Kingsoft Cloud Holdings Limited Q1 2023 Earnings Call
Operator: Ladies and gentlemen, thank you for standing by and welcome to Kingsoft Cloud Q1 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there's going to be a question and answer session. If you wish to ask a question, please press star one one from your telephone. I would now like to hand the conference over to the IR Manager, Nicole Shan. Please go ahead, ma'am.
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Ladies and gentlemen, thank you for standing by and welcome to Kings of Cloud first quarter 2023 earnings conference call. At this time, all participants are in a listen only mode. After the speaker presentation, there's going to be a question and answer session.
If you wish to ask a question, please press star 11 from your telephone. I would not like to end the conference.
Nicole Shan: Thank you, operator. Hello, everyone, and thank you for joining us today. Kingsoft Cloud's Q1 2023 earnings release was distributed earlier today and is available on our IR website at ir.ksyun.com as well as on global newswire services. On the call today from Kingsoft Cloud, we have our vice chairman and CEO, Mr. Zhou Tao, and our CFO, Mr. He Haijian. Mr. Zhou will review our business strategies, operations, and company highlights, followed by Mr. He, who will discuss the financials and the guidance. They will be available to answer your questions during the Q&A session that follows. There will be consecutive interpretation. All interpretations are for your convenience and reference purpose only. In case of any discrepancy, management statement in the original language will prevail.
Confront over to the AR manager, Nicole Shum. Please go ahead, Mar. OK, we have one morefully left, so we can go ahead and save that one for somebody else.
Thank you, operator. Hello everyone and thank you for joining us today. Kinstap Cloud's first quarter 2023 earnings release was distributed earlier today and is available on our IR website at IR.ksyun.com as well as on global news web services.
On the call today from Kings of Cloud, we have our Vice Chairman and CEO Mr. Zhou Tao and our CFO Mr. He Haizan. Mr. Zhou will review our business strategies, operations and company highlights, followed by Mr. He who will discuss the financial data guidance. It will be available to answer our questions during the Q&A session that's on the line.
Nicole Shan: Before we begin, I'd like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the US Private Securities 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 events that involve known or unknown risks, uncertainties, and other factors, all of which 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 this and other risks, uncertainties, or factors are included in the company's filings with the US SEC.
statements within the meaning of Section 21e of the Security Exchange Act of 1934 as defined in the U.S. Private Security Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expeditions and current market and operating conditions.
I relate to events that involve no or unknown risks, uncertainties, and other factors, all of which 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 maturely from those in the forward-looking statements.
Further information regarding this and other risks, uncertainties, or factors are included in the company's filings with the US SEC. 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.
Nicole Shan: 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 conference call are denominated in RMB. It's now my pleasure to introduce our Vice Chairman and CEO, Mr. Zhou. Please go ahead. Thank you.
Finally, please know that, unless otherwise stated, all financial figures mentioned during this conference call are denominated in RMB. It is now my pleasure to introduce our Vice Chairman and CEO , Mr. Zou. Please go ahead. Thank you.
Tao Zou: 大家好，欢迎参加金山云2023年第一季度业绩电话会。我们继续秉承高质量可持续发展的原则，坚持技术立业，以客户为中心，打造全过程口碑，强化经营管理。本季度金山云实现了盈利能力的进一步提升，收入达人民币18.6亿元，兑现了我们的指引。调整后毛利率达10.4%，创历史新高，同比大幅提升6.6个百分点，也是连续第四个季度毛利率稳步提升。调整后毛利额达人民币1.9亿元，创公司单季度毛利额新高，同比上涨1.3倍。正常化调整后，EBITDA利润率为负的5.9%，较上季度大幅提升4.2个百分点。
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[Company Representative] (Kingsoft Cloud): Hello everyone, and thank you all for joining Kingsoft Cloud's Q1 2023 earnings call. We continued to uphold the principle of high quality and sustainable development, build success based on technology and innovation, forge our reputation throughout the entire business process with customer centricity, and enhance our business and operations management. During the quarter, our profitability further improved. Revenue reached RMB 1.86 billion, in line with our guidance. Adjusted gross margin increased to 10.4%, a historical high, and 6.6 percentage points higher than the same period last year. This is also the fourth consecutive quarter that we have recorded a sequential improvement in adjusted gross margin. Adjusted gross profit reached RMB 194.4 million, a historical high and up 133% year-over-year. Normalized adjusted EBITDA margin was -5.9%, which is a significant improvement of 4.2 percentage points higher than the last quarter.
Thank you very much.
Hello everyone and thank you all for joining KingSoft Cloud's first Q1, 2020-23 earnings call.
We continued to uphold the principle of high quality and sustainable development.
build success based on technology and innovation, forge our reputation throughout the entire business process with customer centricity.
and enhance our business and operations management. During the quarter, our profitability further improved.
Revenue reached RMB 1.86 billion, in line with our guidance.
Adjusted graph margin increased to 10.4%, a historical high and 6.6 percentage points higher than the same period last year.
This is also the fourth consecutive quarter that we have recorded a sequential improvement in adjusted gross margin. The gross profit reached RMB $194.4 million, a historical high and up 133% year over year.
Normalized adjusted EBITDA margin was negative 5.9%, which is a significant improvement of 4.2 percentage points higher than the last quarter.
Tao Zou: 接下来我按照公有云、行业云、产品技术以及一季度以来最新进展的这四方面向大家做具体介绍。公有云方面，本季度实现收入11.5亿元，毛利率2.1%，较去年同期的-3.4%显著提升。在公司总体战略的指导下，我们着力围绕三方面下功夫，即小米金山生态、客户结构调整和降本增效。首先，小米金山生态是我们公有云业务的初心和基本盘。我们致力于以一流的产品技术服务好小米金山生态，获得与我们贡献价值匹配的、可持续成长的收入、利润和口碑。本季度来自小米金山生态的收入水平同比增长，占比提高，且利润率健康。我们还主动开展了客户务实的口碑调研，根据调研结果认真分析整改，以不断提高服务口碑。第二，客户结构调整是差异化打法和提升盈利能力的必然选择。我们致力于围绕核心能力持续开拓肩腰部客户，并战略性清退大客户的亏损项目。本季度我们与数十家肩腰部客户签约和洽谈商机，其中不乏新兴领域，如EV领域支持四维图新、黑芝麻等客户的智能车路协同场景。第三，厉行降本增效，强化供应链管理。本季度我们大力处置冗余资源，降低刚性保底带宽，搬迁整合机房，从而提升资源的利用率。我们还利用渠道优势，结合直采和租赁等不同形式，构建算力资源池，精细化匹配不同客户的需求弹性特点，增强了盈利韧性。以上三方面的措施有力保障了本季度公有云财务表现的达成。
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[Company Representative] (Kingsoft Cloud): Next, I will provide some updates on our progress across four key areas: public clouds, enterprise clouds, product and technology, and latest business updates. I'll start with public cloud services. Revenue was RMB 1.15 billion with a gross margin of 2.1%, significantly higher than the -3.4% gross margin in the same period of 2022. Upholding the overall strategy, we emphasized the three main goals for public cloud services, namely: supporting the Xiaomi and Kingsoft ecosystems, optimizing our customer structure, and improving our cost and efficiency profile. On the first point, we are committed to our original vision and fundamental of firmly supporting the Xiaomi and Kingsoft ecosystems with first-class products and technologies that help drive sustainable revenue, profit, and reputation. In this quarter, revenue from the Xiaomi and Kingsoft ecosystems increased year-over-year, represented an increasing portion of our total revenues, and with a healthy margin.
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Next, I will provide some updates on our progress across four key areas, public clouds, enterprise cloud, product and technology, and latest business updates.
I will provide some updates on our progress across four key areas Public Cloud, Enterprise Cloud, Product and Technology and latest business updates. I will start with Public Cloud Services.
Revenue was RMB 1.15 billion with a gross margin of 2.1%, significantly higher than the negative 3.4% gross margin in the same period of 2022.
Uploading the overall strategy, we emphasized three main goals for public cloud services, namely supporting the Xiaomi and Ting
optimizing our customer structure.
and improving our cost and efficiency profile.
On the first point, we are committed to our original vision and fundamental of firmly supporting the Xiaomi and Kingsoft ecosystems with first-class products and technologies that help drive sustainable revenue, profit, and reputation. In this Quorum, we are committed to our original vision and fundamental of firmly supporting the Xiaomi and Kingsoft ecosystems with first-class products and technologies that help drive
Revenue from the Xiaomi and Kingsoft ecosystems increased year over year, represented an increasing portion of our total revenues and with a healthy margin.
[Company Representative] (Kingsoft Cloud): To ensure that we maintain our respective reputation, we proactively reached out to customers to better understand how we can improve services experiences, and adjust our services accordingly. Second, optimizing our customer structure is a critical component of our strategy to build differentiated business approach and boost profitability. We have focused on expanding our customer base among medium-sized businesses, strategically withdrawing from loss-making projects for larger customers. During the quarter, we negotiated or signed deals with dozens of medium-sized customers, including growth factor companies such as EV, vehicle to everything, also known as V2X technology service provider, for example NavInfo, Black Sesame. Third, we implemented strong cost reduction and efficiency improvement initiatives and enhanced supply chain management. During the quarter, we increased our resource utilization rate by eliminating redundancies, reducing rigid minimum bandwidth commitments, and relocating and consolidating IDC racks.
To ensure that we maintain our respective reputation, we proactively reached out to customers to better understand how we can improve services experiences and adjust our services accordingly.
Second, optimizing our customer structure is a critical component of our strategy to build differentiated business approach and boost profitability.
We have focused on expanding our customer base among medium-sized businesses.
strategically withdrawing from lock making project for larger customers.
During the quarter, we negotiated or signed deals with dozens of medium-sized customers, including growth sector companies such as EV Vehicle to Everything, also known as V2X service providers, for example, Navin
Third, we implemented strong cost reduction and efficiency improvement initiatives and enhanced supply chain management. During the quarter, we increased our resource utilization rate by eliminating redundancies.
[Company Representative] (Kingsoft Cloud): We also leveraged our diverse channels to build a computing power resource pool that relies on a combination of directly owned and leased assets, enabling us to nimbly match the demand elasticity of different clients while protecting our profitability. These initiatives provided a strong foundation for improving the financial performance of our public cloud business for this quarter.
reducing rigid minimum bandwidth commitments, and relocating and consolidating IDC REX. We also leveraged our diverse channels to build a computing power resource pool that relies on a combination of directly owned and leased assets.
enabling us to nimbly match the demand elasticity of different clients while protecting our profitability.
These initiatives provided a strong foundation for improving the financial performance of our public cloud business for this quarter.
Tao Zou: 行业云方面，本季度实现收入7.1亿元，毛利率为24%，较去年同期的16%大幅提升。我们继续从客户质量、业务可持续性、核心能力沉淀复用和利润率这四个维度严格把关。在公共服务领域，我们继续拓展政务云和国资云业务。本季度，我们第9年续签北京政务云，并在山东、上海等地开拓国资云政务云项目。经过多年的发展，天山云承接此类业务模式清晰成熟，利润率健康，可持续性强，且孕育大量高附加值数据类项目机会。在数字健康领域，我们全力夯实五大模式，即区域健康云模式、影像云模式、医共体模式、区域一体化模式和智慧医院模式，以差异化的打法开拓市场，沉淀和复用能力。本季度，我们在数据技服务的产品矩阵、数据中台、切入院端场景和国情化适配方面取得重大进展，并启动由天山云牵头的国家重点研发项目：生物与信息融合的重点专项。未来将以更强大的数字健康领域技术产品力，驱动五大模式深入推进。在金融领域，我们完成兴业银行、中信银行等大型股份制银行的大数据平台建设项目，深入拓展既有客户的增量需求，专注天山云拥有的独特优势的大数据领域。
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[Company Representative] (Kingsoft Cloud): Moving on to enterprise cloud services. Revenue was RMB 710 million with a gross margin of 24%, a significant improvement from 16% in the same period last year. We continued to implement strict project management measures in terms of customer quality, business sustainability, accumulation and reuse of core capabilities, and profit margins. Our public services cloud businesses expanded further. During the quarter, we renewed the contract for the Beijing Public Service Cloud for the ninth year, and expanded our footprint to Shandong, Shanghai, and other regions. After years of development, we have gradually built a mature business model of public services cloud that generates healthy and sustainable margins, and a wealth of opportunities for value-added data projects.
Moving on to Enterprise cloud services. Revenue was RMB 710 million with a gross margin of 24%. A significant improvement from 16% in the same period last year.
We continued to implement strict project management measures in terms of customer quality, business sustainability, accumulation and reuse of core capabilities, and profit margins. Our public services cloud businesses expanded further.
During the quarter, we renewed the contract for the Beijing Public Service Cloud for the 9th year and expanded our footprint to Shandong, Shanghai and other regions.
Of the years of development, we have gradually built a mature business model of public services cloud that generates healthy and sustainable margins and a wealth of opportunities for value added data projects.
[Company Representative] (Kingsoft Cloud): In digital health, we are strengthening the five business models we deploy, namely the regional healthcare cloud model, the medical image cloud model, the integrated healthcare organization model, the regional integrated model, and the smart hospital model. These models allow us to tap into market opportunities with differentiated approach, accumulate and reuse our capabilities. During the quarter, we made milestone progress in our DaaS, also known as Data-as-a-Service product portfolio, penetrating the hospital market through our data management platform, adapting to made-in-China systems, and leading a major national R&D project on biology and information integration. Looking ahead, we expect to leverage such technical and product strengths in our business endeavors in the healthcare space.
In digital health, we are strengthening the five business models we deploy, namely the Regional Healthcare Cloud Model, the Medical Image Cloud Model, the Integrated Healthcare or Organization Model, the Regional Integrated Model, and the Smart Hospital Model.
These models allow us to tap into market opportunities with differentiated approach, accumulate and reuse our capabilities.
During the quarter, we made milestone progress in our deaths, also known as data at the service product portfolio, penetrating the hospital market through our data management platform, adapting to made-in-chime assistance, and leading a major national R&D project on biology and information in...
[Company Representative] (Kingsoft Cloud): In the finance sector, we completed and delivered big data platforms for major financial institutions such as Industrial Bank and China CITIC Bank, helped existing clients solve new challenges, and focused on technical areas where we have unique advantages such as big data. In terms of product innovation, we live up to our model of building success based on technology and innovation by constantly and rapidly iterating on our products and providing a best-in-class customer experience across our core offerings. In cloud computing, our container instances officially started to support the elastic scaling of container clusters hosted in customers' own data centers, enabling unified management of on-and-off cloud resources, ensuring a smooth scaling into the cloud during spikes in usage. This solution can reduce on-and-off cloud bandwidth costs by around 80%.
institutions such as industrial bank and China's city bank. Health-existing find solve new challenges and focus on technical areas where we have unique advantages such as big data.
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In terms of product innovation, we live up to our model of building success based on technology and innovation, by constantly and rapidly iterating our product.
and providing a vaccine-class customer experience across our core offerings. Our
In cloud computing, our container instances officially started to support the elastic scaling of container clusters, hosting customers' own data centers, enabling unified management of on- and off-cloud resources.
Ensuring a smooth scaling into the cloud, storing spikes in usage. This solution can reduce all end off-cloud better with cost by around 80%.
[Company Representative] (Kingsoft Cloud): For such achievements in cost performance and efficiency, it is honored as one of InfoQ's top 10 cloud native innovation solutions. In cloud storage, our object storage product is gaining more and more recognition from the market, jumping to 4th place in the Q4 2022 China Software-Defined Storage report published by IDC, with its market share doubling compared with 2021. We also launched an all-flash array object storage product, which doubles read and write performance, particularly well-suited to application scenarios such as AIGC and the separation of computation and storage in big data, providing tiered storage solutions with top-of-the-line performance at a high cost efficiency. In the enterprise cloud space, we upgraded Galaxy Stack to solve cloud usage and management pain points for enterprise customers.
For such achievements in cost performance and efficiency, it is honored as one of InfoQ's top 10 cloud-native innovation solutions. In cloud storage, our object storage product is gaining more and more recognition from the market.
Jumping to fourth place, in the fourth quarter of 2022, China's software-defined storage report published by IDC Research, with its market share doubling compared with 2021. We also launched an all-flash array object storage product, which doubles read and write performance.
particularly well suited to application scenarios such as AIGC and the separation of computation and storage in big data, providing tiered storage solutions with top-up aligned performance at a high cost efficiency.
In the Enterprise Cloud space, we upgraded Galaxy stack to solve Cloud usage and management pain points for enterprise customers.
[Company Representative] (Kingsoft Cloud): The result is a more unified, convenient, and enriched resource management view across multiple availability zones that provides a better customer experience in terms of usability, safety, and intelligence.
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Tao Zou: 作为小米金山生态唯一的云平台，我们与小米金山生态企业一道战略性布局AI，服务于金山办公的WPS AI等多个里程碑项目。其次，我们在大模型领域严守中立定位，客户用金山云用得放心，因而获得一大批独立AI公司的信任和青睐。第三，我们通过自建和合作方式为客户提供充足的GPU服务器资源。
and the trust and appreciation of an independent AI company. Third, we provide a sufficient amount of GPU server resources to customers quickly and quickly.
[Company Representative] (Kingsoft Cloud): In particular, I would like to address the recent developments in China's AI sector, which has continued to be heated since the debut of GPT-3.5 in Q1. We have kept a close eye on this space and have proactively deployed resources to comprehensively respond to market trends. First, as the only cloud platform in the Xiaomi and Kingsoft ecosystems, we approach AI strategically with Xiaomi and Kingsoft Cloud ecosystems companies in a strategic and coordinated manner, providing support for key programs including Kingsoft Office's WPS AI. Second, we stand strictly neutral in large language model space. This position enables us to retain the full trust and preference of the many independent AI companies that use our platform. Third, with a combination of directly owned and leased assets, we're able to offer sufficient GPU server resources to meet our customers' needs.
Second, we stand strictly neutral in large language model space.
This position enables us to retain the food trucks and preference of the many independent AI companies that use our platform.
Third, with a combination of directly owned and leased assets, we're able to offer sufficient GPU server richels to meet our customer's needs.
Tao Zou: 总体而言，过去几个季度的成绩佐证了我们战略的生命力。展望未来的机遇和挑战，我们将继续秉承这些战略方向，在实践中把战略用活用好，为客户、股东、员工和社会持续创造价值。
In general, the achievements of the past few quarters have shown the vitality of our strategy.
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We will continue to follow these strategic directions, and in practice, we will continue to create value for our customers, shareholders, employees and society by using the strategy well. In summary, our results over the past few quarters have shown that there are many positive developments in the market. We have seen a significant increase in the number of
[Company Representative] (Kingsoft Cloud): In summary, our results over the past few quarters demonstrate that our strategy is yielding results. As we prepare to meet future opportunities and challenges head on, we will nimbly execute on this strategy to create value for our customers, shareholders, employees, and society.
demonstrates that our strategy is yielding results.
As we prepare to meet future opportunities and challenges at all, we will nimbly execute on this strategy to create value for our customers, shareholders, employees, and society.
Tao Zou: 接下来有请CFO Henry为大家介绍一季度财务业绩。谢谢。
[Company Representative] (Kingsoft Cloud): I will now pass the call over to our CFO, Henry, to go over our financials for Q1 2023. Thank you.
I would now pass the call over to our CFO Henry to go over our financial for the first quarter of 2023. Thank you. Thank you, Zouzou. And welcome everyone for joining the call. Now I will walk you through the financial results for the first quarter of 2023.
Haijian He: Thank you, Zhou Zhou, and welcome everyone for joining the call. Now I will walk you through the financial results for Q1 2023. Guided by the high quality and the sustainable development strategy, we are pleased to see that our profitability further improved steadily in Q1. Our adjusted gross profits continued to grow for the fourth consecutive quarter and achieved record high of RMB 194.4 million, increased by 133% year-over-year, representing adjusted gross margin of 10.4%. Along with our strict expenses control, our normalized adjusted EBITDA margin improved from -6.6% in the same period last year, and a -10.2% in the last quarter to a -5.9% this quarter. Our total revenue was RMB 1,864.4 million this quarter, which were in line with our previous outlook.
Guided by the high quality and the sustainable development strategy, we are pleased to see that our profitability further improved sadly in the first quarter.
Our adjusted growth profit continued to grow for the fourth consecutive quarter and achieved record high of 194.4 million RMB, increased by 133% year over year, representing adjusted growth margin of 10.4%.
Along with our strict expenses control, our normalized adjusted EBITDA margin improved from negative 6.6% in the same period last year and a negative 10.2% in the last quarter to a negative 5.9% this quarter.
Our total revenue was 1,864.4 million RMB this quarter.
Haijian He: Within that, revenue from public cloud services was RMB 1,153.7 million, compared with RMB 1,380.8 million in the same period of last year. The decrease was mainly due to our proactive adjustments of CDN business, as well as impact from our client structure adjustments. Revenue from enterprise cloud was RMB 710 million, compared with RMB 792.5 million in the same period of last year. The decrease was mainly due to the January infection of COVID-19 seasonality impact and project quality control. We continue to enhance our cost control measures. Total cost of revenue decreased by 20.2% year over year to RMB 1,670.2 million. IDC cost decreased significantly by 21.4% year over year from RMB 1,110.3 million to RMB 872.4 million this quarter. Depreciation and amortization costs decreased by 8.7%, from RMB 246.1 million in the same period of last year to RMB 224.6 million this quarter.
which were in line with our previous outlook.
Within that, revenue from public cloud services was 1,163.7 million RMB. Compare with 1,380.8 million RMB in the same period of blast year.
The decrease was manning due to our proactive adjustments of the CDM business as well as impact from our clients structure adjustments.
Revenue from Enterprise Cloud was 710 million RMB, compared with 792.5 million RMB in the same period of last year.
The decrease was mainly due to the January infection of COVID-19, seasonality impact, and the product quality control.
We continue to enhance our cost control measures. Total cost of revenue decreased by 20.2% over year, to 1,670.2 million RMB.
IDC costs decreased significantly by 21.4% year-over-year from 1,110.3 million RMB to 872.4 million RMB this quarter.
Depertuation and ammitation cost decreased by 8.7% from 246.1 million R&B in the same period of last year to 224.6 million R&B this quarter. Salution development and services cost decreased by 11% from 476 million R&B.
Haijian He: Solution development and services costs decreased by 11%, from RMB 476 million to RMB 423.6 million this quarter. Fulfillment costs and other costs were RMB 122.7 million and RMB 26.9 million this quarter. Adjusted gross profit of this quarter increased by 133% to RMB 194.4 million, representing adjusted gross margin of 10.4%, compared with 3.8% in the same period of last year. The significant margin improvement demonstrates the success of our strategic adjustments of our revenue mix, optimized enterprise cloud product selections, and efficient cost control measures, and reaffirm our strong commitment to improving our profitability, and delivering high quality, and sustainable development. To help the market and investors better understand our business and our path to profitability, we separately disclose the growth margin and growth profit for public cloud and enterprise cloud in order to better reflect our business nature.
to 423.6 million RMB this quarter. For fulfillment costs and other costs, were 120 to 0.7 million RMB, and the 26.9 million RMB this quarter.
representing a just-for-course model of 10.4%.
Compare with 3.8% in the same period of last year. The significant amount of improvement demonstrates the success of our strategic adjustments of our revenue mix, optimize enterprise-car product selection, and efficient cost control measures, and re-infer our strong commitment.
to improving our profitability and delivering high quality and sustainable development. To help the market and investors better understand our business and our past two profitability, we separate these clothes of growth margin and growth profit for public cloud and enterprise cloud in order to better reflect our business nature.
Haijian He: Within our business lines, gross profit of public cloud services was RMB 24.8 million, which was significantly improved from the gross loss of RMB 47.2 million in the same period of last year. Gross margin of public cloud services were 2.1% compared with -3.4% in the same period of last year. The improvement was mainly due to the proactive scaling down of CDN services and adjustments of our client structure. Gross profit of enterprise cloud services was RMB 169 million, compared with RMB 127.4 million in the same period of last year. Gross margin of enterprise cloud services was 23.8%, improved from 16.1% in the same period of last year. The improvement was mainly due to our more stringent enterprise cloud product selection strategy.
Within our business life, gross profit of public cloud services was 24.8 million RMB, which was significantly improved from the growth loss of 47.2 million RMB in the same period of last year. Gross margin of public cloud services were 2.1% compared with net give 3.4% in the same period of last year. The improvement was mainly due to the proactive scaling down of the ideas.
Haijian He: In terms of expenses, excluding share-based compensation and impairment of long-lived assets, our total adjusted operating expenses were RMB 595.8 million, decreasing by 18.3% from RMB 729.6 million last quarter. Within that, adjusted R&D expenses was RMB 202.6 million, decreasing by 15.4% from last quarter. Adjusted selling and marketing expenses was RMB 104.2 million compared with RMB 118.4 million last quarter. Adjusted G&A expenses decreased largely by 22.3% from RMB 371.9 million last quarter to RMB 289.1 million. As of 21 March 2023, our cash and cash equivalents and short-term investments amounted to RMB 4.5 billion, providing us with significant and sufficient liquidity for operations. The capital expenditures for this quarter was RMB 44.6 million, which primarily consists of payments for servers. We have been taking control of our procurement of traditional servers, such as the ones being used for CDN business.
was mainly due to our more stringent enterprise-powered product selection strategy.
In terms of expenses, excluding share-based compensation and impairment of long-lived assets.
Our total adjusted operating expenses.
or 595.8 milliron b decreasing by 18.3 percent from 729.6 milliron b last quarter.
Within that adjusted R&D expenses was $220.6 million decreasing by 15.4% from last quarter.
Adjust the selling and marking expenses worth 100.04.2 milliron B compared with 118.4 milliron B loss quarter. Adjust the GNA expenses decreased largely by 22.3% from 370.9 milliron loss quarter to 289.1 milliron B.
As of March 21st, 2023, our cash and the cash equivalent and shortening investments amounted to 4.5 billion R&B, providing us a significant and sufficient liquidity for operations.
The capital expenditure for this quarter was 44.6 million B, which primarily consists of payments for service.
Haijian He: While for high-performance servers, especially in the recent popular AIGC areas, we have been actively cooperating with our suppliers in various ways to access the resources needed, including but not limited to capital expenditure model. We also, in the operational leasing, which was, payments will not be included in our CapEx, but amounted will be an OpEx model. Meanwhile, due to the payment schedule, certain cash payments for server purchases, including the servers, will be used for the AIGC business, which we ordered earlier this year, will be gradually reflecting sequentially in the following quarters. Lastly, we have recently released our ESG report for 2022 to present a very in-depth review of the company's progress in the last year in the ESG practice. We have also noticed that recognition from rating agencies and scoring of the company increased from certain well-known ESG agencies.
We have been taking control of our procurement of traditional servers, such as the ones being used for CDN's business.
While for high performance service, especially in the recent popular AIGC areas, we're being actively operating, cooperating with our suppliers in various ways to access the resources needed.
will be an O-Cax model. Meanwhile, due to the payment schedule, certain cash payment for servant purchases including the service will be used for the AIGC business, which we ordered earlier this year, will be gradually reflecting sequentially in the falling quarters.
Lastly, we have recently released our ESG report for 2022 to present a very in-depth review of the company's progress in the last year in ESG practice.
We've also noticed that recognition from rating agencies and scrolling up the company increased from certain well-known ESD agencies. We have taken great pride in educating the highest ESD standard.
Haijian He: We have taken great pride in advocating the highest ESG standards. We will continuously strengthen our ESG governance and engage with our partners to amplify our positive impact in the cloud industry, and the society, thereby delivering long-term value for our shareholders. Looking ahead, we will continue to pursue our high-quality development strategy and unlock synergies within the Xiaomi and the Kingsoft Group ecosystems, while staying agile to capture new opportunities in the new era of AI technology advances. We expect our total revenue to be between RMB 1.85 to 2.0 billion for Q2 2023. While this forecast and comments above are based on our current and preliminary views on the market and operational conditions, which are subject to change.
We'll continue to strengthen our ESG governance and engage with our partners to amplify our positive impact in the cloud industry and the society.
We will continuously strengthen our ESG governance and engage with our partners to amplify our positive impact in the cloud industry and society, thereby delivering long-term value for our shareholders.
Looking ahead, we will continue to pursue our high quality development strategy and unlock synergies within the Xiaomi and the Kinsok Group Eagle system.
while staying agent to capture new opportunities in the new era of AI technology at the moment.
We expect our total revenue to be between 1.85 billion RMB to 2.0 billion RMB for the second quarter of 2023.
Why are these forecasted comments of a based on current and preliminary views on a market and operational conditions?
Haijian He: With which we firmly believe that given the time, the effect of ongoing strategy initiatives and the new business opportunities, especially in the AIGC areas, will continue to amplify and reflect our financial results in the mid to long term. Thank you.
which are subject to change. With which we firmly believe that given the time, the effect of ongoing strategy initiatives and the new business opportunities, especially in the EICC areas, were continuing to amplify and reflect our financial results in the mid-to-long term. Thank you.
Nicole Shan: Thank you. This concludes our prepared remarks. Thanks for your attention, and we are now happy to take your questions. Please ask your question in both Chinese Mandarin and English, if possible. Operator, please go ahead. Thank you.
Thank you, this concludes our remarks. Thanks for your attention, and we are now happy to take our questions. Please ask our questions in both Chinese and English, if possible. Our presenters, please go ahead. Thank you. So, ladies and gentlemen, we now begin the question and answer session. If you wish to ask a question, please press star 11.
Operator: Ladies and gentlemen, we now begin the question and answer session. If you wish to ask a question, please press star one one on your telephone. We are now taking the first question. The first question from Xiaodan Zhang from CICC. Please go ahead. Your line is open.
on your telephone. We are now taking the first question.
And the first question from Xiaodong Zhang from CACC. Please go ahead. Your line is open.
Xiaodan Zhang: 然后我的第二个问题是关于我们的毛利率。那在这个季度我们看到毛利率环比还是有比较明显的优化的。另外我们也披露了公有云和行业云的毛利率的水平。那想请教一下，这个毛利率改善的趋势是否可以持续？以及我们中长期分公有云和行业云的毛利率的预期是怎么样的？那我快速地翻译一下我的问题。So my first question is on our pricing strategies.
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Xiaodan Zhang: We noticed that several cloud service providers have announced their price cuts on their products in the past few months. Could you please share your views on the price trend going onwards? Are we going to make adjustments to our pricing strategies accordingly? My second question is on our GP margin. We have seen a meaningful sequential improvement in the gross profit margin for Q1. Is this improvement sustainable? What is our expectation for the segmental gross profit margins in the mid to long term? Thank you.
our GT margin. We have seen a meaningful sequential improvement in the growth profit margin for the first quarter. So is this improvement sustainable and what is our expectation for the segmental growth profit margins in the mid to long term? Thank you.
Tao Zou: 我先回答第一个。确实我们也关注到市场上友商发出了关于所谓大幅度调整价格的声明。所以我们也认真地仔细分析过。从结果上来说，我们认为对我们现有的产品服务各方面并没有实质性的影响。具体到未来说，金山云会不会有类似的。反正从目前的我们自己的分析结果来看，友商所谓的列表价调降并没有实质性的意义。对整个行业，我们也关注到，我们的观点是也不会有真正实质性的影响。因为具体我就不展开了，友商到底在哪些领域降价，对不同的客户类型到底有什么影响，这个其实稍作分析大家都能得出我这个结论。所以我们的观点更多的认为这可能是一种市场营销行为。并不是一种实质性的降价行为。所以我们也不会去简单地、轻易地去推出类似的这种价格策略。好，OK。
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[Company Representative] (Kingsoft Cloud): OK. Indeed, we have noticed our peer players' so-called large-scale price cut, and we have analyzed it carefully. In terms of conclusion, I would say that its impact to our current products and services is limited, and there's actually no material impact to our current offerings of products and services. Now, as to in the future whether we will have anything similar in terms of pricing strategy, we should say that the peer players' catalog price cut is actually limited if we just take a close look at the specific products that are included in this action. We also do not think that it has any material impact to the industry as of now. Our feeling is that this action is more geared towards PR purposes. Thank you.
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Okay, so indeed we have noticed our tier players so-called large scale price cuts and we have analyzed it carefully. In terms of conclusion, I would say that it's impact to our current products and services.
are limited and there's actually no material impact to our current offerings of products and services.
Now, as to in the future, whether we have anything similar in terms of pricing strategy, we should say that the tier players catalog price cut is actually limited. If we just take a close look at the specific products that are included in this action.
And we also do not think that it has any material impact to the industry as of now. So our feeling is that this action is more geared towards PR purposes.
not think that it has any material impact to the industry as of now. So our feeling is that this action is more geared towards PR purposes. Thank you.
Haijian He: Thank you, Sophia. Happy to take on the second question regarding the gross profit. As you mentioned, we are very happy to see that, especially starting from H2 of last year, the company has adopted quite important initiatives to expanding our gross profits, which you probably can see in the recent results have achieved very positive results. Also, I want to put the data into the context in the past six quarters actually. If you remember the lowest point on the gross margin was back in Q4 of 2021.
Thank you, Sophia. I'm having to take on the second question regarding the growth profit. As you mentioned, we are very happy to see that, especially starting from the second half of last year, the company has adopted quite an important initiative to expand our growth profit, which you probably can see in the recent results. Have a good time.
achieved very positive results. But also I want to put the data into the contacts in the past set quarter sexually.
Haijian He: At that time, if you remember, our gross margin on a company level was only about 1.2%. In the past six quarters, especially the second half of last year, we sequentially increased the gross margin to today's about 10.2%, which is actually almost seven to eight times higher than the Q4 2021. It reflects a combination of a few important reasons and the drivers. First is really a better mix of the products, including our efforts to cutting back certain low profit margin products, and also increasing the diversification of the top clients and the middle size clients as well, which actually giving Kingsoft Cloud a better positioning in terms of the pricing power and the commercial terms we negotiated with our customers. Second is our efforts to cutting back certain resources from service, the bandwidth, and lower utilized cabinets as well.
If you remember, the lowest point on the course margin was back in Q4 of 2021. At that time, if you remember, our course margin on a company level was only about 1.2%.
And in the past six quarters, especially the second half of last year, we sequentially increasing the growth margin to today's about 10.2%, which is actually almost 7 to 8%, 7 to 8 times higher than the P4 product on your one. It reflects your combination of
a few important reasons and the drivers. First is really the better mix of the products, including our efforts to cutting back certain low profit and margin products.
And also increasing the diversification of the top clients and media-sized clients as well, which actually giving King South Cloud a better positioning in terms of the pricing power and the terms and commercial terms we negotiated with customers.
Haijian He: All those efforts are the combination of those impact to our gross margin. More importantly is really our internal strategy and management quality in terms of how we control, how we deliver, how we execute the enterprise cloud projects, and how we make sure in terms of the PMO office can actually take a very good role in managing the cost and the efficiency of enterprise cloud. That's why on this quarter, we are first time to separate the gross margin of enterprise cloud and public cloud. Both business lines are making a positive growth margin, and we are happy to see that trend going forward. The second point you're asking, I think the key trend we are trying to see is three things. First of all, on a combined basis, we are happy to see and hopefully
as well. So all those efforts are the coming, as the combination of those impact to our growth margin. But more importantly, it's really our internal strategy and imaginance quality in terms of how we control how we deliver how we execute the enterprise cloud projects and how we make sure in terms of the
the PMO office can actually take in a very good role in managing the cost and the efficiency of enterprise cloud. So that's why on this quarter, we're first time to separate the growth margin of enterprise cloud and public cloud. As you can see, both business lines has a making of positive growth margin, and we're having...
Haijian He: The growth margin of Kingsoft Cloud as a company will improving sequentially on a quarter-to-over quarter basis. I think we are confident to see the trend going forward.
Haijian He: Given the few things, we already see the good results and continue to do that. Second, I think the potential of the growth margin expansion of the public cloud will be more propelled compared with enterprise cloud. We're going to make sure the potential of the margin expansion on public cloud will taking a more obvious role in terms of margin expansion of the company, but also on the same time, we want to make sure the growth margin of enterprise cloud will keep a sustainable basis and will expand on a relatively rational pacing as well. By doing two things, hopefully we can keep the growth margin on the company level will continue to grow as well. The last point, I think we will also take a very careful view regarding the growth versus the profitability. It doesn't say that margin is the only one factor we're trying to keep a focus, but also want to balancing the growth opportunities in terms of, for example, the recent AI opportunities, we will make sure we have enough resources to invest.
sequentially on the quarter to over quarter basis. So I think we are confident to see that the trend going forward, giving the few things, we already see the good results. We want to continue to do that. Second, I think the potential of the growth margin expansion of the public cloud will be more propelled compared with enterprise cloud. So we're going to make sure that the potential
the growth margin of the company level will continue to grow as well. The last point I think will also take a very, very careful view regarding the growth versus the profitability. So it doesn't say that margins, the only one factor we're trying to keep a focus, but also well will balance in something.
Haijian He: At the same time, we are going to make sure our growth margins can continue to improve. Our CEO Zhou also mentioned we will make a very rational decision and are not going to follow any irrational trends in terms of pricing cuts and other things that are reflecting the potential risk of our growth margin. Thank you.
The growth opportunities in terms of, for example, the recent AR opportunities, where we're making sure we have enough resources to invest. And on the same time, we're going to make sure our growth margins are continually improved. And our CEO , Joe, mentioned, we will make a very rational decision and a nod to going to follow any on rationale trends in terms of pricing cuts and other things that are reflecting.
Operator: Thank you for your question. We are now taking the next question. The next question from Brian Gong from Citi. Please go ahead.
question.
Brian Gong: 周总，Henry，Classic Nicole 晚上好。我有个 follow-up question，就是刚才 Henry 提到我们未来也要 balance growth versus profitability。我想请问一下，我们什么时候可以看到公有云和行业云的增速再次起来？这个时间点大概是什么时候？另外刚才周总也提到了 AI 对我们的影响，有两个小问题。第一个就是刚才提到已经有第三方的大模型在我们这边跑了。想问一下这个数量，我们目前看到有多少家第三方大模型在我们这边跑？第二个就是我们这边 GPU 芯片的储备是否足够来满足未来的需求？I will translate myself. Thanks management for taking my question. Just a follow-up to Henry's point that Kingsoft Cloud will balance growth versus profitability ahead. When should we see public cloud and enterprise cloud growth will accelerate again in the future?
And the next question from Brian Gong from CT. Let's go ahead.
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the digital digital. I will translate myself. Sense management, predicting my question, just to fall off to the honours point that King's Off-Cloud will balance schools and versus profitability ahead. When should we see, you know, public cloud and the enterprise cloud growth to accelerate again?
Brian Gong: Zhou just mentioned the impacts from AI on Kingsoft Cloud. Can management elaborate, have we seen any large language model from third party already on our cloud? Do we have enough GPU, those chips to meet the demand in the future? Thank you.
party already on our cloud. And also do we have enough to queue those tricks to meet the day and Monday in the future. Thank you.
Tao Zou: 我来回答，等下Henry适当补充一下。第一个问题就是你问到公有云、行云增速什么时候能起来？这个我要分开跟你回答。大家都知道公有云主要是服务于主要的互联网或者泛互的一些大客户。我自己认为AI这一波对我们来讲就是一次非常好的机会。其实你后面也问到了，这第二、第三个问题都类似。我们也多次对外说，我们这次中立云厂商的定位，其实在这次也表现很明显。此外，其实这一次围绕AI这一波，小米、金山、顺为整体的协同作战也效果非常显著。所以公有云我认为机会已经来了。等下回答你第二、第三个问题我还会展开。行云主要我们自己内部是分为经三块，都略有不同。像政务云这块，其实我们总体来讲现在是先聚焦，把原有的模式夯实。所以目前我们锁定的区域也是由之前的全面撒开，逐步锁定以北京、湖北先为根据地。实际上我们在这两个区域的政务云增速也是非常快的，尤其是盈利能力。但是我刚才也谈到，我们总体区域是在收缩。相比前几年，你会看到我们过去基本上全国开发，遍地开花，所以项目数量短时间之内可能反倒是跟你前比你会发现阶段性地还会变少。但实际上这些项目的盈利能力反而是增加的。所以对于未来长期去看，我们认为先收回来夯实，把技术服务夯实再撒出去，未来只会越来越快。好吗？然后医疗数字健康这个板块，我刚才跟奥林科的时候也谈到，我们五种模式在经过过去两三年的打磨，其实我们现在已经进入到了将五种模式在全国去复制推广的这么一个阶段。从今年有的商机以及具体跟进的一些项目来看，其实也是在一个加速的过程当中。也就是说，对于数字健康这个板块，其实无论是盈利能力还是营收能力，我认为都在起速。这是第一个问题。
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[Company Representative] (Kingsoft Cloud): OK. I'm going to answer your question separately since you mentioned for both public cloud and the enterprise cloud. In the public cloud space, as you know, we mainly serve internet customers or quasi internet customers. As you also mentioned in the second question, the current wave of AIGC or AI is in itself a very good wave of opportunities for us. As we have commented on, we'll continue to leverage our neutrality positioning, which is well manifested in the fact that we're able to engage with a large number of independent AI developers. Also the effect of our coordinated and strategic approach with Kingsoft and Xiaomi ecosystem is also very good. This is about our public cloud opportunities.
Okay, so I'm going to answer a question separately since you mentioned both public cloud and the enterprise cloud. In the public cloud space, as you know, we mainly serve internet customers or quality internet customers. The public cloud services to help them.
And as you also mentioned in the second question, the current wave of AIGCO AI is in itself a very good wave of opportunities for us. As we have commented, we'll continue to leverage our neutrality positioning, which is well-manifacted in the fact that we're able to engage with a large number of independent AI developers.
and also the effect of our coordinated and strategic approach with King South and Xiaomi ecosystem. It's also very good.
[Company Representative] (Kingsoft Cloud): In terms of enterprise cloud, because we have three basically different major verticals, namely public services, digital health and finance. I'm going to answer to you separately. In the first part is the public services cloud. Our overall strategy in this line of business is to actually shrink and to focus a little bit in terms of geographical locations first. In terms of project number, you might see the number of projects decreasing, but the profitability will be increasing, and we'll be focusing on some of the core regions, for example, Beijing and Hubei provinces. We believe that in the medium to long term, such approach, which namely is to shrink and to enhance our technology capabilities and services first, and then to expand, is a healthier way of growth. Secondly, in terms of digital health, as we commented in the prepared remarks, we are enhancing and we are pushing forward the five models of digital health business. We see it's accelerating not only in terms of profitability, but also in terms of revenue scale. That's basically about the enterprise cloud side.
So this is about a public cloud opportunities. In terms of enterprise cloud, because we have three, basically different, major verticals, namely public cloud, public services, digital health and finances, I'm gonna answer to you separately. So in the first part is the public services cloud. Our overall strategy in this line of business.
is to actually shrink and to focus a little bit in terms of your graphical locations first. So in terms of project number, you might see the number of projects decreasing, but the profitability will be increasing and will be focusing on the core, some of the core regions, for example, Beijing and Ubea provinces. We believe that in the medium to long term,
such approach, which namely is to shrink and to enhance our technology capabilities and services first, and then to expand is a healthier way of growth. And technically in terms of digital health, as we commentated in the prepared remarks, we're enhancing and we're pushing forward the five models.
of digital health business. We see it accelerating not only in terms of profitability but also in terms of revenue scale. So that's basically about the the enterprise cloud site. Okay.
Tao Zou: OK。第二个，你刚才问到作为中立的云厂商，现在其他的一些做大模型的AI公司，有多少在我们这跑？这个说实话我确实没有办法具体回答你。因为一来涉及到客户本身的隐私，二来其实我们有很多项目本身也是在签合同、交付部署的过程当中。所以反正我也多次谈到，作为中立的云厂商，在这次的AI这波当中，我们确实是体现了它的独特优势。我只能去说到这步，好不好？希望你谅解。
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and the other users will be able to be able to use the data. As to your second question as to how many large-language model providers or companies are running on our platform, I have to say that I apologize we cannot answer your question in details. This is due to the fact that first of all the confidentiality
[Company Representative] (Kingsoft Cloud): As to your second question as to how many large language model providers or companies are running on our platform, I have to say that I apologize we cannot answer your question in details. This is due to the fact that first of all, the confidentiality consideration of our customers, and secondly, currently we still have a large amount of such companies that we are in the negotiating stage for potential transactions.
we still have a larger month of such companies that we are in the negotiating stage for potential transactions. I felt relieved with this enthusiasm, eh? When did you come back to Dime-H tablespoons?
Tao Zou: 第三块，你问我们是不是有足够的芯片继续资源。我在想怎么回答你。结论是我们现在肯定不够。为什么？说实话，这一波AI的热潮，我觉得用热潮，我们的客户说实话，对这块叫做澎湃的意愿。对，非常凶猛。你也知道整体的A100是已经被美国禁了，像A800也确实是现在总体供货也有一定压力。所以我们前期通过直采和租赁的方式，已经尽我们所能去满足我们客户的AI的增长需求。但实际上从目前我们客户的澎湃的热情来看，确实这一波AI浪潮很猛。我们没有信心拍胸脯保证有多少来多少。所以我们现在对客户的承诺是我们一定会尽我们所能，通过直采和租赁的方式，去尽可能满足我们的客户的需求。
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[Company Representative] (Kingsoft Cloud): As to your third question about our GPU chips reserve, the short answer and conclusion is it's definitely good to have more. We have been seeing great enthusiasm from such customers and expecting to expand the AI related business. As you know that in the market, A100 has been essentially banned by the U.S. side, and we also see very tight supply on A800 market. As I commented earlier, we are adopting flexible and combined channels to satisfy such needs, and that would include, first of all, directly owning such chips or GPU servers, and secondly, in terms of leasing such assets. What we can say is that we definitely try our best to meet such needs and to satisfy our existing and potential customers' needs in that regard.
That's your third question about our GPU chips reserves. The short answer to the conclusion is it's definitely good to have more. We have been seeing great inclusions from such customers and expecting to expand the AI-related business. You know that in a market, 100 has been essentially banned by the US side.
And we also see very tight supply on 800 markets. But as I commented earlier, we're adopting flexible and combined channels to satisfy session needs. And that would include, first of all, directly owning such a chip or GPU service, and especially in terms of leaving such assets. So what we can say is that we definitely try our best to meet such needs and to satisfy our existing entities.
Haijian He: Thanks. Brian, thanks for the question. Just to add only two points. First of all, today we are publishing our Q1 results. As you remember, back in Q1, the AIGC topic emerged actually in early part of April, so definitely not in the current quarter's results. We actually keep quite positive regarding the growth prospect. Given in Q1, as you know, part of China was affected in COVID, and many of the bidding process during the two sessions, if you remember back in March, was affected as well on the timing. As we actually promised, probably one or two quarters early, on this quarter as a first step, we'll separately disclose our gross margin on public cloud and the private cloud. As a second step, hopefully in the coming quarters, we are going to also disclose our backlog numbers and other things.
And we actually keep quite positive regarding the growth prospect. Given in Q1, as you know, the part of the China was affected in COVID and many of the bidding process giving the two sessions, if you remember, back in March, was affected as well on the time. So as we actually promised, I'll probably want to quote us earlier. So on this corner, at the first step,
Haijian He: I think you're going to see some growth potential in the timing and the pacing of those growth opportunities in the coming quarter as well, which are going to be a combination of the AIGC opportunities and the money we spend and how we actually control the balance of the growth and profits. The second point is, maybe some of you also noticed that in Q1, our CapEx number was a little low. I think that's also not a reflecting implication on the growth in terms of the spending, because on the cash flow category, we actually haven't ordered the servers, but the timing of those payments has not hit accounts on the cash flow items in Q1, and many of the new opportunities are coming in April and in May. Actually, we're working on those opportunities as well.
and that the money we spend and how we actually control the balance of the growth on profits. The second point is maybe some of you also noticed that in Q1, our cat X number was a little low. I think that's also not reflecting implication on the growth in terms of the spending because on a cash flow category we actually haven't.
the orders, but the timing of those events has not had accounts on the cashier items in Q1, and many of the new opportunities are coming in April and in May, actually, I'm working on those opportunities as well. I think these are the two hot points, hopefully it can be helpful for you. For the next quarter, hopefully we can give you more color regarding the backdrop, and you can see the growth opportunities in your more kind of quantitative ways are coming forward.
Haijian He: I think these are the two hot points that hopefully can be helpful for you. For the next quarter, hopefully, we can give you more color regarding the backlog, and you can see the growth opportunities in a more quantitative way coming forward. Thank you.
Brian Gong: Thank you. That's very helpful.
Thank you. Let's work up for. Thank you for your question. I'm now for the question. I will hand back to conference on the course of proposing remarks.
Operator: Thank you for your question. There are no further questions. I will hand back the conference to Nicole Shang for closing remarks.
Nicole Shan: Thank you, Operator. Thank you once again for joining us today. If you have any further questions, please feel free to contact us. Look forward to speaking with you again next quarter. Thank you. Have a nice day.
Thank you operator. Thank you, Lester Gainesville, Johnny, and I today, if you have any further questions, please feel free to contact us. Look forward to speaking with you again next quarter. Thank you, have a nice day.
Operator: That concludes the conference call today. Thank you for participating. You may all disconnect.
Nicole Shan: Okay.
That's composed of questions. Thank you for participating. You may hold this connect.
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