

In a comedy is fighting with the U S. S. Easy the company does 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 Foley. Please know that unless otherwise stated all financial figures mentioned during this call Oh, no maybe RMB.

It's now my pleasure to introduce our CEO 30 Watts. Please go ahead.

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Got it.

Thank you Nicole and thank you all for joining our third quarter 2021 earnings call.

In the third quarter, we generated RMB two 1 billion in total revenues, which was an increase of 40% from the same quarter last year.

Cloud services revenues reached RMB, one 9 billion, an increase of RMB $140 million over the second quarter.

Our enterprise cloud services revenue reached RMB $730 million up.

78% over the same period last year.

Since the beginning of 2021 we continue to deliver rapid growth despite market headwinds regulatory changes and ongoing challenges as everyone adjust.

To a new normal have the pandemic continues to evolve.

As the largest independent cloud service provider in China, We will continue to execute our growth strategy and strive to become the most trusted cloud partner for our customers and to create the digital future together.

Our neutral position enabled us to develop more in depth and extensive collaboration with an expanding base of premium customers and further nurture our multi dimensional ecosystem.

We believe we will benefit from our long term thinking and achieve continued and sustainable growth.

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Now, let me walk you through our performance across our major vertical.

I'll start off with public cloud.

Despite the challenging market environment, we still achieved a faster growth than the industry average this quarter.

Leveraging our neutral position in <unk>.

<unk> been a premium customer experience, we made significant progress expanding our customer base and diversifying our product and services portfolio, especially for multi cloud deployments.

As mentioned in our last earnings call made fun, China's leading local lifestyle service platform has become our new premium customers for public cloud services.

Got it with other newly engaged for premium customers. There's data usage increases contributed to our public cloud revenue growth.

Following our success with my time in Q2, we continued to expand our customer base among top internet companies.

You announced that Kinder at all one of the largest e-commerce platform in China has become a new customer in Q3.

We believe such new customer engagement trend will continue and will drive our growth in public cloud services.

We proved ourselves to be agile and move quickly to engage with emerging high quality premium client amidst the regulation changes.

Engaged with show to your car hailing, a leading player which has been rising and meet the shifting competitive landscape.

They love it our full suite of hybrid cloud solutions, including computing resources.

And big data product at the parent level.

Independent in our space with further diversified our offering beyond the video and gaming.

We continue to provide public cloud storage services to tune our dot com one of the leading online travel platforms in China on top of this we provided them with more products such as containers big data solutions and bare metal servers.

On the gaming front, we are highly recognized by customers for our cloud services.

Hi, Pat and Scott.

We signed an agreement with IGT game to support their proprietary blockbuster and mobile game includes too.

We help them plan and design their cloud architecture to support game there.

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On product and technology problems. According to the 'twenty funding, China financial Great distributed database market report that was published in.

In September by Frost, <unk> Sullivan and internationally authority so they agency.

Our Dragon based database was placed in the leaders quadrant of their prostate radar.

Along with other two leading competitors in China are product, what's recognized visionary technology excellent product performance and outstanding monetization.

This once again demonstrates the recognition our corp have product to come on in the industry, including among top global industry research firms.

Earlier this year, a big data cloud products, but also placed in the leaders quadrant by Frost <unk> Sullivan and Theyre Twenty-twenty, China data management solutions market reports.

At the same time, we continue to ramp up our investments in cutting edge technologies. According to IDC 50 per cent of data will be processed at the edge by 2023.

During the quarter, we improved our apps storage capabilities and developed at storage knows in Jiangsu Province in September providing strong support for various applications.

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Moving to the enterprise segment going digital has become essential for many businesses and industries to adapt to new norms.

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In the financial services sector, we continue to expand our client base and deepen our collaboration with our customers.

On the Central Bank level, we won the bid to build a big data cloud platform to support China's new digital RMB.

After winning contracts from one bank and China Citic Bank in Q3 with better our corporation with another top commercial bank and how to migrate its middle office to the cloud.

The solution enables the smart in Madison of their underlying business data and led to a 665% efficiency improvement in their big data capability and development.

We announced back in August we agreed to acquire Camelot as a part of our effort to build out our enterprise cloud service business now that we have officially joined hands with Camelot, where you'll be able to cover all of the top 20 banks in China.

The fully consolidated temblor fast product and solution.

Product portfolio.

Especially in the risk management financial compliance and anti money laundering areas, which have been offered to more than 240 financial institution.

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In the health care sector, we have been pioneering new lighthouse project in Jiangsu provinces among other provinces.

In Q3, we kicked off the delivery of the junk food Providence Medical imaging cloud. This project will be the first to enable provincial level medical image data sharing.

Expected to connect more than 30 hospitals by the end of this year.

<unk> put into operation. It is estimated that the project will save billions of RMB in medical insurance each year.

We're very proud to be able to create such a positive social impact together with our customers.

We're also making steady progress with our big data cloud projecting it will be a profit. Meanwhile, we also made significant progress in our health care ecosystem in one case, we have been cooperating with a leading health care data solution provider.

This cooperation has already introduced him to many of them premium customers, including rating hospital, which is the fourth largest hospital in China and the largest in Shanghai.

Building on the foundation, we plan to expand our collaboration and strengthened our branding resources and service capabilities with more hospitals in China.

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So the total Bulldog for three days and go down.

A woman she traveled to fully appreciate the fact that we're selling.

But strategically.

In the public services second we were selected for our Beijing, Sydney Cloud project.

The total contract value was approximately RMB $85 million.

This marks the fifth year in a row that we provide services for the same projects exemplify our ability to secure repeated revenues.

In addition, we also quickly replicated our successful experience with public services cloud to other parts of China and one bit.

<unk> from Citi thing honestly province, and Shandong Province to name a few which are all in delivery space.

We won the bid to be the exclusive provider of an urban cloud infrastructure for Citi in Hubei province, with contract value around RMB 36 million.

He will elaborate our leading cloud computing and data big data technology and facilitate the intelligent transformation of the city public service systems.

We also started cooperating with the Shenzhen Big data Research Institute with strong policy support the Institute will integrate Big data research resources in Shenzhen.

The Bay area and further across China to facilitate the nationwide advancement of big data applications.

Despite some disturbances from the pandemic and power shortages, where it's definitely carrying out a project.

Also making progress with new bids and our backlog continues to increase.

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Also attending to those countries.

Within our enterprise segment, the integration of catalog is well underway.

Mentioned in Q2 catalogs have delivery centers in most major cities across China. We have selected six tickets to be initial pilot cities for integrated project delivery in.

In the finance services sector, we have started engaging with nearly 10 banks that tableau has introduced to us.

Our integrated team will provide delivery and services directly to these customers.

In terms of ecosystem cooperation Xiaomi kicks off the group and WPS have all started working with Camelot in various aspects.

We'll focus our efforts on the finance health care and public services sector, and we have started with consulting and planning services in the hope of developing a fully integrated one stop two weeks off solutions.

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In terms of regulatory backdrop, we have been paying close attention to.

All new regulations and policies, including the Kraken regulation on protecting Internet data security that was published by the Cyberspace administration of China for public opinion.

The regulations have yet to be finalized and the effective date is still uncertain.

But as we have always emphasized we manage our business operation in a localized approach within each jurisdiction and continuing to deliver solid progress with data security and privacy and yeah Chi programs.

Unlike companies that put that data of millions of individual users, we focus on serving enterprise customers.

In addition, we have fully complying with regulatory requirements, including around data classification and data security.

So now we have successfully obtained ISO 27001, I S. O 27017, and I S. O 27018, which I'll bet worldwide recognized attendance and certification in terms of data security and personal information protection management systems.

Alright.

The circle O'hara General surgery.

Susan.

I will now pass the call over to our CFO Henry to go over our financials for the third quarter. Thank you.

Yes.

Now I'll walk you through our financial performance for the past quarter.

Our total revenue reached $2 1 billion RMB in Q3, representing approximately a 40% year over year.

Growth.

She has been consistently higher than the growth of the major peers in mainland China.

Revenue was probably call services was one six times been in RMB, a quarter over quarter increase of $135 2 million RMB.

In 19 consecutive.

Second quarter revenue increase since our IPO.

There were a number of drivers first our existing client base remain stable, including our top three clients in particular.

Patricia and makes it impossible to avoid any potential conflicts of interest with our customers.

Being able to grow together with our customers.

Second we continue to engage with our European customers in Q2 of this year. Meanwhile, China hitting Tonight conglomerate has become on your premium customers called public call services with.

What's the trend continues we're proud to announce that T north or whatnot that leading largest e-commerce platform, China has become our new premium customers in Q3.

Neocon case exactly five two things number one.

Paul Cloud strategy is gradually more accepted by the market and I'm not sure. These efforts have to diversify our customer base and at the risk the top client concentration risk and also clients from video related to vertical will also help grow our computing business at a contributor to that probably cost incremental high quality.

<unk> revenue growth.

Lastly, we were able to dig deeper into the needs of our clients as you'd imagine earlier well for them.

Our more diversified portfolio of products and technology through cross selling including containers edge computing.

Sure.

Revenue from car services was $726 9 million RMB, representing approximately 78% year over year.

Got it.

But I haven't seen a rapid growth in demand you know enterprise cloud market.

The macro roughly an enterprise cloud market.

More flagship projects in our financial services health care at a public service sector and to replicate our success to more customers.

Our client base continues to grow at Sally and a short term however, deliver all of our enterprise.

And in some regions and mainland China was affected by the recent wave of pandemic.

Although we can deliver our technologies are part of some projects are emotionally our team has been unable to deliver on Paypal at some of our client okay.

Travel restrictions.

In Q3, some of our projects will also delay due to power shortages all goodness by local authorities.

A common practice for enterprise cloud, we implement our public cloud technology to enterprise cloud private environments, and a whole variety of Datacenters.

Although all products all you can see we're not affected by power shortages in some of our customers saw a temporary disruption to their own private IDC center.

And the time available for our team to deliver projects on our site and of course certain delay however.

However, we'll have to see a country the situation has been improving and the process.

In line with our strong top line growth cost of revenue grew 44% a year over year to 2.33 billion.

How do you see cost the largest cost component representing approximately 67% of total cost of revenue grew 33, 1% year over year to 1.41 billion RMB.

How do you think half cautious cabinets at a bandwidth costs our costs increased by $155 four.

In RMB, a sequential basis, which was due to the preemptive shot at storage on the lines with office.

Depreciation and amortization cost increased by 28% to 200 million RMB, representing approximately eight 6% off the total revenue.

Adjusted gross profit was 92.2 million RMB compared with $114 8 million RMB in the same period of last year.

Our adjusted gross margin for this quarter was three 8% compared with six 6% in February of last year.

We would like to offer a bit more color. After this short term volatility.

To support the growth of the public cloud business cloud.

Cloud company typically purchases.

The data center.

Based on the forecast of demand from our clients and of the market in general.

In the beginning of every year.

As many of the audience may have seen starting from mid of this year.

Demand from many into that clients in China are growing but slower than previously market forecasts beginning of this year.

Therefore, the underlying infrastructure resources has not being fully utilized as targeted.

Incremental investment of resources made earlier this year may not be fully monetized in a short term to walk by end of this year, which may impact our business.

Due to this reason for example, the increase.

$155 4 million RMB, obviously cost this quarter impacting our gross margin this quarter, our business model and our client base remains very robust and we believe the utilization pattern will naturally be optimized as we see I'll probably call. It demand continue to grow.

Total non-GAAP operating expenses were $451 2 million RMB, representing a 15, 3% increase from Q3 last year, mainly due to the ongoing investments into our business.

Our competitiveness.

We have provided all caught him was competitive compensation and therefore increased personnel expenses.

Excluding share based compensation adjusted R&D expenses were 231 6 million RMB.

Then you increase of 51, 3% year over year.

As a percentage of total revenue and increased slightly from eight 9% in Q3 last year to nine 6% this quarter.

Adjusted selling and marketing expenses increased by 37, 4% to $114 3 million RMB.

Percentage of total revenue it decreased a little bit from four 8% in Q3 last year to four 7%. This quarter. Adjusted G&A expenses were 100 zero $6 3 million in R&D as a percentage of revenue increased from three 7% in Q3 last year to four four.

Is that this quarter.

Although the level amongst the lowest in the peers.

Accordingly, our adjusted EBITDA loss was $140 7 million RMB adjusted EBITDA margin was negative five 8% this quarter compared with Nokia of two 5% last quarter or quarter over quarter decrease was due to the decrease in gross profit.

The increase in personnel expenses and the onetime off related Camelot transaction expenses.

Adjusted net loss was $363 8 million RMB with adjusted net margin at.

15, 1%.

[noise], that's all September 30th quite up to what we had sufficient cash and cash that covers the ammonia off approximately six did in R&D during the quarter kind of expenditure for $96 6 million.

F Q4, lastly, our 2020 anticipating supply chain pressure, we have purchased are sufficient.

To support our business growth.

Based on our current operation and placebo a high operational efficiency, we will make a very disciplined approach with capital expenditure.

For the second half of this year in.

In Asia the service delivery on a payment cycle also led to a relatively low capex. In Q3. However, we do think that your capex will be at a similar level compared with last year.

Yeah, that's right, but I haven't received great endorsement from regulators.

Evidenced by obtaining a conditional approval for the Camelot transaction.

From the National Anti Monopoly Bureau, 8-K N P M Mountain State administration for market regulation in China.

The approval process was completed within about one month time, which is significantly faster than the regular review timeframe, especially considering today's market regulation environment.

In October with a median of three parties regarding the registration of shares related to the transaction.

Our computer transaction and it began and integration of the two teams.

Cannot bring us over 500 Premier Kosmos and a wealth of industry Knowhow, especially in industries, such as Internet financial services consumer retail and manufacturing among others.

Coming out of her delivery hubs in multiple key cities across China. They are local team was able to deliver future enterprise cloud projects directly on improving our execution capabilities of the whole company.

We believe significant synergies will be further Alicia.

Yes.

Looking ahead, we expect our total revenue to be between 2.63 billion R&D and two.

Through eighth grade RMB for the fourth quarter of 2021, representing a year over year increase of 35% to 47%.

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

Lastly, we held our first Investor day events. After IPO October 21st this year.

Representative from our key accounts flight ecosystem partners and I'll show you some leaders join our senior executive and discuss industry trends and our distinctive elements, including senior executives are clients from National Health Commission, China Construction Bank quite show you who buy that.

Camelot at him all of us to shut the birth of perspective.

We are committed to improving our different transparency brings sustainable value to all stakeholders and are delivering long term value to our shareholders.

This concludes our prepared remarks.

Thank you.

Please ask your question.

English.

Operator, Please go ahead.

Thank you as a reminder, if you wish to ask a question.

Please press star one on your telephone keypad and wait for your name to be announced if you wish to cancel their request. Please press the pound or husky.

Your first question comes from Brian Gong from Citi. Please ask your question.

Covid going forward.

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So I'm, assuming you've got some color towards completion.

So I'm not sure you call it.

Sure.

Level.

Although frustrated myself a good evening.

You're welcome and thanks for taking my questions. My question is regarding the Entre Cross cloud honest on our other plus called settlements was impacted by power shortage and.

I mean, given that makes lots of other encore and the power shortage largely use.

Have we seen any acceleration protects delivery.

We see entrepreneurs cloud revenue rose to go back to normalized level for next year and what gross level, we should expect some too.

Okay.

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Someone who will die.

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When I kind of go along you're going to get them to even though you wouldn't see the hot seat.

I spoke to you a bit on culture related cool, but can you go through.

Yes.

Okay. So the response from the CFO, so if I'm the CEO, Mr along with B.

As you rightly pointed out.

There are two key.

The factors affecting our industry.

Beckman.

One is the power shortage or curtailment the other as the pandemic in terms of the power shortage.

Know that in Q3 that it was the main factor and.

In our two business segments, respectively, I'll talk about that.

Cloud segment, because the IGT is enjoying relatively high grade of protection and priority and then most of them has a reserve or backup power generators. So those who are not.

Fact that negatively affected but in terms of the enterprise following the industrial power.

Because of the Itc's in most of the cases out there private idc's with Shanghai designated by the customer.

Generally case by case.

And have been affected by the power shortage.

I have to agree with you that currently the power shortage situation has largely been alleviated. However, we do see that in the midterm to long term the carpeting.

Emission control, we continue the pressure will continue to be there and there might be more policies in relation to ITC construction and I do see power consumption.

But in any case the power shortage, we expect in the short time has been alleviated and then we're able to now progress.

Progress our.

Deliveries for.

Enterprise cloud in Q4.

Factor about pandemic, obviously didn't still going along in some cities because of the very stringent.

Measures the government takes.

<unk> causes the delay of our delivery.

However, you do see that overall speaking the demand the industry. Our enterprise cloud remains very strong our backlog continued to grow why there's impact to delivery. We also have proactively try to find solutions to the COVID-19 impact.

We have been proactively utilizing that camelot local teams.

Which are.

Distributed across China to help with delivery and increased delivery efficiency. The second part is that we proactively manage our timetable of delivery and try to make up for some of the time that was a lot.

Because of the power shortage and and pandemic control.

But overall speaking, we do see the industry cloud to enjoying a very high growth rates coming from the demand is very strong demand. Thank you.

Yes.

Thank you that's very helpful.

Yeah.

Our next question comes from leaping Chow from TICC. Please ask your question.

You didn't know Harry Nicola Shaw.

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Sure sure Xiaomi and holding the two Washington.

I hope you've always been piece should that lays out.

Thank you Jody.

I want to be clear.

Yeah.

Good evening management, we have I have two questions here.

Seeing a cool down in public safety, Yeah, and so my first question is what's your opinion in next two to three years a market.

My Kid gloves, and what will be the company's organic growth scribe first then target to achieve and second question Mickey.

Our gross margin has seen some pressure caused by outbound infrastructure investment.

And revenue recognition on my question is.

When do you see utilization rates to catch up and what's your budget for next year's Capex and lastly, Oh, we do wonder how is the collaboration with Dan's going so far thank you.

Yeah.

Oh no.

Which I like 100 gig of upheaval in countless ways.

He's been traveling.

And in fact island.

Uh huh.

From a different angle.

100.

It's also her pump on the well.

This is Arthur.

So you're gonna do sure Julian.

And doctors want to see we're trying to do.

Sure sure sure paths with them down so it's a crucial point, even though you've got a call.

Oh.

No one time.

Cause a huge or the cause I'm not maybe extend lamesa. So it sounds like actually on a carbon quantity.

Oh do you want to go do it yourself when its unions.

Julia Kumar of Tucson to constantly drive their tweets you hung yeah, there's some glenn we.

We found clear Jim.

Let me go through each of them.

The woman a cool little but I was wondering if you are talking to us.

Don't shoot tool control down syndrome.

No transition, though to twice a year with a hoodie and do this year because it comes with the Jin Guan.

So much of Q2.

For that let's say listen the children, who show you deemed oh shoot.

Really I think what you think actually you could talk to.

The receiver.

Yeah, Jim Guar, Handan, sushi and I'll take that one I couldn't do continue.

On television, we're trying to do what we've done this elsewhere.

Oh from country, like China, which sounds like Hulu and Youtube.

In Pakistan.

You can find those on Schindler, it's useful for champion Council.

I tend to kind of go on you'll see.

Yeah, I mean, I shouldn't wonder if you don't see I wonder if you're young gender issues in one seafood a theater.

Piece of Silicon.

Yeah.

Oh, one honestly.

Sure sure.

So as you know when we're going to make your time carnival.

Yeah.

I don't see the cause at all on the table. That's I'm sure. She grew up with travel to Hong Kong.

Got it.

People can use them now.

Okay.

No no no.

On the heels on cuda to see what you've heard do you want to me it seemed the T V.

Not at all.

Okay.

It sounds if I could I go to talk to you in this room.

With them then they can go short term.

The woman solutions, a pretty good year with Oh, sorry, I thought you were talking.

There's a couple of the food out are critical.

Said differently in tutor Tinder I sure feed her onboard the ship on time Charter Hall.

So I don't even know how much it could come down.

Is that a freedom class with other drugs as usual.

Good I'm glad you're there should the classroom.

I'm not sure if its initial door Cynthia.

Yes, I don't think they usually don't balloon you sound more bullish with them and sit today.

Continental will just I'm trying to Oh.

So was it that what we're trying to do the two room you don't agree with what are your typical quicker you go figure out of course with them during the <unk>.

Susan.

Oh sure yes.

No.

So do you look at the whole thing it sounds like you have another two in one country vertical for food or they go with it.

Oh.

Well I'm going to kind of your thoughts with you.

Can I just furniture fleet.

A little bit lower on the secretary to sleep.

I guess I couldn't dunia and not all of the black ships, even though I need to find out I will need to consider.

The Russian economy volatile you know why a bulk of holding on to her time come.

Co generative natures.

Got you drew centuries ago 300, or so.

So I'm not sure we can conjecture.

Pick a crown jewel Google before.

Oh I'm sorry, it was absolutely has to be the yield or kind of what we're doing.

To me, the O'toole, who come in through tens or hundreds of free food.

The bulk of it.

So let me stop here okay. Good.

Sure.

Although they had to go out there who want to hear that you think people are.

Okay.

But coming to work on.

Or a hotel or trends.

First of all too familiar sure portion.

Okay.

Eat parachute boyfriend pieces here, who come and go pick a particular time yeah.

Schedule I'll take it.

Yeah.

Both of them to do that through the onetime spend than we hoped.

You know they don't put them on the phone call and heaters my pencil pretty cool.

What are the.

Petroleum, they're kind of like Oh good.

How 'bout cool.

Peter Thompson.

And they're trying to get people some people feel it not to go to a doctor.

Certainly, Jason while you're trying to go.

Turning to the seafood I find in the U S.

It is easy to order and take a tour.

I think that that's.

People.

So it's a good computer in country and I think it will muscle.

The critical yield will go go go.

Okay.

Sure if each of them to meet the whole pool.

Some of them because they can.

So you can see food or food or home. That's how are you trying to negotiate with you.

So it is good bunker.

Lululemon theres, sometimes she doesn't want it.

Oh sure.

Neither.

Oh on ETE dominated I wouldn't it wasn't.

What he said.

Okay.

Okay, just to quickly translate for reference.

So in relation to a question about the.

Our growth prospects in the public cloud and enterprise.

I thought about public cloud obviously, we have noted that this year the public cloud demand.

Decelerated and promote the fact that we think its due to two reasons.

One is that.

There was a high base it was actually a high base of last year.

No.

So the demand for cloud services have searched a lot actually shifted a great extent.

But obviously that is not a new factor for this year.

Second reason is.

As you have all noticed.

That seems at the beginning of this year actually even till now new regulations have been coming out from the government to regulate them a lot of the customers that industry. Its that we engage with and accordingly, all customers in such industries will need to come through those new regulations and to be compliant, which we believe take some.

Hi.

We do think that this is going to be a short term impact as the regulations become more and more clear and more favorable from that from the government cuts back then.

But also looking at the long term picture.

Do you see that their customers have already started to make new.

Arrangements.

New potential vertical markets in.

In the face of the top entertainment video and the gaming.

And then we're happy to see that this actually happened together with the further penetration of our five key technology and we're seeing the new concept like none of us and the hardware in terms of those for those applications have been launching an increasing in volume the technology integration has also been.

Accelerating.

We do think that the internet.

It's a cyclical sector, which we just think that in the future one to two years to come we're entering into a new lodging cycle, which will reasonably expect to have a higher growth rate than average growth rate of that factor.

Hum.

Hum.

Ourselves.

We have engaged a significant amount of new customers.

This quarter and I mean, the market headwinds as mentioned before.

And we believe those are really benefiting from our neutrality and also from the multi cloud deployment trend whereby we have essentially become the top choice for our customers whenever they want to engage a new cloud vendor.

And we think that all of our customer base in terms of volume and the depth of relationship remains robust and then a doctor.

It's a very strong fundamental for the company in terms of industry cloud as I answered in the first question that was asked by city.

Market demand remains very strong we think the demand of digitalization is actually in the Atlantic and for a long time to.

We also expect that demand to remain strong and also in the verticals that we have chosen to be focused on will continue to tap is benign third cycle of gaining more customers and developing our advantages and as a result of that are increasing our revenue.

And the third question, our cooperation with Biogen.

We actually have a very long term partnership and cooperation history with violence actually starting from the basically the eruption explosive growth of short video clips in China.

That includes a lot of vacations like sequel, I like hotel, and though in which.

<unk> essentially made back then.

Essentially made us a trusted partner a bite that that is a very solid relationship with them and and you have also seen that we have signed the comprehensive partnership agreement with volcano income, which is under debate downtime Brown.

Where we are working to explore ways to combine our advantages in terms of ice capabilities and nationwide delivery capabilities.

Volcano engine to create win win situations and more recently either cooperation we have with a software duck call to pay them, which is the authentic identity authentication software, where we have been.

Tweaking and trying to find ways to promote the application software so and <unk> young as the two companies you can look at a wider.

Zoom out into our ecosystem partners and Theres also the cooperation between WPS and kicked up and bite them. So I would say that across our two ecosystem ecosystem, we have always maintained multi dimensional and strong relationships.

But by then thank you.

I think youre right now I would take on a second question on pharma briefly a few points.

First of all.

Probably also called so Betsy the pricing environment, especially not only on the supply side of all of our clients ask me a nice stable. So when they don't cut all of our major products or product level contribution margin or gross margin has been rather stable. So that's actually not the reason that backing off on gross margin in Q3.

Kind of a true if you also know.

No that in most of the enterprise so it ought to be industry in China.

Okay.

Regiment will be.

A negotiated on an annual basis, which means that right now we're already in the Q4. So we are they are getting into the process to negotiate the pricing terms of somebody in a quality and all the key terms with all major suppliers.

And it was right now in the process of collapsing the IP budgeting inside information from our key accounts. That's why we do get even for next year. We can do a good kind of analysis and matching the demand and the supply and further improving the utilization. So that's why I think the.

The mismatch on the resale side it can be gradually.

Mitigated by the end of this year. So for next year given that it is going to have a new annual contracts for some of our key clients and also some of the key vendors.

So the pricing impact.

It can be further mitigate it so that's going to be a short term impact point number three for next year as you're asking about capex.

For the same dollar where we definitely prioritize that into a high quality of potential revenue streams.

Got it okay that honor.

Considered to spend on a serious of us rather than the Cpus are high on Cpus or the G. P. O will for next year, how does that change with a high quality procurement regimens and we believe that will indirectly and directly converted into a potential of a high quality revenue stream going forward and also if you remember in our recent Investor day.

Actually Intel has been partnered with us to host an investor day events that actually also include information that we are partnering with our key vendors and we're going to have a director of regimens with our key vendors to secure high quality.

Fundamentally infrastructures.

And the last point I think for next year. We also will continue to build our own infrastructures in the recent quarter. We have closed very successfully on time for the Tianjin data center for the first phase for a second phase for another 30000 cabinets I will we will basically no basketball are starting to plan for next year and that will add.

Adding to our new revenue streams for that probably caused a revenue opportunity. So that's the summary.

We are second in a row.

To see net incremental revenue or behind a man of the public cloud business I think that will add to that.

Naturally to mitigate the impact of the mismatch and after.

After after.

And that will gradually improving the gross margin going forward.

Thank you.

Thank you.

Yeah.

Your next question comes from Thomas Chong from Jefferies. Please ask your question.

Uh huh.

All of that to you as well if he could win T lashes wouldn't you saw woman.

Awesome.

The other critical financial a one P M.

So when you saw that we like and.

While the common diebold and so do they tend to be like a window Mayo you've got a P. P I wasn't sure.

If I heard that you got something about that.

It's just when you thought that would sure I'm sorry.

I don't think that I don't see you got portrayed English.

Okay.

But boy are adults.

Sure.

Yeah, He's a guy.

A long time the market the pocket P J.

Like I always do something Youll touch on what you got from noble.

Sure.

But when you do those would it be less.

Uh huh.

So when you saw those mi band.

Yeah, well you guys Sogou there you've got a kind of a b C. What's that.

Oh, Thanks management for taking my questions. My first question is regarding.

Or the old customers.

Yeah Yeah.

On May one and paint all the Internet Giants just wanted to get a status about their revenue contribution over the next couple of years as they are.

In things off clock and my second question is regarding our long term.

Our assumptions are in terms of the revenue and the margin as well as the <unk>.

Between <unk> and.

And the enterprise quote and order here from our side of the story.

He was at the beach.

<unk> that make a fax a lot of the different pieces of this.

Okay.

Any color about the contribution coming from Beijing or any qualitative color.

It would be great. Thank you.

[noise] positive no.

Oh, sure and you're going to see at all are you putting them on the cool pool is on.

May 'twenty, two I'm going to go backwards on truthful to hit that are putting a lot of copel would come inside to coach is doing so well it should come in the seafood.

I will come to yield issues when I got here could be to understand though that people put them doing that.

Again this is just something you enjoy it.

But who need them.

And what is your current quarter could be understandable judiciary when was that.

We will come towards us on the call with you that the whole time in the short ton it looks a little sooner.

Cool.

You saw what or who keeps that.

Neil.

That's all I got.

Sure.

Sure sure.

On the balance sheet.

I took her fulltime here, though.

Well is it going to that.

What are they going to I heard exactly what Mr doesn't want to see the black tea.

Yes.

The whole pools with and without that I share.

Sure.

Uh huh.

I think the future when she first repeat hung Chung.

So we're going through that analysis, yeah, cool genetic or themselves.

That's a pretty constant.

That's one.

Cool.

Sorry.

I, probably didn't do global Hilton I clearly believe pool.

Because you're talking to each of them.

Uh huh.

Do you believe it is useful.

Got it.

The accumulative each of them don't want choices I kills them more of a feel for the total beds in the.

You can actually oftentimes, but that's sort of ticket.

And.

To go to trial.

Sure sure.

But these are some of the young child sure fire sure Okay.

So in theory, you can get in the Kingdom.

Yeah.

Oh, My God, you don't get all the transit authorities.

Okay.

So I was.

Thank you very much for the question.

As you pointed out the larger Internet names like you've mentioned Matewan and Pinto go out into two who the multi cloud deployment for them.

He is an inevitable choice both from a technology perspective, and from a business or commercial perspective.

And I've mentioned, it kicks off cloud and professional and neutral a cloud provider. We're also there.

And top choice.

We do think I'm currently the revenue and the growth of these customers have been very stable.

And.

Unfortunately, we don't have like detailed numbers as a percentage of revenue, but we do see them to continue to grow a very stable and on the on the on the good trend.

Now in terms of the macro environment uncertainty I mentioned I also play into a public cloud and enterprise cloud space with them too.

It's got briefly respectively in the public cloud space I've mentioned I do think it's going to be a short term impact and once this is over it is going to enter into a larger business cycle, where we expect to see.

Our growth to accelerate.

In the industry cloud space.

The demand remains very strong and as a tool of the effect affecting factors are one is power shortage and be out of it and that makes the power shortage has already been.

Last week in resource.

The pandemic impacts has been alleviated our.

Our ways to fight this.

Our leverage and Camelot local teams to a trial back to catch up with the progress and to deliver revenue.

Now as I mentioned before the impact on baking actually because of a locally based in Beijing. So we do not have any material impact.

In the Beijing projects due to the.

Pandemic control measures, thank you and I'll leave the margin.

Washington's two port Henry since the answer.

Thank you Oh quickly on the <unk>.

So first of all one of them mentioned that.

We still keep the same attention.

To deliver an improving margin profile for the long term so both gross margin and non-GAAP EBITDA margin one of the parties why do we think about next year's market. So that's why as I just mentioned and why do we think about a demand thing about supply side.

And how about the pricing environment and also how we optimize all of our personnel expenses. These are the key priorities for next year's budgeting process as we ought to weak today.

So that's why we probably at this moment.

On our call and I'll give a very clear guidance for the EBITDA margin breakeven tiny but.

Some of the audience, maybe remember we did have an intention to have that margin improvement to be delivered in the near term.

And this is the first point the second point I think.

Given the high quality revenue opportunities is also a key area of focus for next year. So when I think about a kind of expenditures and how that convert it into the revenue opportunity and how that APAC. Both on the gross margin D&A expenses will go up as well.

I'll do a very thorough analysis and the whole Canada impact for the margin improvement. So as a result, our where we want to say at this moment, yes, I think for next year.

Hopefully we would see on an annual basis, both gross margin and non-GAAP EBITDA margin and we'll see improvement on par with SCR on annual basis, I think we remain confident on that objective. However, the timing and the scale of that hopefully we can communicate once we have completed the prudent budgeting process.

Thank you.

Thank you.

Yeah.

We will take the final question from Kyna Wong from Credit Suisse. Please ask your question.

Yes.

We thank you for taking my question my intention to I O.

Once you take that one.

No we're not breaking out Lindsay just to pick on us.

Anyway, let me see.

Can you just can.

I'm not sure that they stay closer to say yeah yeah.

Uh huh.

Uh-huh chunky and yes, it has been going up and down that path to acre cause the fed to let's say wait now anyway. So it's I mean, we haven't done that yet.

And she said well, let's just look at the Stifel, Inc. Like tissue say cortana they are.

Pass either from a technician to Sunday, he got a tick up.

For what acre Ah boy I didn't seem to make a holiday 60 something of content. So you can so closely that they finish it quite quiet Guy I shouldn't say you know what I'm not yet.

Yeah.

It could be I would say that a timing lag of offering but that said of course hometown pet is a positive right now.

And can I say, Oh, yeah, okay.

Okay.

Uh Huh I D C D C I parse them out now.

Not thicker seams that country I the enterprise call. It just how do you even said in kind of in.

Sure.

That said, maybe I'll pick a part C D link.

Zika, I'm, saying, Oh, they've kind of danger or so forth and hopefully he'll he said that's it.

I gotcha.

Okay.

Yeah.

So.

They're kind of saying no to anything.

Just the first question actually we are looking for a more oh.

I guess on the Oh can become company on that a path and kind of 30 enhancement in the future I mean, even after I can Oh cooperations with signed then and the second question is about what kind of like how do you see policy change that may impact the public call.

US I always say D C.

Suffered from the vendor as well or in your own business My enterprise Com. So thank you.

This is not part of it.

So sure tube, a pathologic tissue them insights union until those that are in the bull's eye to Si E Mail sorry, if that's what you knew you were going to get all of them. They possibly can to share them with you, but what are you doing countries.

Some of the U S b at other Shaw, who can be a cool cool.

It should come in you kind of it. So we do have good well mcgough Bush undertake a plethora of different people.

You've got a whole team here at the home who's actually choose the deals that you see.

Yeah.

Yeah.

The capacitor Patricia what when they couldn't get kick off I'd get a bunch of alterra.

Jeremy if you don't do it when you do go to go out because I do see those either tutor Oh Hulu.

Ooh.

I did see the shred local teachers with with whom you can go through what we went to Oklahoma City territories fully Bluetooth tablet.

But we didn't have a kill it.

People don't go through for whatever someone within the play.

T shirts oh.

Okay.

Sure.

Oh yeah.

Ctrip to Usher syndrome that also right.

So it gives you play that out.

With that I'm going to go Timna, Golar Schindler drilling fluid tree, a drill hole panned out to the country quite useful.

So you can go to Youtube and the fact that we're gonna be a few black tea dog.

Went into Cleveland and since you're the only if we can keep them on the T.

She says.

So in terms of tax capabilities.

And in fact.

Our paths of ability in terms of particular verticals for example, financial services health care and our big data capabilities.

Have actually becoming more and more leading in the in the up here and also we have seen increasing revenue percentage and the promotion of margin. It has brought to us through our business now.

We do believe that we will continue to increase our investment and development of power capabilities in those areas in those verticals that we choose to focus on however, if we don't think this is in anyway in conflict without corporation with volcano engine or bad debt.

In relation to your question about ITC policy, we do not really think about any policy changes will have any material impact to the public cloud I do see it as explained earlier, we do think that the public call I D. C. Generally.

Relatively high standards and they have been built according to the latest government policies and guidelines.

Including the idea is that we built ourselves and then we do not think they are going to be negatively affected in terms of the ITC is for enterprise cloud customers.

The impact mainly came because of the abruptness of the policy change from the from the government I E. The power shortage and we do think that in the future they will be able to adjust to any policy changes in that space that's what.

Thank you.

Yes.

Yeah.

At this point I would now to hand, the call back to Nicholas Chen for closing remarks.

Thank you operator, and once again, thanks, everyone for joining us today Covid, how any further questions. Please feel free to come forward to speaking with you again last quarter.

Uh huh.

Thank you that does conclude our conference for today. Thank you for participating you may now all disconnect.

[music].

Yeah.

[music].

[music].

At this time all participants are in a listen only mode. There will be a presentation followed by a question and answer session at which time. If you wish to ask a question you will need to press star one on your telephone I must advice you that this conference is being recorded I would now like to hand, the conference over to your first speaker today.

Nicole Shan IR manager of King soft cloud. Thank you. Please go ahead.

Thank you operator, Hello, everyone and thank you for joining us today, so clubs circled her funding what learnings through it is familiar to earlier today and is available on our IR website at IR. Okay. That's why you wouldnt they'll call as well as on global Newswire services on the call today from the cloud.

We have our CEO interpreting what.

And so that's very cool Mr. Wang will review, our business operations and the company highlights followed by Mr. Ho, who will discuss the financials and the guidance there will be a little poultry. That's real question. During the Q&A session that follows you Wanna be consecutively integration all each versions off oil companies and the reference, whereas only and kicked off.

I need as Christine mentioned my statement, you know Rachel language vocal wheel before we begin I'd like to remember that this conference call contains forward looking statements within the meaning of section on the he helped US security exchange ex Covid 1934, as amended NFC funding in the U S Pro as a commodity and litigation Reform Act of 1995.

These forward looking statements are based upon management's current expectations and current market and operating conditions and relate to you was that even more all unknown risks uncertainties and other factors all of which are difficult to predict and the money we shall be all of the company's control, which may cause the company's actual results performance.

Achievements to differ materially from dosing in the forward looking statements whether information regarding these and other risks uncertainties or factors are included in the Companys filings with the U S. S. E. Z go comedy does 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. Finally, please note that unless otherwise stated all financial figures mentioned during this call.

In RMB.

It's now my pleasure to introduce our CEO forgetting wants. Please go ahead.

All she has a nickel.

Does that all play out.

Okay.

Our union in Tucson to do those.

Okay.

<unk>.

So I wouldn't be at Parker Sudan, he wont be firmed up.

This issue.

As we go forward.

So really should order yeah. So Shaun udal can be summed up to do clear through that on the scar free Oh.

Oh, Yeah, Yeah sure that'll hit our failure can be summed up I'm going to stop.

Already our union and Truing up what was asked.

Hi, Jim.

And what's your thought on kind of like Utah grocery standpoint, Chicago.

Without a washout.

Pushout ultra Johnny so cool to fill out of Newport about Seattle uncomfortable they shouldn't teach agenda intrusion there got it.

Can we do with Silicon, Florida, Georgia, Kolchinsky clearly drove it does feel that we're the ones going to come.

Andrea.

Thank you Nicole and thank you all for joining our third quarter 2021 earnings call.

In the third quarter, we generated RMB 241 billion in total revenues, which was an increase of 40% from the same quarter last year.

Public cloud services revenues reached RMB, one 9 billion, an increase of RMB $140 million over the second quarter.

Our enterprise cloud services revenue reached RMB 730 million up 78% over the same period last year.

Since the beginning of 2021 we continue to deliver rapid growth despite market headwinds regulatory changes and ongoing challenge. It has ever want adjust to a new normal have the pandemic continues to evolve.

As the largest independent cloud service provider in China, We will continue to execute our growth strategies strive to become the most trusted cloud partner for our customers and to create the digital future together.

Our neutral position enables us to develop more in depth and extensive collaboration with an expanding base of premium customers and further nurture our multi dimensional ecosystem.

We believe we will benefit from our long term thinking and achieve continued and sustainable growth.

Yeah.

So you got that would cause that accuracy CEO trouble besides all triggered it.

Sure.

So what you end up with.

I mean, it seems like I'm wondering for Greg I think.

Thank you.

Entry to acquire you.

Hum.

Can we do it.

Well the shareholder who didn't get billions.

For sure.

Futures also the cohorts.

June to interact with you soon.

Yeah.

Yeah, just blue material dollar co loading tender, but diesel whole foods made one Cleveland coming out of this and cool opportunities in cohorts you went out of the usual Joe Judy going over your shoulder somehow find out.

The yard you made one cars with local folks, but neither one of them is that support a cohort.

Yes.

Thank you Gordon.

There's nothing I can do the same cohort when adjusted Q4 made ramping those will cause this didn't cold temperatures.

Temperatures were two quarterly doesn't that.

How youre doing the final settlement that'd be helpful.

Quite a few countries in order to fund <unk>.

Have you seen the Golden I noticed Google Buzz worthy agenda.

You don't create an eye.

He won't shouldn't hold up and put it into different so you won't see it run through that.

Also going back would you pass them to other countries.

That's helpful.

Women's athleisure low heating beauty will tweaking how he is doing well.

Well then since you were doing well in.

European too narrow.

The Central Bank.

Would you let alone.

Well as usual good autumn crude how people who're going to team with them on that.

Wonderful guys Huh, SaaS as well as the trend up and put a quote unquote.

The bulk as usual so long to actually Oh people know, but I don't know your people who've done well thought through towards him on our Dunkin' debenture.

Now, let me walk you through our performance across our major vertical.

Got off with public cloud.

The challenging market environment, we still achieved a faster growth than the industry average this quarter.

Leveraging our neutral position heating solutions on a premium customer experience.

Made significant progress expanding our customer base and diversifying our product and services portfolio, especially for multi cloud deployments.

Mentioned in our last earnings call made fun, China's leading local lifestyle service platform have become our new premium customers for public cloud services.

Together with other newly engaged with premium customers. There's data usage increases contributed to our public cloud revenue growth.

Following our success with made one in Q2, we continued to expand our customer base among top internet companies we have.

Proud to announce that pingo at all one of the largest e-commerce platforms in China had become a new customer in Q3.

We believe such new customer engagement trend will continue and will drive our growth in public cloud services.

We proved ourselves to be agile and move quickly to engage with emerging high quality premium clients amidst the regulation changes we can.

Gauged with show T car hailing, a leading player which has been rising and meet the shifting competitive landscape.

I love it our full suite of hybrid cloud solutions, including computing resources.

And big data product at the parent level.

Independent in our space, we further diversified our offerings beyond the video and gaming.

We continue to provide public cloud storage services to tune our dot com one of the leading online travel platforms in China on top of this we provided them with more products such as containers big data solutions and bare metal servers.

On the gaming front, we are highly recognized by customers for our full stack cloud, including.

So the highest path and south.

We signed an agreement with IGT game to support their proprietary blockbuster mobile game includes too.

Help them plan and design their cloud architecture to support game developed deployment, which resulted in a stable and most gaming experience for tens of millions of concurrent players.

Sure.

So that kind of thing.

Sure he would be quote each other places to go Fabulous fill in Chicago Rd Rd, Google assumed from Bush's physical Chicago.

And even the dragon basis would be cool seafood.

Draw your attention to the Shanghai built yet.

Hum.

Okay.

If you move to talking to you at Wuxi.

Yes.

Sure the quality is just fine.

So I kind of hope.

Warmed up lithium cost the country type of quarter. How many are challenged to go they're going to go.

Kosher well many as I can guarantee for the future because I did see the Fuji already our fund me Antonio if I can do this we will use that data and <unk>, but you'd also see San Diego and central Fortunately It feels that you learned from Johnson <unk> Johnson, who did the loyalty with data accounting people won't be the future.

Yeah.

On product and technology problems. According to the 'twenty funding, China financial grade distributed database market report that was published in September by Frost, <unk> Sullivan and internationally authority. So they agency.

Our Dragon based database was placed in the leaders quadrant of their prostate radar.

Along with other two leading competitors in China, our product was recognized for its visionary technology excellent product performance and outstanding monetization.

This once again demonstrates the recognition our corp have product to come on in the industry, including among top global industry research firms.

Earlier this year, a big data cloud products, but also placed in the leaders quadrant by Frost <unk> Sullivan and Theyre Twenty-twenty, China data management solutions market reports.

Same time, we continue to ramp up our investments in cutting edge technologies.

According to IDC 50 per cent of data will be processed at the edge by 2023.

During the quarter, we improved our app storage capability and developed at storage nodes in Council province in September providing strong support for various applications.

Hum.

Sure.

They tend to lead through the heart lung function.

Moving to the enterprise segment going digital has become essential for many businesses and industries to adapt to new norms.

But generally what are you all.

So tissue caught our Cochin Bts Jacqueline Ko tornado.

Yeah. So if you look over to Lincoln.

Thus, we will of course depend from Japan to assemble.

Uh huh.

Cool.

But maybe more probable.

Charter attached to it that could impact.

The cohorts you kind of yield do you conclude your Doctor Knowhow.

Okay, well I can only teach them about them to do so.

Well, Mr population will have tried to a central crisis you're.

We'll find out here yet.

Sudhakar Autodesk.

So Jeff we'll get.

<unk> that's helpful. Arthur you uncle Womans own Kingbird will go okay.

And third is to political science agenda I'll pass the time to think about it.

You're only a couple of our buy certain documents yet.

In the financial services sector, we continued to expand our client base and deepen our collaboration with our customers.

On the Central Bank level, we won the bid to build a big data cloud platform to support China's new digital RMB.

After winning contracts from Boston Bank, and China Citic Bank in Q3, we furthered our corporation with another top commercial bank and how does it migrate its middle office to the cloud.

Our solution enables the smart in Madison of their underlying business data and led to a 665% efficiency improvement in their big data capabilities and development.

As we announced back in August we agreed to acquire Camelot as a part of our efforts to build out our enterprise cloud services business now that we have officially joined hands with catalog will be able to cover all of the top funded banks in China.

It will be fully consolidated hemlock fast product and solution.

Our product portfolio, especially in the risk management compliance and anti money laundering areas, which have been offered to more than 240 financial institution.

Sure.

So you don't see an economy also.

I'm sure somebody is working hard on.

But that's all done so all based on little cartoon.

I'm thrilled that you don't want a general solution young children at home, which actually it's awful guys tell them, what's one for Chunghwa. So groceries have shown some food and sundries and peanuts.

Two of our Union.

Yeah.

Junk food you, we do you probably aren't going to cause some potential.

N G E.

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Joe You took ownership will then tissue Unbilled receivable ratio Tien continues you can probably tell them the telco well know hijack Shanghai, It's Angela here I'm sorry.

Hopefully most of the learning Center, you know who did Dupont for Shanghai comes from capital.

So HED will go untreated you Havent done we'll get back to you I'm going to meet with you.

Don't worry you antique Oklahoma to try short window.

Sure Rajeev.

Just on mobile.

Yeah.

In the health care sector, we have been pioneering new lighthouse project in Jiangsu provinces among other pharmacies.

In Q3, we kicked off the delivery offer Johnson Providence Medical imaging cloud. This project will be the first to enable provincial level medical image data sharing expected to connect more than 30 hospitals by the end of this year.

<unk> put into operation. It is estimated that the project will save billions of RMB in medical insurance each year, we're very proud to be able to create such a positive social impact together with our customers.

We're also making steady progress with our big data cloud projecting of Hubei Province.

Meanwhile, we also made significant progress in our health care ecosystem in one case, we have been cooperating with a leading health care data solution provider.

This cooperation has already introduced us to many of them premium customers, including rating hospital, which is the fourth largest hospital in China and the largest in Shanghai.

Building on this foundation, we plan to expand our collaboration and strengthened our branding resources and service capabilities with more hospitals in China.

So I think we'll fully rebased income with the T cell.

But anyway.

Tricia culturally issue and yet they didn't go to Church Museum showroom Tricia T shirt.

So that all foods outgoing CEO.

Chris will put your Dougherty <unk> co.

So I'm comfortable with what do you mean, Shlomo because you're just going to go.

Of course, there's always Daniel.

The operational <unk> for example.

Absolutely.

Two don't come true global generally soon so we can drive it shouldn't issue.

Do you want to start from.

Go to a tertiary care centers.

Balance sheet Brookwood other tasks will be ideal.

Further it backwards.

Yeah, you're right here, you can see kind of some of those.

Well continue to show each of them pushing the envelope.

Also the Joseph Abboud looks for three days and go find a woman. She traveled fully appreciate the fact that we're selling.

But strategically.

And the public services sector.

Selected for phase for our Beijing, Sydney Cloud project.

The total contract value is approximately RMB $85 million.

This marks the fifth year in a row that will provide services for the same projects exemplify our ability to secure repeated revenues.

In addition, we also quickly replicated our successful experience with public services cloud to other parts of China and one pit.

From anything honestly province, and Shandong Province to name a few which are all in delivery case.

We won the bid to be the exclusive provider of an urban cloud infrastructure for Citi in Hubei province, with contract value around RMB $36 million.

He will elaborate our leading cloud computing and data big data technologies and facilitate the intelligent transformation of the city public service systems.

We also started cooperating with the Shenzhen Big data Research Institute with strong policy support the Institute will integrate Big data research resources in Shenzhen.

Bay area and further across China to facilitate the nationwide advancement of big data applications.

Despite some disturbances from the pandemic and how it sort of it.

It's definitely carrying alcohol project.

Also making progress with new bids and our backlog continues to increase.

So yeah, you'll deepwater could I saw the article virtualization rule minyard People's material could I suppose I should I'm working there.

Well, Joe put into well maybe you guys can do what I'm sure. So Eric also what's also there should that be should will may you too. So I'd just refer you on coffee Coca Cola and the data well Mcdonough.

<unk>.

So I, sometimes look at Xiaomi.

Show me She's Angela you just unbundle country isn't good enough.

Women's health is going to be too you know Google Woody Mcgee.

Did you find one group.

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From the tissue samples of attempting to close well known.

Any other country.

Within our enterprise cloud segment, the integration of catalog is well underway.

As we mentioned in Q2 Camelot have delivery centers in most major cities across China, we have selected fix it.

To be initial pilot cities for integrated project delivery.

In the finance services sector, we have started engaging with nearly 10 banks that tableau has introduced to us.

Our integrated team will provide delivery and services directly to these customers.

In terms of ecosystem cooperation.

Tell me kicks off the group and WPS have all started working with Camelot in various aspects.

We will focus our efforts on the finance health care and public services sectors, and we have started with consulting and planning services in the hope of developing a fully integrated one stop two weeks of solutions.

Well, Mike as you meet your going to.

Our focus into the future.

Welcome to the Cingal Coca Cola item to Egypt.

I'm looking at Graco.

Judy Lassa does Virginia Sunday.

On the EBIT Delta Downs ankle and I'll touch on that.

Tricky treated truly unchanged.

Thank you.

Did you talk one just real quick.

<unk> yeah.

Kind of walk through by quarter Okay.

Is it the whole Super Bowl <unk> yogurt to vehicle.

Jim what <unk> truly Unchained, Bob Houghton was also who's the CEO.

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Sure.

In terms of regulatory backdrop, we have been paying close attention to all new regulations and policies, including the drag congratulation on protecting Internet data security that was published by the Cyberspace administration of China for public opinion.

The regulations have yet to be finalized and the effective date is still uncertain.

But as we have always emphasized we manage our business operation in a localized approach within each jurisdiction and continuing to deliver solid progress with data security and privacy and <unk> programs.

Unlike companies that puts out data on millions of individual users, we focus on serving enterprise customers.

In addition, we have fully complying with regulatory requirements, including around data classification and data security.

So now we have successfully obtained ISO 27001, I S. O 27017, and I S. O 27018, which are that worldwide recognized standards and certification in terms of data security and personal information protection management.

Alright.

Well thank.

Thank you Doug.

Yeah.

I will now pass the call over to our CFO Henry to go over our financials for the third quarter. Thank you.

Thank you everybody.

Now I'll walk you through our financial performance for the past quarter.

Our total revenue reached $2 1 billion RMB in Q3, representing approximately 40% year over year growth, which has been consistently higher than the growth of the major peers in China.

Revenue was probably call services was one six times been in RMB, a quarter over quarter increase of $135 2 million RMB representing.

19.

Second quarter revenue increase since our IPO.

There were a number of drivers first our existing client base remain stable, including our top three clients in particular or unusual position that makes it possible to avoid any potential conflicts of interest with our customers.

<unk> been able to grow together with our customers.

Second we continue to engage with a new agreement customers in Q2 of this year. Meanwhile, China of eating in a conglomerate has become on your premium customers small public call services.

What's the trend continues we're proud to announce that T north or whatnot that leading largest e-commerce platform, China has become our new premium customers in Q3.

At Neocon case, exactly five two things number one.

Our cloud strategy is gradually more accepted by the market not much to these efforts have to diversify our customer base and at the risk the top client concentration risk and also clients from non video related to vertical will also help grow our computing business and contribute to that how many cost incremental high quality.

<unk> revenue growth.

Lastly, we were able to dig deeper into the needs of our clients as beauty I mentioned earlier, we're providing a more diversified portfolio of products and technology through cross selling including containers edge computing.

Solution.

Revenue from Enterprise call services was $706 9 million RMB, representing approximately 78% year over year.

Okay.

But I haven't seen a rapid growth in demand in the enterprise cloud market.

The macro roughly in enterprise markets, where beauty more flagship products in our financial services health care at a public service sector and replicate our success to more customers.

Our client base continues to grow steadily and a short term however, deliver our enterprise product and in some regions and mainland China was affected by the original wave a pandemic.

Although we can deliver our technologies are part of some projects are emotionally our team has been unable to deliver on time.

Some of our class one paid off due to travel restrictions.

In Q3, some of our projects will also delay due to power shortages or limits by local authorities.

Common practice for enterprise cloud, we implemented our public cloud technology to enterprise cloud private environments, and a whole lot easy etc.

Although our protocol you can see we're not affected by power shortages in some of our customers saw a temporary disruption with our own product IDC Center. That's a shortened the time available for our team to deliver projects on our sites and of course searching to life.

However, we'll have to see currently the situation has been improving and the process.

In line with our strong top line growth cost of revenue grew 44% a year over year to 2.33 billion.

How do you see cost the largest cost component representing approximately 67% of total cost of revenue grew 33.1 month and year over year to 141 billion RMB.

How do you see cost conscious of cabinets at a bandwidth cost our cost increased by $155 4 million RMB, a sequential basis, which was due to the preemptive shortage storage on the line resources.

Depreciation and amortization cost increased by 28% to 200 million RMB, representing approximately eight 6% after total revenue.

Adjusted gross profit was $92 2 million RMB compared with $114 8 million RMB in the thing.

Period of last year.

Our adjusted gross margin for this quarter was three 8% compared with six 6% in the same period of last year.

We would like to offer a bit more color of this short term volatility.

To support the growth of the public cloud business cloud company typically purchases of us in.

And at least the data center.

Based on our forecast of demand from our clients and to the market in general.

The beginning of every year.

As many of the audience may have seen starting from mid of this year. The IC demand from many clients in China are growing but slower than previously market forecast beginning of this year.

Therefore, the underlying infrastructure resources has not being fully utilized as targeted incremental investments of resources made earlier. This year. It may not be fully monetized in a short term to walk by end of this year, which may impact our business due.

Due to this reason for example, the increase.

$135 4 million RMB in IDC cost this quarter impact our gross margin this quarter, our business model and our client base remains very robust and we believe the utilization pattern will naturally optimized that we'd see I'll probably call. It demand continue to grow.

Total non-GAAP operating expenses were $451 2 million RMB, representing a 15, 3% increase from Q3 last year, mainly due to the ongoing investments into our business.

Our competitiveness.

I've provided a heart team with competitive compensation, and therefore increased personnel expenses exceed.

Excluding share based compensation adjusted R&D expenses were $231 6 million RMB representing.

Representing an increase of 51, 3% year over year.

As a percentage of total revenue and increased slightly from eight 9% in Q3 last year to nine 6% this quarter.

Adjusted selling and marketing expenses increased by 37, 4% to $114 3 million RMB.

What percentage of total revenue a decrease a little bit from four 8% in Q3 last year.

Four 7% this quarter.

SG&A expenses were 100 zero $6 3 million RMB as a percentage of revenue it increased from three 7% in Q3 last year to four 4% this quarter.

Although the level amongst the lowest in our peers.

Accordingly, our adjusted EBITDA loss was $140 7 million adjusted EBITDA margin was negative five 8% this quarter compared with Nokia of two 5% last quarter or quarter over quarter decrease was due to the decrease in gross profit the increase in personnel expenses and a onetime off really.

Camelot transaction expenses.

Our adjusted net loss was $363 8 million RMB with adjusted net margin negative $15 one per se.

[noise], that's how September 30th plenty of time to what we had sufficient cash kind of cash that caused that.

Approximately 6 billion RMB.

This quarter kind of expenditure for $96 6 million RMB.

Q4 last year, 2020, and integrating supply chain pressure, we have purchased are sufficient.

To support our business growth.

Based on our current operation and placebo a high operational efficiency, we will make a very disciplined approach with capital expenditure.

For the second half of this year in.

In Asia the service delivery on a payment cycle also led to a relatively low capex. In Q3. However, we do think that your capex will be at a similar level compared with last year.

You know in Asia, but haven't received great endorsement from regulators.

The dust of attaining our conditional approval for the Camelot transaction.

From the National Anti monopoly Bureau, AK steel.

The state administration for market regulation in China.

Once completed within one about one month time, which is significantly faster than our regular review of timeframe, especially considering today's market regulation environment.

October with a minimum of three parties regarding the registration of shares related to the transaction we are.

And I'll come to you to transaction and it began and integration of the two teams.

Coming out bring us over 500, Permian Kosmos and a wealth of industry Knowhow, especially in industries, such as Internet financial services consumer retail and manufacturing among others.

Coming out of cash delivery hubs in multiple key cities across China. They are local team with what your level of future enterprise cloud projects directly on improving our execution capabilities of the whole company.

We believe significant synergies will be further Alicia and sure enough.

Looking ahead, we expect our total revenue to be between $2 six 3 billion RMB two.

<unk> eight 3 billion RMB for the fourth quarter of 2021, representing a year over year increase of 35% to 47%.

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

Lastly, we held our first Investor day events. After IPO October 21st this year.

Representative from our key accounts Florence ecosystem partners industry thought leaders join our senior executive and discuss industry trends and our distinctive elements, including senior executives are clients from National Health Commission, China construction Bank quite show cheerful by death.

Camelot at among others to shock the birth of perspective.

We are committed to improving our different transparency brings sustainable value to all stakeholders and are delivering long term value to our shareholders.

This concludes our prepared remarks.

We're not having to take out please.

Please ask your question till Tonight, and we kind of English.

Operator, Please go ahead.

Thank you as a reminder, if you wish to ask a question. Please.

Please press star one on your telephone keypad and wait for your name to be announced if you wish to cancel their request. Please press the pound or husky.

Your first question comes from Brian Gong from Citi. Please ask your question.

Covid going forward.

So it's official once you want once you so quickly.

So what I mean by 72 or higher you're in your car or so dollar you show for us thinking about you and yourself.

Change in.

Tim do well he's shown cubic changzhou each U R.

Thank you Ella.

Put it all well many milk hundreds of course some of the Joel you also just one of them.

Just to show a.

We will continue to grow so that's also without some kind of switched to <unk>.

So who are.

You've got some color towards completion.

Sure sure.

Cool level.

Although frustrated myself Oh good evening, good evening management. Thanks for taking my questions. My question is regarding the answer across cloud honest on our other plus cost settlement was impacted by power shortage.

The pandemic human and that makes lots of other encore and the power shortage largely use.

Have we seen any acceleration protects delivery.

We see also cross cloud revenue rose to go back to normalized level for next year and whats gross novel wish wed expect some too.

Okay.

No what I put on a new <unk> for sure.

How long is it something in the one of tissue Q4 local carefully.

Insulate yourself when you go sure sure Thunder shareholder people Cynthia.

Well Linda.

<unk> found some do it.

Hunter you hooked onto fall asleep, so exactly on time.

Oh T J on the take or pay talk longer. So we did see for see if amortization I should go to.

Okay.

Thank you Tahira I mean, even though they have a cookie.

And if you feel that there's IDC asleep.

I should be Ulta, beauty's sits where it shows all the cause a shift in the medium term.

No.

The only thing other thing Honda Honda do sure.

Cynthia.

Thanks, sure well exactly.

Shanghai Chengdu I forgot it is integral to the team.

It's a little hot where my shirt that it shouldn't.

There's a whole suite.

I did see the easier to control.

Okay.

Then we can dig agenda.

But frankly, that's also they can help each other.

Okay.

Well Nathan.

Actual CEO country or a pen on the bulk of it seems like maybe the handoffs and the.

Yeah sure Mike.

The.

Some with adults who can go into it.

When do you use a shoe show.

And what's a woman does show a more central theme download Dolby digital.

Sure.

I'll kick off with them.

That's helpful though.

Oh, I'm, Tim attitude it'll find usual.

Oh man.

So that's what happened.

So for.

Q2 times, you don't need to do it.

When I look upon it as if it's included.

Sure Josh.

Cool.

What are some of the you'll visit someone.

I'm going to die.

The whole rule can.

When I kind of go hungry here, you're going to email.

It will take advantage of hydrogen.

He will sit on calls we'll let you go.

Yes.

Okay. So the response from the CFO since I'm. The CEO. Mr. Long you think is that as you rightly pointed out.

There are two key.

The factors affecting our industry.

Beckman.

One is the.

The power shortage or curtailment, the other as the pandemic.

In our two business segments, respectively, I'll talk about that so in the <unk>.

Cloud segment, because the ITC enjoying relatively high rate of protection and priority and then most of them has a reserve or backup power generators. So those who are not.

A fact that negatively affected but in terms of enterprise.

Enterprise following the industrial proud.

Because of the Itc's in most of the cases out there private idc's with Shanghai designated by the customer.

Generally case by case.

And have been affected by the power shortage.

I have to agree with you that currently the power shortage situation has largely been alleviated.

However, we do see that in the midterm to long term the carpeting and.

Emission control, we continue the pressure will continue to be there and there might be more policies in relation to IDC construction and IDC power consumption.

But in any case the power shortage, we expecting a short term has been alleviated and then we're able to now progress.

Progress our.

Deliveries for.

Enterprise cloud in Q4.

Second factor about pandemic, obviously didn't still going along in some cities because of the very stringent.

Not sure if the government takes.

<unk> causes the delay of our delivery.

However, we do see that overall speaking the demand the industry. Our enterprise cloud remains very strong our backlog continued to grow while there's impact to delivery. We also have proactively try to find solutions to the COVID-19 impact.

We have been proactively utilizing the hemlock local teams.

Which are.

Distributed across China to help with delivery and the increased delivery efficiency. The second part is that we proactively manage our timetable for delivery and try to make up for some of the time that was a lot.

Because of the power shortage and and pandemic control.

But overall speaking, we do see the industry cloud to enjoying a very high growth rates coming from the demand is very strong demand. Thank you.

Yes.

Thank you that's very helpful.

Yeah.

Our next question comes from leaping Chow from TICC. Please ask your question.

You didn't know Harry Nicola Shaw judicial with ex U S. What you Daniel some of them.

Oh in <unk> Joshi.

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Johannes you shouldn't come in and say, Oh, well, you're showing you ship no not a woman.

I'll send you should talk to them.

Sure.

You said something around the wholesale even though you guys. Some upon so if you think I mean fish and then you got some kind of moved down that you don't need.

I hope you're all well then you should imagine that.

Do you know what mandate.

And just Oh God.

So do shift going down that COVID-19.

Yeah.

Just you'd be women Easter does give us your thoughts on that.

I must say.

Oh, well Tricia diet and my tongue in cheek.

So body because she can shop with you no matter how long the unions all elements that you are a teacher association, who they get to Washington.

Well, it's always a N T shirt that lays out.

I.

Once you get close things out.

Good evening management, we have I have two questions here.

Seeing a cool down in public safety.

And so my first question is what's your opinion in next two to three years, our market growth and what will be the company's organic growth scribe first then target to achieve and second question Mickey.

Our gross margin has seen some pressure closer by outbound infrastructure investment and a delay in revenue recognition Oh. My question is when do you see.

Utilization rates to catch up and what's your budget for next year's Capex and lastly.

We do wonder how is the collaboration with Dan's going so far thank you.

Oh no.

We still have 100 people in Canada to blame you.

Uh huh.

He has no drama.

Let me conclude.

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Sure Julian each human doctors when they used to.

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No what I'm, saying.

Cause assured okay cause I'm not maybe so it sounds like Occidental Colton.

Just a follow up.

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I've got a choice you hung your lithium glenda.

We found a gym.

They could go to you too.

The woman the Cooper.

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Indonesia market conditions.

Conditional to twice a year with a fully Andrew this year cause you to them for timberland.

Not so much.

Now, let's look at Winchester, who show you deemed Oh shoot.

But really I think what you're doing actually because she didn't meet the procedure.

Yeah I can go a few hard though because you couldn't put your TCE.

I don't I don't want to come and do the due diligence on them.

Okay, because I was trying to do what you've done this elsewhere.

Oh from country like Ooh.

Stripping exercise.

You can find those on Schindler tusa, who are trying to be helpful.

But they're not getting the kind of usual, you'll see oh, yeah, I mean, I guess I'm wondering if you're doing it.

Sure.

I assure someone seafood and.

So we're feeling quite a piece of silicon.

If you look at home food and go home.

Cause you know hydrophilic a little one.

The Olympics Israel.

So as you know when we're going to waste your time Carnival.

Yeah.

And also the cause at all on the table, that's I'm sure Ctrip with trouble too.

Just to kind of pick.

People can use them now.

So too soon but just telling you that.

Well I'm sure.

On the heels on Cuda to say, you'll see you've heard do you want to meet in the debate.

Not at all.

There's a phone.

You're trying to reach out to us.

I could I go to talk to you in this room with them and they'd go GA.

The woman solutions, a pretty good year with a certain social you'll find there's a cohort of Florida chemical.

It differently than tutor Tinder I sure feed Hong Kong human timeshare.

So I don't even know how much it could come down.

As usual I'm going to hear their sugar classroom.

Chris its initial door Cindy I can tell you sound good.

Just one more question today.

Asia and continental.

I'm trying to understand.

So is it that we're trying to do the two room.

Trigger quicker you go figure out of course with some down.

Switching to the Yorkshire.

No.

So the whole thing will depend on kind of another tool in the country.

With all the legal and.

Oh.

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Just turning to your fleet.

A little bit more on the secretary to sleep.

I guess, I, couldnt, dunia and the door to door trips, even though you're going to find out that I will need to issue a consolidated.

The.

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It will then go through restructuring to go 300, a ceiling either.

So I'm not sure I heard a figure changeover.

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Hi, there.

I do but coming forward.

The hotel will translate to the shareholders, who want me assure portion.

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Yeah.

Here to take the time to.

Peter I'll go vertical.

I'm not going to do that.

The onetime spend than we hoped.

You know they don't put on the phone call and heaters I pencil pretty cool.

Okay.

Good good.

Cool.

Okay.

And they're trying to maybe also on people feeling I know to go to a doctor, who and Sheila to seven Jason while you're trying to puzzle.

Turning to the U S.

It is easy to order them Fisher.

They go to work.

So you've got a good computer in country and I think it will muscle.

The critical year won't go good.

Okay.

Sure if each of them.

To meet the whole pool.

Some of them in terms of accretion.

So you can see political tool or.

A home that's L. A T shirt.

Or does it feel like a corridor Cisco puncture.

And there's no impact.

Oh sure.

I was at a meeting.

Oh on each of them and this is how we're gonna go listen I don't have them with us.

Peter.

Okay.

Okay. So quickly frankly for reference.

So in relation to a question about the growth prospects.

In public cloud and enterprise.

I thought about public cloud, obviously would have noted that this year the public cloud demand.

Tolerated and come out the fact that we think its due to two reasons.

One is that there was a high base. It was actually a high base of last year as a result of the pandemic. So the demand for cloud services have searched a lot actually shifted to a great extent.

But obviously that is not a new factor for this year.

Second reason is.

In fact as you have all noticed.

That seems at the beginning of this year actually even till now new regulations have been coming out from the government to regulate a.

A lot of the customers that industry its that we engage with and accordingly, our customers in such industries will need to come through those new regulations and to be compliant, which we believe it takes some time, but we do think that this is going to be a short term impact.

As the regulations become more and more clear and more visible from the from the government perspective.

But also looking at the long term picture.

We do see that their customers have already started to make new RV.

Arrangements in new potential vertical markets.

The space itself Entertainment video and the gaming.

And then we're happy to see that didn't actually happen together with the further penetration of our <unk> technology, and we're seeing the new concept like meta versus and the hardware in terms of those for those applications have been launching an increasing in volume the technology integration has also been.

Accelerating.

Do you think that the internet.

It's a cyclical sector, which where do you think that in the future one to two years to come we're entering into a new lodging cycle, which will reasonably expect to have a higher growth rate than average growth rate of that sector.

Hum.

Uh huh.

Ourselves.

We have engaged a significant amount of new customers in.

This quarter and I mean, the market headwinds as mentioned before.

And we believe those are really benefiting from our neutrality.

And also from the multi cloud deployment trend, whereby we have essentially become the top choice for our customers whenever they want to engage a new cloud vendor.

And we think that all of our customer base in terms of volume and the depth of relationship remain robust and then at that serves as a very strong fundamentals for the company.

In terms of industry cloud as I answered in the first question that was asked by city.

Market demand remains very strong we think the demand of digitalization is actually in the Atlantic and for a long time to.

We also expect that demand to remain strong and also in the verticals that we have chosen to be focused on will continue to tap is benign typo of gaining more customers and developing our advantages and as a result of that are increasing our revenue.

And the third question, our cooperation with Biogen.

We actually have a very long term partnership and cooperation history with violence actually starting from the basically the eruption explosive growth of short video clips in China.

That includes a.

A lot of applications like sequel, I like hotel, and <unk>, which essentially made back then.

Essentially I made out the trusted partner of by then that is a very solid relationship with them.

And as you have also seen that we have signed the comprehensive partnership agreement with volcano income, which is under the bite downtown Brown, where we're working to explore ways to combine our advantages in terms of ice capabilities.

<unk> nationwide delivery capabilities wasteful cannot engine to create win win situations and more recently at our cooperation with <unk>.

With a software called <unk>, which is the offense.

Dennis your authentication software, where we have been tweaking and trying to find ways to promote the application software so and youngest the two companies you can look at wider.

Out into our ecosystem partners and Theres also the cooperation between WPS and kicked up and bite them.

So I would say that across our two ecosystem ecosystem.

<unk> always maintained multi dimensional and strong relationships.

Thank you.

I think you are right now I would take on a second question on fiber briefly a few points.

First of all.

You probably also comes out of this in the.

The pricing environment, especially not only on the supply side a lot of our clients has been very stable. So when they look at all our major products are part of our contribution margin or gross margin has been rather stable. So that's actually not the reason that backing all gross margin in Q3.

Kind of a true.

Also I.

I know that in most of the enterprise so it ought to be industry in China.

The parochial regiment will be negotiated on an annual basis, which means that right. Now we are already in the Q4. So we are getting into the process to negotiate the pricing in terms of.

The volume the quality and all the key terms with all major suppliers.

Right now in the process of collapsing the Hiseq budgeting inside information from our key accounts. That's why we do believe for next year. We can do a good amount of analysis and the matching of demand and supply and further improving the utilization. So that's why I think.

The mismatch on the resale side it can be gradually.

Mitigated by the end of this year so for next year given it.

It's going to be a new annual contracts for some of our key clients and also some of the key vendors.

So the pricing on the gross margin can be further mitigate it so that's going to be a short term impact point about three for next year as you're asking about capex either for the same dollar we're definitely proud highest that into a high quality potential revenue streams. So when I look at that on a.

I consider it to spend on a serious of us rather than the Cpus are high on Cpus or the NPL will for next year, how does that change with a high quality procurement arrangement and we believe that will indirectly and directly converted into a potential of a high quality revenue stream going forward and also if you remember in our recent Investor day.

Actually Intel has been partnered with us to host an investor day about that actually also include information that we are partnering with our key vendors and I'm not gonna have a director of regimens with our key vendors to secure high quality.

Fundamentally infrastructures and the last point.

And for next year, we also will continue to build our own infrastructures.

Recent quarter would have closed very successfully on time for the Tianjin in data center for the first phase for a second phase for another 30000 cabinets I will we will basically platform are starting to plan for next year and that we're adding to our new revenue streams for that probably caused a revenue opportunity.

Summary.

Second in a row to see net incremental revenue over the honeymoon off the public cloud business I think that will happen.

Naturally to mitigate the impact of the mismatch and after.

After after.

Office and it will gradually improving the gross margin going forward.

Thank you.

Thank you.

Okay.

Your next question comes from Thomas Chong from Jefferies. Please ask your question.

So you said funny tones, a day, so all of that to you as well.

So I wouldn't you saw woman.

So it doesn't seem that the other critical financial one Oh.

So I wouldn't say that those sure.

While the common side woman, so do they tend to be well below Mayo, you've got I'll keep you I wasn't sure though.

If I heard that you got some of the other.

It's just when you thought that was true.

Alright.

I don't see you got portrayed English.

So it woman.

So it's interesting.

Interest that caused by a lot but boy are adults.

Yes.

It's.

Long term the market the pocket P J.

Oh, yes, sorry.

First of all when you got from noble.

Sure.

But when you do those would it be.

Sure.

Yes.

So when you start those up.

You may begin.

Yeah, well you guys Sogou the Ito.

So it'll be all Jesse.

Oh, Thanks management for taking my questions. My first question is regarding.

The old customers.

This year, we have had that Amit.

One of those or the Internet Giants.

Just wanted to get to say this about that revenue contribution over the next couple of years as they ramp up.

In terms of club and my second question is regarding our long term.

Our assumptions are in terms of the Repping Neal.

And as far as the mix between <unk> and.

And enterprise quote and order via firm sorry about this fall we given that.

The Beijing, if I may.

Effects.

A lot of the different business I think we'll look at I'll say about it.

About.

The contribution coming from Beijing, or any qualitative color would be great. Thank you.

Sure.

Oh no.

Sure and you're going to see it all.

Put them on pump.

That's a moment when he knows what I'm going to go backwards on truthful.

L a cohort come inside to support doing so well.

Sure.

That's helpful.

Oh Youre welcome to yield issues on regulatory issues could be to understand though that to your question.

I just don't know now because it just.

So as to who who need them.

And what is your cool quarter to be honest yountville judiciary or what was that.

Later, we will conduct the town to cope with you that they are all coming to us.

Sure.

Well sure.

Untreatable.

You saw what or who keeps that.

Hi, Neil.

Therefore that would refer to as good.

Sure.

On the Dupont, regardless of oil even at the home.

Yes.

Well is it going into that.

Got.

So that's what we do.

This is a blood to the system without even talking to us.

The whole pools with and without that I share with you about exactly what Ralph how are you.

As usual she says.

China onshore.

Yeah sure.

I think there themselves.

Yeah.

Because it's important to listen online Tonight, that's wonderful.

There's a separate team to go about Houghton.

Before either because you're talking to each of them.

So lumpy.

So too.

If you believe that this is useful.

Got it.

Cumulative.

As I close on more particular to anticipate in the U.

You can actually oftentimes, that's a particular woman.

Uh huh.

Sure sure.

Indeed, some with a young child I'm sure fire sure Okay.

So in theory, you can get in the Kingdom of Tinder users can comment.

Oh, My God, you don't see it on the transceiver utility.

What I said.

So thank.

Thank you very much for question.

As you pointed out the larger Internet names like you mentioned matewan and pins, although I have to chew, who the multi cloud deployment for them.

Is an inevitable choice both from a technology perspective, and from a business or commercial perspective.

And I've mentioned, it kicked up a cloud as professional and neutral cloud.

Cloud provider.

Also there.

And top choice.

We do think I'm constantly.

Currently the revenue and the growth of these customers have been very stable.

And.

Unfortunately, we don't have like detailed numbers as a percentage of revenue, but we do see them to continue to grow a very stable and on the on the on the good trend.

Now in terms of the macro environment uncertainty that I mentioned.

I also play into a public cloud and enterprise cloud space with them too.

Got briefly respectively in the public cloud space I've mentioned I do think it's going to be a short term impact and once this is over it is going to enter into a larger business cycle, where we expect to see.

Our growth to accelerate in.

In the industry cloud space, the demand remains very strong and.

One of the factors affecting factors are one is power shortage and be out of it and that makes the power shortage has already been.

Largely been resolved.

Pandemic impact has been alleviated.

Our ways to fight this on that game.

Impact are leveraging Camelot local teams to a trial.

To catch up with the progress and to deliver revenue.

Now as I.

Mentioned before the impact on baking actually because we are locally based in Beijing. So we do not have any material impact.

In Beijing.

Due to the.

Pandemic controlled measures, thank you and I'll leave the margin.

Question for Henri.

Yeah.

Thank you.

Uh huh.

On the margin so first of all on the automation that.

We still keep the same attention.

To deliver an improving margin profile for the long term so both gross margin and non-GAAP EBITDA margin one of the priorities. While we're thinking about next year. So that's why as I just mentioned and why do we think about the demand and supply side.

How about the pricing environment and also how we optimize all of our personnel expenses. These are the key priorities for next year's budgeting process as we are doing today.

So that's why we probably at this moment.

On the call and not give a very clear guidance for the EBITDA margin breakeven timing, but as some of the audience. Maybe remember we did have an intention to have that margin improvement to be delivered in the near term.

And this is the first point the second point I think.

Given the high quality revenue opportunities is also a key area of focus for next year. So when I think about a kind of expenditures and how that convert it into the revenue opportunity and how that impacts both on the gross margin D&A expenses will get about what we will do a very thorough analysis.

That impact for the margin improvement so as a result, we want to say at this moment is nothing.

And I think for next year.

Hopefully you will see on annual basis, both gross margin and non-GAAP EBITDA margin will see improvement compared with Ses on an annual basis I think we remain confident on that objective. However, the timing and scale of that hopefully will get communicated once we complete the prudent budgeting process.

Thank you.

Thank you.

Yeah.

We will take the final question from Kyna Wong from Credit Suisse. Please ask your question.

We thank you for taking my patient I didn't catch it I almost want to say the winter.

No I can't Lindsay just to thank goodness.

Anyway, let's see how he does.

Can you just can I think of course anything hearing about 10 minutes or so.

It does of course interesting yeah yeah.

Uh huh.

Uh Huh chunky and yes, it always had been going Oh, yeah, it's been down that path to acre capability, let's say wait now anyway.

Yeah.

As he said.

And guy like tissue say Cortina.

Passing to frontline took season two Sunday he got a digger.

For the acre.

We haven't seen cause acre holiday sets, you said that your content so closely that they finish it quite wine Guy I shouldn't say you know what.

Yeah.

Okay.

But terminator offering that day that said of course hometown pet is a positive right now.

And can I say, Oh, yeah, okay.

Okay.

Yeah that does.

I do see that yeah quite a few months now.

Uh-huh I'm not sick of us in that country I think your enterprise call. It just hanging in Japan.

Sure.

And so I took a pause.

And Zika I'm, saying, Oh, they kind of danger Corporately here. He said I said, a doctor Union City, that's going on.

Yeah.

So I think I always severely.

And they get kind of a side I know, it's a good thing.

Yeah. The first question actually we are looking for more.

Visibility or ideas on the Oh from the company on the path.

Kind of 30 enhancements in the future I mean, even after I can oh cooperations with by then and the second question is about well kind of like how do you see policy changes that may impact the public call.

I always say D I B C.

Separate from the R&R as well or your own, especially with my enterprise Com. So thank you.

But it is not part of it.

You tube a trigger.

Passenger yields you show them insights Union until you without knowing the rules.

<unk> E mail sorry, if that's what you knew you were going to get all the parts of the time between Ctrip and we can't say what are you doing countries releasing.

And with the U S B, although I'm sure we'll come to you who don't give you a little differently. It should come with it so it took a while ago.

Bush undertake a plethora of different people.

So you've got a whole team here at the home.

With that I just showed you.

The bigger part of the original one.

Taking a lot of other folks out there.

If you don't do it when you do go to go out because I do see though Peter.

Ooh.

I did see the.

Teachers, who with whom you can golfing, we budget of Oklahoma City territories are truly being.

Todd.

We didn't have the scale either way.

If you don't go through we'll go down to someone with them.

Sure sure.

Okay.

Sure.

Sheldon.

Ctrip Joshua young children and adults.

So it gives them to touch on the new software that goes in.

Schindler drilling fluids Korea turned out to the country quite useful.

So you can go to Youtube.

We're gonna be a few go door to door.

Which went into Cleveland Citadel claim frequencies and wanted to.

Oh I see.

So in terms of tax capabilities.

In fact.

Our possibility in terms of particular verticals for example, financial services health care and our big data capabilities.

Have actually becoming more and more leading in the in the up here.

And also we have seen increasing revenue percentage and the promotion of margin. It has brought to us through our business now.

We do believe that we will continue to increase our investment and development of power capabilities.

Those areas in those verticals that we choose to focus on however, if we don't think this is anyway in conflicts without corporation with volcano engine or buy that.

In relation to your question about ITC policy.

We do not really think that any policy changes will have any material impact to the public cloud I do see it as explained earlier, we do think that the public call I didn't see it they generally have relatively high standards and they have been built according to the latest.

Government policies and guidelines, including the idea is that we built ourselves and then we do not think they are going to be negatively affected in terms of the ITC is for enterprise.

Our customers are the.

The impact mainly.

It came because of the abruptness of the policy change from the from the government I E. The power shortage and we do think that in the future they will be able to adjust to any policy changes in that space.

Thank you.

Yes.

At this point I would now to hand, the call back to Nikolas Chen for closing remarks.

Thank you operator, and once again, thanks, everyone for joining us today Covid, how any further questions. Please feel free to contact the forward to speaking with you again last quarter.

Thank you that does conclude our conference for today. Thank you for participating you may now all disconnect.