Q4 2021 Kingsoft Cloud Holdings Ltd Earnings Call
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Good day, and welcome to Kings off clouds fourth quarter and fiscal year 2021 earnings conference call. At this time, all participants are in a listen only mode.
After the Speakers' presentation, there'll be a question and answer session.
I'll ask a question during the session you will need to press Star then one on your touch tone telephone if anyone should require assistance. During the conference. Please press Star then zero to reach an operator.
As a reminder, this call's being recorded.
Like to turn the call over to Nicole Shan IR manager of King's off cloud you may begin.
And you know Michelle Hello, everyone. Thanks for joining us today himself plus what's called her into fiscal year 'twenty. One earnings release was distributed earlier today and is available on our IR website at IR Delta T. As why you Wouldnt they'll call as well as our global newswire. So is it on the call today.
For him to yourself Wow, we have our CEO . It's are you doing well and the CFO Mr. Jorge Cool Mr. Huang will review our business operations and the company highlights followed by Mr. Ho, who will discuss the financials and the guidance there will be available to answer your question I'm doing go to I session that follows there would be conceptually integration.
Operations of oil companies and their reference purposes, only and cause of I need to scripts being managed by the same as in the Orange Bowl language for well before we begin I would like to remind you that this conference call contains forward looking statements within the meaning of section 21 E of the Securities Exchange Act of Nike 34 at the Monday and that's D.
I mean, the U S. Probably it's a crazy litigation Reform Act of 19 that spot as forward looking statements are based upon management's current expectation and current market and operating conditions and their religious Li one study well known or unknown risks uncertainties and other factors all of bleach are difficult to predict and many of which are beyond the company's.
Control, which may cause the company's actual results performance or achievements to differ materially from those in the forward looking statements further information regarding these and other risks.
All factors are included in the company's filings with the U S. M. D. C. The company does not undertake any obligation to update any forward looking statements 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.
First call on.
It's now my pleasure to introduce our CEO are you do you want to please go ahead.
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Thank you Nicole and thank you all for joining our fourth quarter and fiscal year 2021 earnings call.
In the fourth quarter, we generated RMB 266 billion in total revenues, representing an increase of 38% year over year.
Cloud services revenue reached RMB 153 billion and our enterprise cloud services revenues reached RMB, one 3 billion up 111% year over year.
For the full year of 2021, our total revenues reached RMB 9.06 billion, an increase of 38% year over year, I'm on which our public cloud and enterprise cloud services revenues reached RMB 616 billion and RMB 290 billion respectively.
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2021 was a year full of challenges as opportunities.
Internet sector faced the pressures from market headwinds, new regulation and the pandemic, especially in the second half of the year.
Within public cloud services traffic driven demand continued to grow but at a slower pace as internet companies began to take a more cautious approach to investing in new businesses.
Nevertheless to proactively embrace changes and better align ourselves with the evolving market environment, We conducted a strategic review of our business and carried out repositioning initiatives.
We intend to optimize resource allocation to our board cloud services, which enjoy healthy margin to achieve above industry core business growth.
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Currently we have already started adjusting our CDN services are done.
And to the slow down in CDO demand. She didn't demand we are optimizing our underlying resources downsizing CDN nodes improving team efficiency in an effort to balance scale and the profitability and facilitate healthy and sustainable growth.
In addition, the gradually optimize resource allocation to our higher margin services, including computing Big data and database products and solutions as we continued to strengthen our technology competitiveness and improved customer stickiness.
Due to supply side, I'm taller array rigidity, resulting from contract term restriction.
While the adjustments had a negative impact on our public cloud revenue and the overall margin in Q4, we expect to see our adjusted gross margin and EBITDA margin improved in the first quarter of 2022, compared with Q4 of 2021 .
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With a successful track record and years of experience, we have established a closer relationship with a large premium customer base.
This positions us at the advantageous frontline of tapping into our customers' different needs.
And our cross selling a rich offering portfolio.
During the quarter, we selectively expanded our high value added video services and explore different scenarios and projects with high computing power need which we can offer.
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In video space, we provided cloud elastic computing and auto computing products to our clients quite show a leading short video platform in China and facilitated the establishment of its live streaming solicitations in Beijing.
<unk> comprehensive capabilities, including but not limited to reporting data storage fast coding and especially that they shouldn't have helped quite a show improve the user experience of its live streaming business.
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Turning to the intelligent mobility sector.
Our customer show cheap car hailing served as the exclusive taxi service provider for the Beijing Winter Olympic games.
As a digitalization partner I'll show cheap we.
We provided a full suite of cloud services to help at the liver is stable and smooth online mobility experience.
Our solution deployed several key technologies, including micro services engine Dev ops function computing and covered five major areas, including software R&D processes computing resources architectural framework data storage and processing as well as security.
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On the gaming front the cubic meter of cloud gaming program, which we launched together with Xiaomi Nico Interactive entertainment and welding made it official debut on Xiaomi TV and Xiaomi phones.
Proud to provide the professional full stack cloud gaming solution and to serve as a cloud computing power provider.
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Moving to the enterprise cloud business.
All revenues to maintain a fast growth benefiting from the continued the trend of digital transformation.
Earlier this year, we announced the appointment of Mr. Chau, who while he has our president in charge of public service business unit, while he continued they're responsible for Campbell of operations and management.
Your appointment will accelerate the integration of hemlock into the company and promote the efficient growth of our enterprise cloud services shows.
So who joined Camelot in 2016 and is currently responsible for its overall operation and management.
Before that he worked as a vice president at IBM Global headquarter.
He has over 27 years of experience and expertise in corporate governance and management consulting.
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Further on the integration with catalog, we have made progress in terms of resources sharing off each other's technology products and customer base over the past few months.
As part of himself cloud Chemlawn Hasnt started the first cooperation with Kings of office software.
The company and catalogs have been jointly engaging customers ranging from the internet new retail to consumer sectors and jointly work on solutions deployment in places, including Beijing Council Council and Hubei provinces.
We expect this year to be a year of accelerated integration of our resources, including technology product solution talent and customer base, thereby deepen our customer engagement and propel the rapid growth of our enterprise cloud business.
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With the approval of top down planning of National integrated data center across our system.
Construction of commercial which is fun for transporting data from different regions to western region for storage and calculation is officially launched.
As a leading cloud company with core technology capability, we are taking part in this project.
So far we have built a data center and delivered after first a pilot project for the Chin Young cluster industrial computing hub, which is one of the 10 national clusters.
At the same time, we're also deploying big data projects in computing hub, including the Guangdong, Hong Kong, Macau, Greater Bay area, and the Yangtze River Delta region.
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In addition, as Beijing public service cloud provider, we provided intensive fiber security support and services to the public service platform during the Beijing 2022 Winter Olympics.
We implemented various cyber security protection measures, including resource guarantee automatic alarm services onsite support service and cyber security guarantee services.
Doing so we say the guard at the efficient and stable operations of over 300 public service system for more than 20 departments and the bureaus.
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I will now pass the call over to our CFO Henry to go over our financials for the quarter.
And how are you doing.
And welcome everyone for joining the call before diving into the financial details I would like to walk you through the following summary for the past quarter.
Our gross margin this quarter declined sequentially due to the adverse impact from our IDIOM product <unk>.
Despite a challenging market environment, we were able to remain stable relationship with our printer customers, including leading to another client however, as a new technology budget from the Internet sector clients in general has been increasing at a slower pace than expected starting from second half of last year.
They're meant to us has been softened and affected all public cloud revenue on a top line and also affected our resource efficiency connected to our bottom line.
We expect to see our adjusted gross margin and adjusted EBITDA margin to improve in Q1, 2022 compared with Q4 and you're trying to what well also take more active control cost control measures implemented to optimal resource allocation plan and improve our overall operational efficiency to achieve adjusted.
At EBITDA breakeven in Q4 and plenty of time.
Amounting to 6.71 theater at RMB, providing us sufficient liquidity for operations.
However, maintaining our disciplined approach to Capex and also expect to achieve our full year Capex plan in the range of one to one of our pillars for 'twenty two.
Now I will go through our financials in more detail in.
In Q4 cost of revenue grew 44% a year over year.
Two 2.63 billion RMB, the major cost component, what IDC costs consisting of bandwidth.
We committed earlier of 2020 , one despite a weaker than expected. He met further we disposed of some lower utilized I D say resources, causing certain one time off expenses.
As a result, our leasing costs grew 22% year over year to 1.32 would be that RMB in Q4, depreciation and amortization costs were $227 3 million RMB.
<unk> costs were $361 8 million RMB that increase reflect the stock cost of delivering enterprise cloud project by Camelot.
Cost increased by 34% to $720 7 million RMB, which was mainly due to the revenue growth and offset by the cost savings synergies from Camelot and improving your appointment efficiency.
In terms of expenses, we have a carryout integration with camelot to maximize synergies, including organizational alignment and integration based on our business needs and our product research plus it costs, one time expenses for the quarter.
Impact expected to gradually decrease starting from Q1, 2022 and expenses as a percent of total revenue expected to be at a similar level with the previous quarters.
Total non-GAAP operating expenses were 538 point formula RMB, increasing sequentially from $432 8 million in Q3, excluding share based compensation at a DNA adjusted R&D expenses were 244.4 million R&D as a percentage of total revenue.
Expenses decreased slightly from nine 5% in Q3 to nine 2% in this quarter adjusted selling and marketing expenses were $124 8 million RMB.
That is our total revenue they increased from four 2% in Q3 to four 7% in this quarter.
Adjusted G&A expenses were $169 2 million RMB.
Percentage of total revenue the increased four 2% in Q3 to six 4% in this quarter.
As of December 31, 2021, we had sufficient cash and cash equivalents and short term deposits amounted to $6 71 billion RMB. During this quarter. The Capex was 107.
The 8 million RMB and therefore, your Capex was 735.
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To provide our shareholders with greater liquidity and protection, we have already launched a preparation for Duke primary listing in main bar of Hong Kong stock exchange we.
We are one of very few Chinese ADR with St. Pauls Landshark, one vote single class share structure.
Before I speak of IPO on NASDAQ in 2020, we had being a subsidiary of <unk> group for almost a decade, whereby king subgroup itself in Hong Kong listed company was transparent track record of disclosure, including ours.
Why is the ongoing operation is subject to various factors from regulatory approvals and market conditions. We believe the above mentioned factors presents us favorable conditions.
Based on prevailing market practice and the listing rules assuming a successful due primarily the Hong Kong listing status will not be contingent on a U S listing status and other case would be for secondary listing as defining alcohol as singles there.
Could be eligible to be included as a constituent of hometown composite index theorist potentially we may also be eligible to be added into China, Hong Kong stock connect in the future.
Through the process, we are expect to grab opportunities to further cooperate with our strategic partners in larger and more diversified shareholder base and improved liquidity for shareholders.
In the Meanwhile, we have always.
Maintain close in a multinational corporation with our strategic shareholders, namely in Kings Hill Group and Xiaomi recently to further strengthen our capital type sign a strategic cooperation and antibiotics agreement with both parties. According to the agreement tensile Goober in a show me it will have the right to participate in all the subsequent.
Capital market financing transaction and increase that investment on a per order basis.
Subject to regulatory approval and market conditions.
In terms of data security and privacy, we have attend the enterprise privacy and data governance certification from trustee.
Production has always been one of our key priority we're happy.
We'll remain committed to managing data and compliance with laws and regulation the industry best practice, and a leading international standards to provide a stable and a secure environment for our stakeholders.
Our company is also preparing the 20th Honeywell Yesterday report, which is expected to be published in May.
We do understand our shareholders focus on our company revenue and our profit outlook.
Especially during the volatile market environment.
I'd like to offer more details to help our shareholders on a static company priorities and objectives.
First of all we expect our total revenue to be between 2.05 billion RMB added 215 billion and RMB for the fourth quarter of 2022, representing a year over year increase of 13% to 19%, we prioritize our investments into a CGM product and.
Improved mix of high quality cloud product offerings as a result, the revenue auxilium product could it be decline.
Ultimately, 20% to 25% year over year in Q1, 'twenty, if any what we expect the revenue from our core cloud services, including our high quality computing services and enterprise cloud services to remain rapid and healthy growth increasing by around 49% to 55%.
Over here in Q1, 'twenty or 'twenty two.
Second we also in our view that our profitability is expected to improve starting Q1 plenty of 'twenty two.
Adjusted gross margin and adjusted EBITDA margin will be higher in the first quarter of 2020 two compared with Q4 on a stable market condition assumptions, we expect our quarterly adjusted EBITDA margin to a term breakeven by Q4 'twenty to 'twenty two.
Well continue to remain prudent on Capex that we expect our full year capex for 'twenty or 'twenty two will be between one to one 5 billion RMB.
Which will be sufficient to support the sustainable growth of our high quality of product offerings.
We would like also to point out that on a typical cloud economic model generating revenue was from existing demands only require relatively small size of maintenance capex. Our capex plan for 2020 two will be a prior highs to meet the new incremental demands of high quality products.
Which the company has a good level of discretion to adjust on the different market conditions.
Finally, we are hearing voices from shareholders and our company is in our view that the current market valuation significantly deviates from our long term intrinsic value.
The company is currently actively exploring viable capital market options and the tools, including but not limited to adopting share repurchase programs to deliver long term values to our shareholders.
This forecast and comments above are based on our current and the preliminary views of the market and operational conditions, which are subject to a church. Thank you.
Thank you. This concludes our prepared remarks that toilet Shannon we are now.
Three jobs out of Pennsylvania, both Maryann English Armstrong Oh Bruno Please go ahead.
As a reminder, if you'd like to ask a question. Please press Star then one if your question has been answered and we'd like to move yourself in the queue press the pound key.
First question comes from Brian Gong with Citi. Your line is open.
The Union vitamins. Thanks for taking my question two questions. Firstly is that how should we look at public cloud the growth for the full year 'twenty to 'twenty two.
Given the macro sulfonation mobile are restructured to be dull and the whole wheel, we drove strong gross on computing and storage services and the second question is on the price quote commencement share close outlook about our new segments are what would it be the.
Organic growth looked like and what would it be can be a little squirrel suite. Thank you.
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Allow me to briefly translate for lunch.
Awesome.
So in terms of public cloud we.
We think that arguably is actually similar to a lot of the larger firms in the internet space, which obviously, we're experiencing a slowdown in 2021 all of the demand from the Internet space, which constitutes the majority of our public cloud business.
Our customer space. However, I think on one hand, we are seeing the demand from town, but on the other hand because of this this customers in the Internet space are also doing cost cutting which migrating and increasing the use on public health will actually benefit them from a saving.
And therefore, the general observation and what we see is that a new demand for public.
Public cloud service seems to be slowing down however, the the usage.
Percentage, how we actually do believe that there's a potential for that number to increase.
And Oh that's.
For that for that same reason, we do see that from 25 to 2023 and only 24 on a medium term.
Time timeframe are we do feel that in a relatively optimistic for the growth of pumping hop series.
Situation around PJM is a little bit different.
Costs basically we see that are not the type of thing.
Videos actually remained a part okay. However, the issue is actually out round, the uncertainty and volatility of the business, which caused our efficiency and our profit margin to decrease. So therefore, that's brought about the adjustment that we talked about in the prepared remarks and to get rid off.
Some of the lower lower efficiency resources and CDN notes. However, it is also worth pointing out that in the computing and storage side of the business within the public cloud business.
There's much less impacted and we are still seeing robust growth as Henry commentary just now a while the CDN business, we are adjusting downwards to announce it.
It's still growing significantly faster.
And at a pace.
It will be.
In terms of in terms of my enterprise, we do see still see a very strong growth demand.
The fourth quarter I'm 2021 throughout 2022, we think the issue is with the Covid situation.
We do believe that the demand is there there's tremendous demand for industry cloud for enterprise cloud. However, the issue is that the COVID-19 situation increases the uncertainty of such projects.
So what we as an enterprise it to do is to comprehensively evaluate and five cloud project.
In all this demand huge demand in the market.
The parameters of implementation cycles from project quality et cetera.
And to balance out that business scale and profitability and rolled out of the office business and in terms of our integration with <unk>, we have actually.
<unk> made great inroads into integration with Camelot in the book in the fourth quarter of last year. So actually we are jointly working on engaging with customers starting that.
We also see great potential in our improving.
Improving anti aging and growing the business.
Okay.
Thank you that's very helpful.
Our next question comes from the things I always see I see your line is open.
Hey, Jim.
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Oh, Thanks for taking my questions I have two questions.
So first is about the competition.
We can see that I didn't catch it and why we are becoming more and more active in enterprise cloud. So is the competition heating up the verticals like healthcare financial industry, and public service et cetera, and with D. E pads are the company enterprise cloud.
Margin in the coming quarters, and secondly is that that is about a probably a couch.
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You said something about you know them quite well without telling me a drink butchers food.
You can see here coming up in wishing you go they go tolling, though seen times when you thought the country seems to differ if at all to see a woman theaters that are yoda accomplished all of them that have been coming down but being seen in China.
Well if you are in good hands with government.
Yeah sung hwan Chan will no doubt at all that got out there for you.
I'm comfortable that they qualify younger not that hung yeah. It does.
Who's a little closer to what kind of a little girl com, Yeah cool pool, the huge OTR corridor.
Yes, sure sell mode.
Yeah, and fosters real hooked up with adult heating and locum question holds it up.
Young.
Oh sure to do something with your entrance in the you go through all of the if you go to other you have a long time.
So in terms of competition that you mentioned for enterprise.
As I mentioned just now.
Industry the market demand is huge.
At the current stage the key issue to be resolved, it's really to meet Uh huh.
Our partners rather than worrying about the competition in this explosively growing market.
Two things one is the coffee situations complicated.
The the issues at hand, which impacts the deployment speed.
And increases uncertainty of project delivery and secondly, as you know.
There are so many verticals and so many industries for a digital transformation and for the adoption of industry and enterprise cloud.
Both are such demand requires a cloud service providers to enhance their local services to meet the needs of our clients.
So that actually means that the each are called vendors all in capabilities is more important now shifting to our own competitive edges theres several things I'd like to highlight one is that we have entered into three verticals of our choice.
Namely public services financial services, and and health care and we have had already a quite significant accumulation of expertise and knowhow and have achieved a one of the fastest growth rates in the Chinese market. So we have already accumulated customer and product and solution.
Vintages.
In that in that regard and secondly, our integration with Camelot has been relatively city and therefore not greatly in our.
Our capability of servicing clients of delivering and in particular of cross region surveys capabilities and that is particularly advantageous to us in under the situation of Covid disruption.
In terms of R&D focus when do you think.
Our view is that the technology evolution of customers. It is not something like from zero to one the continuity of the technology as a product.
Are generally good so it is a continuous process of providing a more stable and more powerful solutions and end product. So we will continue to focus on four ice products, the operating that scale and performance and capability and in particular some of the.
Application moves onto the past level, we are doing our research our R&D focus on big data Big data analytics database and containers.
Oh, and I would point out like I mentioned is that it is becoming increasingly important to combine the technology and public cloud.
It is with the needs of industry clients with the explosive growth of an industry cloud.
Which will have a significant impact in the delivery speed and stability and the operation of those projects once they are adopted.
Okay. Thank you.
Our next question comes from Thomas Chong with Jefferies. Your line is open.
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It's all about if you oh, well they wouldn't easier Guan yu.
Tim.
But it's unclear.
Oh sure.
And they come from.
And then myself all high something when you thought you might say inside I think Giovanni I O J E T.
Well it seems like a more kind of some.
Some funding can stop I mean are they seeing long drill.
Can you hold the hottest Susana diet, whether you saw a woman.
Margin.
But you'll kind of.
Thanks management for taking my questions I have questions. My first question.
Updates on the regulatory and vitamins and.
And second is about the growth rate in the first and the second half.
The macro headwinds and the corpus situation and my first question is about our long time my margin assumption I. Thank you.
Yeah.
Oh, not equal to sure a frenzy, though yeah. Tim was then once we're sure doesn't call I'm not sure. What does he was familiar with Evo women's Felicia I strip Ultra woman, who called in golf, but we also are using once you go about Germany.
Your son or not yet about what actually the answer is I don't know that your woman.
Or what else would you target.
Yeah, the Jin Guan torture kind of a moot yen a meal convene should take RCC social automobile Ron Yeah, there's somewhat of a 10 watt whatever amount with it.
Goodbye.
I think what we're trying to see you all a.
One of them that hung even loss ratio. What you told me I cannot tell you because I talked for someone that Tricia I forgot about it off with a boost as well.
That completes in the pilot.
It didn't go up.
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Yes, I'm going to come.
So I was just in one of the tuition fees to tender.
If I worked with Trimble.
For the two goals.
No doubt go to three 1% a year with us.
So food, though.
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How long ago, but not somebody or not I don't know what your dog sounds good I saw ebay.
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What you've done great with someone.
Sure.
A couple of months you sold and then kind of what can go wrong, yeah. The cause.
You know me across Youtube amongst all of US what do you think of when they go they attended the some food.
Somebody Norway.
70, Shin young.
Or somebody like that way.
We are used to.
Some color on the woman the sunbelt and quantity, if you're calling it a lot easier yet to alphatec couldn't do it.
Oh Jacob.
I think Peter Cardamom, Conger eating kitchen, and translate if you're a woman that Oh can you shouldnt yield them it didnt seem.
From what you have been in people, especially on the shelf.
I want to go home in the Honolulu.
Sure.
We don't quite see the Zynga.
So in Congo.
When the whole I mean, if you do take a closer the English world.
I told him he's a hardy are fun in the.
Somewhere in that regard and pressure to go through.
The whole woman.
Yeah, and the bigger turnkey that they'll close to the EBITDA.
You'd be that Oh, God I sure a little work that all our problems.
No way without Goldman so you're going to get that installed with.
I mean, we're doing quite.
So there you can see from the us.
You bet.
As you said.
So oh regulatory environment I'd like to answer this question from fibrosis.
The compliance of ourselves as a business, we maintained daily communication and frequent communication with our regulators, which we continue to maintain a highest in regulatory and compliance and it talks about and secondly is the general regulatory policies to the Internet and factors on that regard we haven't.
More clear signal from the regulators however on the industry cloud or an enterprise side, we continue to see a government policy support.
Including the that answer which is fine which is transporting August sustainable work that can be a commutation a project the third.
This question is the general attitude from the comments.
Chinese ADR, which we're happy to see some of that stabilizing signals.
We continue to monitor.
And in terms of growth and profitability looking forward, we do think that for the first half of 292. It is likely to be still a adjustment period, where where companies, especially internet companies will continue to adjust for the policy changes that happen in 2020 one.
However, we do believe that as the general environment policy guidance becomes clear, we're still confident with the innovation capability of the sector in general and then which we believe will further drive the recovery and growth of the industry analysts our business in the second half of the year now in terms of ourselves.
As I mentioned, the adjustment and the repositioning of our business. We have made great inroads in progress in that regard and we have almost completed the adjustment.
In order to improve our efficiencies and stability and also improving our financial performance. When do you think that you know the improvement of our financial performance stability is well on track in 2022 and confident of the EBITDA growth.
Adjusted EBITDA margin breaking even in the fourth quarter of 2022, and we do think that in the following year. We're also thrilled to be a year of improving our margin profile.
Yeah.
Our next question comes from Joe <unk> with Nomura. Your line is open.
Uh huh.
Yes, Sean.
Our union women.
Because it required that somebody that you bought Thomas C D and E Commerce was not at all.
Oh, So you should see children, who are you.
I think that tells me where are you in Chicago.
Uh huh.
Yeah.
Are you working on right now.
Yeah, Yeah, Hi P J.
That's all for me.
No matter where that stood.
Oh I got you.
I'm going to argue with that.
The whole audio.
It would seem that you don't see anything like that.
There you go.
Concrete poles that you can issue.
So I have I actually have two questions. The first one is what is the percentage of the CDN business as.
Oh total public cloud business in 2021, and what's the expectation for 'twenty two and the second question is how many how many employees we have at this moment.
And I was trying to find one and how how much prevent it but I'm not sure.
It's about four R&D staff and how many we are going to recur.
Recruit in 'twenty two thank you.
Yeah sure.
Joe This is a Henry hub. So if you really are looking back for the past few years, you've made already out of the trends that.
That's the CDN business has.
Has the decline gradually.
Manage all of our total revenue.
So for the year of 20th Honey was Oh city revenue with annual total revenue already declined below in the range of 30% to 48% and our intention to further reduce the revenue contribution from lithium products carry out into the year I was trying to find a true so I've.
Actually two major objectives first one is we want to cutting back even while relatively stable relationships with our top clients.
A dollar value, but in terms of percentage I think in 2022, our CDN business. It will contribute hopefully a less than 20 or 25% to 25% of the total revenue that it will give us a more diversified revenue streams and also I'd, rather have a higher quality of the revenue contribution.
So this is actually the first point, but again, I think while we evaluate which card or which region, which knows we adjusted well looking deeper into our client relationships and also we're looking to the cross selling opportunities into the computing and storage and it will not harm our relationships with our clients as well as losing a lot of opportunities.
As interim cross selling for other products. So to your second question as you probably already remember that.
Flavio, we completed acquisition of Camelot, which SPD mentioned gave us a great RH being a nationwide network for delivery, especially in the challenging Covid environment and then we're also making some adjustments in the process of realizing the cost synergies in terms of a teams integration. So there are a few information with me.
Sure.
First of all for the OLED overlapping functions with did some active adjustments and alignment and a team integrations that actually will give us more efficiency of the delivery capacity.
And in terms of the total R&D personnel as we disclosed in our IPO prospectus, which actually are very stable S antigen levels over a 6% to 8% so because they're all per cent of kings out cloud employees are R&D related functions and all.
Our total employee size, including the Camelot team has increasing significantly by the end of last year. If you compare with a number of plenty of money and I think that will give us a great capacity to deliver our services from the original cloud cloud native technology that cost, but also give a client highest quality of.
Services and also we can provide a wider range of product and research in house. So I think that'll give us not only capacity, but also more flexibility.
More investment into that culminated with technology, especially moving toward a path and a SaaS function, including the container dockers Big data and the database is what Gideon just mentioned thank you.
Thank you Harry.
Our next question comes from kind of Wong with credit Suisse. Your line is open.
Hum.
With you on that one.
He got not just the capacity because he did you say she does show cleaner dining army 90 minutes, you're seeing Mcdonough.
Mcdonald.
And just can you do you have any.
Self build out.
But anyway.
This isn't a business that you think are I think are good news.
She also told me that tissue.
I value of that nature.
And if so what would I should the tenant began congress yeah that intelligence.
Yeah.
I didn't see that.
Hi, Jessica.
Yeah, I think it should be the Aragon I just missed what kind of dollars I caught up my opinion.
Yeah, you know equal, but I just see the increasing congestion he took a bandwidth.
Lockup usage.
Intending that cause you concern.
Yes.
Uh huh.
Anything you're hunting and shooting I saw that they claimed gosh it great.
I guess just can you hear me.
When she does that I think are changing that they got a snow Lake Oh, yeah exactly.
Exactly.
Yeah, but chipotle in Gaelic ultimately I guess those out that take a while you do that Oh gosh I should do that.
So let me translate.
So the first question is about the Catherine kept us like a breakdown of how much it'll be self build I D C.
Yes.
Restructuring our restructuring.
It's about 2022 and the second one is about that.
One of the car.
And he walked the lockup usage of bandwidth.
That's actually a redundancy cost of redundancy of underlying expenses, but we believe.
It could be some like contract that you signed with the operator about the bandwidth.
Where should we expect them to at the end of the lockup period end.
We should consider that the overall cost structure in pools in 2022, I think you have a new.
Ah contract they deal with the operator.
Yes.
Uh huh.
Thank God, we're not restricted.
When it come back for the Army.
Arlen I know a woman the year with the syngas.
As you saw on the kind of.
Yeah look we want to hear some good they don't churn kudos go.
Or sometimes without any goodwill basically they tend to do so.
So you shouldn't count woman <unk> Nguyen the Capex to total though.
Oh, Hi, Sophie hundreds into Crystal Orange Armenia.
Oh, you're talking about how old the peak loss at a woman.
Until they get too hot too shallow water, but they all come on certain elements I Junior Oslo Kai who can deal with what is the total number that we all heard that people sit into your plan.
So it's another thing to see the bulk of the enzyme that's a good year with a huge Ohio for a doctor.
The Bulldogs Englisher Dolan.
All of us to go sell it or what do you do with you know I'll be honest the womens.
Well Miss you too they find sea legs into the T cells.
You wouldn't think that it is somebody like well.
Yeah.
Okay. Good.
It's actually on the tusa.
They go.
Oh no no.
It was $3 two I D C hotels, one of them one of them Patriot doesn't mean that there aren't going to let it go too high for you at all as you pointed out.
I really don't draw on it for the cool pool, the food they actually humility. So if I sound like a sudden but don't see nobody can take a window on the 18th keep Exxon bought in Colorado, So Delaware should a woman from Q U K sure woman.
Lilly EBITA by just offering a true Susana felt he suddenly go quadrant or don't have the 70 this woman coming down the woman seafood little ones I Didnt in Q4, the Hawk computer even without doing don't go usher to collect.
Okay, all right I'll just recap alphabetical.
Oh, Yeah, yeah yeah.
I told you even hot alternative apparel quite for them are digital in between the next two quarters.
Sure.
Okay.
He built it simply women shall be mainly in the queue.
Mostly women already our union appeals without kind of half of the total weight.
Yeah, and I think you said you could see it.
I don't think it's that already are in yes, you know what you know about it but don't call, though there's all kind of in the ballpark I can go on in terms of gender I'd, just say that to your home.
So you'll have that tissue, which I can tell you all of them are going to the highest share of wounds from Saudi Shanghai should deal with them in general.
Well this is the highest really how quickly the artisan.
So.
That's your question.
They saw the.
The nature of cloud computing business, there's always a lead time, which we need to.
Considering plant in order to prepare the resources for providing a service and in previous years, our budgeting and actual money is spent on capex on the money spent how can relatively accurate I. There's already it's really only last year because of the overall market volatility that theres some.
Okay.
And.
As mentioned earlier answering all the questions.
And just my days, it's mainly focuses on the CDN business whereby in fact that the demand is still there and huge however from our perspective because of the increased volatility that decreases our efficiency and profitability and therefore, we thought that we are downsizing.
I think that business. However that adjustment has largely completed in the fourth quarter and with some of the remainder to be completed in the first quarter. This year.
Ah as you rightly pointed out they kept the underlying resource Odyssey does require a HEICO for renegotiation and that has primarily been completed as well. So we do expect to see margin improvement starting in the first quarter after here and in terms of Capex.
The the self constructing that's helpful. I do think capex happening I'm going as planned and you know for every year the fourth quarter.
Relatively.
<unk> has been relatively less than the other quarters due to the seasonality in terms of Capex.
Remember last year, it's a little bit less because of the adjustments that we are conducted so we were a little bit cautious in the in the pacing of that however, we will catch up with that in this year.
Yeah.
There are no further questions I'd like to turn the call back over to Nicole Shannon for any closing remarks.
Thank you Michelle.
Thanks, everyone for joining us.
Yeah.
Feel free to ask.
Look forward to speaking with you again next quarter, telling us that.
This does conclude the program you may now disconnect.
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