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Kingsoft Workplace Group (3888.HK) has introduced a big improve of their monetary efficiency for the fourth quarter and full 12 months of 2023. The group’s complete income for the 12 months reached RMB 8,534 million, marking a 12% year-on-year progress.
The Workplace Software program and Service enterprise skilled a considerable 17% improve in income, whereas on-line video games and different companies grew by 6%. Notably, the group’s working revenue soared by 90% to RMB 2,227 million. Kingsoft Workplace Group additionally highlighted the profitable launch of WPS AI, a complicated workplace utility, and their plans to launch JX3 Final in 2024.
Key Takeaways
Kingsoft Workplace Group’s complete income elevated by 12% year-on-year to RMB 8,534 million.Workplace Software program and Service enterprise income grew by 17%, pushed by subscription progress.The group’s working revenue surged by 90% to RMB 2,227 million.WPS AI, an clever workplace utility, was launched, enhancing their product suite.The gaming section noticed sturdy efficiency, notably from JX3 On-line, with plans to launch JX3 Final in 2024.The corporate maintains a strong money place with RMB 24 billion in money sources.
Firm Outlook
The corporate will proceed to spend money on AI and collaboration to offer high-quality services.Plans to deepen presence within the digital workplace and Wuxia Sport area in 2024.Goals to leverage know-how developments and pursue sustainable improvement.Intends to offer dividends and buybacks to shareholders.
Bearish Highlights
The corporate didn’t spotlight any particular challenges or setbacks through the name.
Bullish Highlights
Kingsoft Workplace Group’s progress in paying customers is attributed to the sturdy model enchantment of WPS Workplace.Constructive adjustments within the cloud enterprise are anticipated on account of elevated business demand.The event of AI and information property is anticipated to profit the corporate’s general enterprise.
Misses
There have been no particular monetary misses reported through the earnings name.
Q&A Highlights
The corporate mentioned the adoption of rules uniting cloud and information, expressing optimism in regards to the home market.Plans to extend costs in operational and cloud companies on account of added worth.The corporate is assured that AI and information property will profit the card-related sectors and their private enterprise.Development in month-to-month lively units suggests a constructive reception to AI integration and improved workplace software program experiences.
In conclusion, Kingsoft Workplace Group’s earnings name underscored a 12 months of sturdy monetary efficiency and strategic developments. The corporate’s deal with AI, cloud providers, and enhanced consumer experiences positions them for continued progress within the know-how sector. With a strong money place and promising developments of their product choices, Kingsoft Workplace Group is poised to additional its market presence within the coming 12 months.
Full transcript – Kingsoft Corp Ltd (3888) This fall 2023:
Operator: Good day, and thanks for standing by. Welcome to the 2023 Fourth Quarter and Annual Earnings Convention Name. Right now, all members are in a listen-only mode. After the audio system’ presentation, there might be a question-and-answer session. [Operator Instructions] Please be suggested that immediately’s convention is being recorded. I’d now like handy the convention over to your speaker immediately, Yinan Li. Please go forward.
Yinan Li: Thanks, operator. Women and gents, good night and good morning. I wish to welcome everybody to our 2023 fourth quarter and annual outcomes earnings name. I am Yinan Li, the IR Director of Kingsoft. I wish to begin by reminding you that some info supplied through the earnings name might embrace forward-looking statements, which will not be relied upon sooner or later for numerous causes. These forward-looking statements are based mostly on our personal info and knowledge from different sources, which we consider to be dependable. Please check with the opposite publicly disclosed paperwork for detailed dialogue on threat elements, which can have an effect on our enterprise and operations. Moreover, in immediately’s name the administration might be ship ready remarks in each Chinese language and English. A 3rd get together in operator will present consecutive interpretation into English. In the course of the Q&A session, we’ll handle your query in each English and Chinese language with automating interpretation supplied by the third get together in operator. On that translation is solely to facilitate the communication through the convention name. In case of any discrepancies between the unique remarks and the interpretation, the statements made by the administration will show nicely. Having mentioned that, please permit me to introduce our administration workforce who joined us immediately. Mr. Tao Zou, our Government Director and CEO, and Ms. Yi Li, our performing CFO. Now I am turning the decision to Mr. Zou.
Tao Zou: Hey, everybody. Within the 12 months 2023, the Group’s general efficiency maintained stable progress regardless of challenges, we truly promoted our co-business to steer a stable basis for sustainable improvement sooner or later. Specializing in the technique of multiscreen, cloud, content material, collaboration, and AI, Kingsoft Workplace Group continued to spend money on R&D of AI and collaboration and strengthen the competitiveness of our product by means of technological innovation, product integration, efficiency enhancement, and different initiatives. When it comes to on-line video games enterprise, we adhere to the unique intention of making prime video games and insisted on long-term operation. As growing Wuxia Video games, we’re additionally making incremental progress in exploring new recreation genres. In 2023, the Group’s enterprise demonstrated a progress resilience with a bunch complete income of RMB 8, 534 million, representing a year-on-year improve of 12%. The Workplace Software program and Service enterprise maintained stable operation with annual income of the RMB 4, 557 million, representing a year-on-year improve of 17% pushed by the expansion of home particular person and institutional subscription companies. Income from on-line video games and different enterprise amounted to RMB 3, 977 million representing year-on- 12 months improve 6%, primarily pushed by the sturdy progress of a JX3 On-line. Operation revenue of the group amounted to RMB 2, 227 million in 2023, rising by 90% year-on-year. These outcomes mirrored our efforts to stick to the technological pushed companies, repeatedly concerned in product and know-how, and cling consumer expertise. Now, I’ll flip the decision to Ms. Yi Li.
Yi Li: Thanks. Good night and good morning, everybody. Kingsoft Workplace Group has launched WPS AI, an clever workplace utility powered by giant language fashions, specializing in the event of three strategic instructions. AI-generated content material, co-pilot, and perception. WPS AI formally launched public beta testing within the Chinese language Mainland line within the fourth quarter, laying a stable basis for additional commercialization. We’ve additionally upgraded the WPS Workplace to enhance consumer expertise. As well as, we proceed to enhance the end-to-cloud integration expertise and enhanced consumer exercise within the cloud. Whereas adhering to long-term membership technique, we have now upgraded the membership advantages construction, launched the tremendous membership system to satisfy the wants of various customers by means of a versatile mixture of advantages. For institutional prospects, we have now upgraded WPS 365, new productive forces in workplace, to offer content material creation, workplace collaboration, open ecosystem and digital asset administration capabilities. We continued to advertise the end-to-cloud integration and collaboration course of, and targeted on the enterprise situations of presidency and premium prospects of state-owned and personal enterprises. We deepened our product capabilities to serve industries corresponding to finance, transportation, power, publishing, healthcare, client retail, high-end manufacturing and the Web, incubated safe and environment friendly options that may be utilized throughout the business, and continued to duplicate typical circumstances for widespread adoption. In the meantime, we have now been repeatedly collaborating with premium prospects to discover possible options for the implementation of WPS AI in authorities and enterprise workplace situations to advance its utility in numerous industries and workplace settings. Within the area of public cloud service, we inspired prospects to make use of cloud and collaboration purposes, enabling them to handle their digital property, and expanded market attain with channel companions. By highlighting the options of our merchandise, we attracted enterprise prospects and elevated their consumer engagement and cost retention. We’ve carefully monitored the localization business coverage adjustments and buyer demand, and brought the initiative to faucet native authorities market prematurely. And to localization business, ranging from the alternative wants of the shoppers corresponding to finance, power and operators, we promoted the adoption of the brand new license mode and deepened their cloud and collaboration workplace course of. We put customers first and formally shut down home third-party promoting enterprise in December 2023. When it comes to abroad enterprise, based mostly on our stable basis within the cellular sector, we continued to domesticate our consumer base on desktop platforms. Trying forward, Kingsoft Workplace Group will proceed to deal with AI and collaboration, additional sprucing the merchandise, and supply high-quality AI collaborative workplace services to particular person and institutional customers In 2023, the web video games enterprise noticed regular progress. The flagship recreation JX3 On-line demonstrated resilience and robust vitality. It has been in operation for 14 years and achieved a file excessive in annual income. JX3 On-line continued to iterate and launch new growth packs with upgraded graphics, offering gamers with extra numerous and enriched gaming expertise. World of Sword Origin was successively launched in Vietnam and Chinese language Mainland, attracting devoted gamers with its basic gameplay and nostalgic enchantment, whereas additionally contributed to the worldwide attain of conventional Chinese language tradition. The worldwide launch of the anime shooter recreation, Snowbreak: Containment Zone, expanded the consumer base of anime and abroad markets. The sci-fi mech recreation Mecha BREAK made its debut at The Sport Awards on the finish of the 12 months, gaining widespread consideration from the worldwide marketplace for its artwork design and modern gameplay, eagerly awaited by international gamers. Trying ahead to 2024, the discharge of JX3 Final will supply gamers model new expertise throughout a number of platforms. We’ll proceed to develop into new genres, refine sci-fi mech recreation Mecha BREAK and repeatedly optimize anime recreation Snowbreak: Containment Zone. As for the monetary outcomes, I am ranging from This fall, use RMB because the foreign money. Income elevated to 9% year-on-year and 12% quarter-on-quarter to RMB 2, 310.1 million. The income cut up was 56% for workplace software program and providers and 44% for on-line video games and others. Income from the workplace software program and repair enterprise elevated 80% year-on-year and 70% quarter-on-quarter to RMB 1, 286 million. The will increase have been primarily as a result of progress of each home particular person workplace subscription enterprise and institutional subscription enterprise of Kingsoft Workplace Group. The expansion of home particular person workplace subscription enterprise was primarily attributable to the will increase in each the paying ratio and common income per paying consumer, ensuing from enriched membership advantages and upgraded membership system. The expansion of institutional subscription enterprise primarily benefited from the rise in price discount, effectivity, enchancment, and digital transformation wants of presidency and enterprises, in addition to our optimization of services to enhance the clever workplace expertise and speed up [inaudible]. Income from the web recreation and different enterprise stored flat year-on-year and elevated to 7% quarter-on-quarter to RMB 1, 024 million. The quarter-on-quarter improve was primarily pushed by the income contribution from World of Sword Origin launched in Chinese language Mainland in September, partially offset by decreased income from sure current video games. Value of income elevated 11% year-on-year and eight% quarter-on-quarter to RMB 440 million. The will increase have been primarily on account of increased server and bandwidth prices, together with the enterprise growth. of the Kingsoft Workplace Group. Group revenue elevated 9% year-on-year and 13% quarter-on-quarter to RMB 1, 896 million. Group revenue margin got here to flat year-on-year and elevated by 1 share level quarter-on-quarter to 82%. Analysis and improvement prices elevated 4% year-on-year and a pair of% quarter-on-quarter to RMB 685 million. The will increase have been primarily on account of elevated headcount and private associated bills of Kingsoft Workplace Group, reflecting our steady efforts to enhance services. Sale and distribution bills elevated to 30% year-on-year and decreased to 40% quarter-on-quarter to RMB 377 million. The fluctuations primarily resulted from adjustments in promotion spending on on-line video games enterprise in corresponding quarters. Administrative bills elevated 5% year-on-year and decreased to 9% quarter-on-quarter to RMB 171 million. The quarter-on-quarter lower was primarily on account of decreased personal-related bills. Share-based compensation price elevated to twenty-eight% year-on-year and 6% quarter-on-quarter to RMB 77 million. Working revenue earlier than share-based compensation price elevated to 70% year-on-year and 76% quarter-on-quarter to RMB 792 million. Internet different good points for the fourth quarter of 2023 have been RMB 8 million, in contrast with losses of RMB 42 million for the fourth quarter of 2022 and good points of RMB 18 million for the third quarter of 2023 respectively. Share of losses of associates have been RMB 286 million for the fourth quarter of 2023, in contrast with losses of RMB 256 million and RMB 307 million for the fourth quarter of 2022 and third quarter of 2023 respectively. Earnings tax expense decreased 13% year-on-year and elevated 187% quarter-on-quarter to RMB 126 million. Because of the explanations mentioned above, revenue attributable to house owners of the dad or mum was RMB 205 million for the fourth courtroom of 2023, in contrast with revenue of RMB 48 million and RMB 28 million for the fourth quarter of 2022 and third quarter of 2023 respectively. Revenue attributable to house owners of the dad or mum excluding share-based compensation prices was RMB 257 million for the fourth quarter of 2023, in contrast with revenue of RMB 83 million and RMB 69 million for the fourth courtroom of 2022 and third quarter of 2023 respectively. The web revenue margin excluding share-based compensation price was 11%, 4% and three% for this quarter, the fourth quarter of 2022 and third quarter of 2023 respectively. Now, on 12 months 2023, income elevated 12% year-on-year to RMB 8, 534 million, workplace software program and providers made up 53% improve to 70% year-on-year to RMB 4, 557 million. On-line video games and others made up 47% and elevated to six% year-on-year to RMB 3, 977 million. Gross revenue margin elevated by 1 share level year-on-year to 82%. Working revenue earlier than share-based compensation price elevated to 19% 12 months -on -year to RMB 2, 541 million. Revenue to house owners of the dad or mum was RMB 483 million for the 12 months of 2023, in contrast with a lack of RMB 6, 049 million for the final 12 months. The Group had a powerful money place in direction of the tip of 2023. As of thirty first December 2023, the Group had money sources of RMB 24 billion. This money generated for working actions was RMB 3,489 million and RMB 2, 574 million for the 12 months ended thirty first of December 2023 and thirty first of December 2022 respectively. Capital expenditure was RMB 474 million and RMB 509 million for the 12 months ended thirty first December 2023 and the thirty first December 2022 respectively. In 2023, our core enterprise has steadily superior. In 2024, Kingsoft Workplace Group reaffirmed the state alternatives of digital financial improvement and repeatedly discover the enterprise alternate options of digital workplace providers. We’ll proceed to hold out product innovation and consumer expertise optimization round multiscreen, cloud, content material and collaboration AI to repeatedly enhance service high quality and supply particular person and institutional customers with extra environment friendly and clever workplace options. On the identical time, we’ll deepen our presence within the area of Wuxia Sport and make progress within the new [inaudible] of sci-fin mech recreation deliver gamers all new recreation expertise. Trying forward, we’ll proceed to leverage know-how, embrace AI and these new alternatives to pursue prime quality and sustainable improvement. Thanks all. With that, let’s go to the Q&A session.
Yinan Li: Hello operator, we’re prepared for the Q &A session.
Operator: [Operator Instructions] And your first query comes from the road of Xiaodan Zhang from CICC.
Xiaodan Zhang: Thanks. So thanks administration for taking my query. And my first query is on the gaming enterprise. So JX3 On-line delivered a powerful file in 2023, so what’s your expectation for its efficiency this 12 months and will you please share with us your newest full 12 months steerage for the King section. And secondly, may you please give some shade in your plans for money utilization and shareholder returns for 2024. Thanks.
Tao Zou: So I’ll take the primary query and likewise, I’ll reply part of the second query. Thanks a lot for the query. I believe within the first quarter of this 12 months we’re having a very secure outlook since majorly contributed by the JX3 and since we have now prioritized and actually all of our effort within the JX3 origins and all of our workforce are welcoming the beginning or the discharge of the JX3 origins. And if we’re going to take outlook of this 12 months’s precedence, I’d say our precedence launch goes to be specializing in the releases within the fourth quarter of this 12 months, the place we’re going to see the discharge of the mecha video games and likewise the video games together with the [creation of gold and also the shadow of moon].And if we’re taking an outlook right here, we would not be having a fairly clear conclusion for the reason that main focus of this 12 months goes to be focused on the efficiency of the fourth quarter and the efficiency of the sport. We will solely do on a fairly clear conclusion of the efficiency of the sport after one month of the discharge.
Yi Li: Thanks a lot. let me take the second query in regards to the money on our account. At present, our money is prosperous by way of the entire operation within the Kingsoft Workplace Group, however we have now stored a proportional money in our account. Since we face a fast improvement of the substitute intelligence, we’re not going to exclude the potential alternatives the place most likely within the first half of this 12 months, we is perhaps investing in a possible AI-related enterprise, particularly within the area of AI-empowered 2B websites and after the primary half of this 12 months, we would have a favor concluded in that half. Now let me introduce you the efficiency of the money figures or index that we have now within the 12 months 2023. The 12 months 2023 have witnessed a really secure whereas stable progress by way of our revenues, which is rising by 10% whereas we have now already registered 19% by way of our revenue and the revenue improve, we present by it has been rising from 24% to 26% 12 months by 12 months. And our money stream has elevated by 36%. And by way of the dividend in addition to the buyback, which is our dedication to our shareholders, let me discuss in regards to the dividend first. We’ve paid a really secure and stable dividend to our shareholders. And we have now all the time supplied a really secure money dividend to the shareholders. Within the area of the buybacks, this 12 months, we have now deliberate for RMB 300 million buybacks, the place RMB 250 million goes to the shareholders and RMB 5 million goes to the workers as an incentive to the workers. And by way of the dividend and buybacks this 12 months, we’re going to rely the quantity in keeping with the efficiency of the market, in addition to the money is in our account. And presently, what I’ve at my hand is the primary department of the dividend. We’re planning to have RMB 1 billion dividend. However the consolation determine goes to be determined by the precise scenario out there. And we’re going to disclose the quantity at the moment. Thanks a lot to your query.
Operator: The following query comes from the road of Linlin Yang from GF Securities.
Linlin Yang: My first query is in regards to the OP margin. We noticed the working margin recovered to greater than 30% in This fall. How ought to its efficiency ought to we anticipate for 2024? The second query is about WPS AI. How is the testing efficiency? And I noticed the expansion price of paying customers has elevated within the final quarter. What are the principle drivers? And the way ought to we anticipate this progress in 2024? The third query is about cloud, what constructive change there within the cloud enterprise not too long ago and has there been an enchancment in business demand? How ought to we anticipate the underside line in subsequent 12 months? Thanks.
Yi Li: Let me take the primary query from you about what the operational margin, you may see from the earlier file within the Q2 and This fall of the 12 months 2023, we have now registered the operational margin greater than 30%, whereas the Q3 of 2023 have witnessed the bottom level throughout the 12 months. And since in 12 months, that’s to say, by the 12 months 2023, the 2 enterprise sectors of our group, the gaming sector and the workplace sector has stored an excellent momentum. Properly, within the 12 months 2024, we’re seeing that we have now targeted on the substitute intelligence associated area remains to be at a boarding stage, the place we will deal with the funding alternatives, each in our workplace software program sector and likewise in out gaming sectors. And that is going have an effect by way of the operational margins, the place we’re going to see within the brief time period the operational margin goes to be shrunk whereas in a long run, the non-obligatory margin goes to be benefited from the present funding. Within the 12 months 2024, the working margin goes be developed and a really wholesome and affordable method. It may not be as excessive as over 30%.
Tao Zou: Let me take you to the second query, which is in regards to the WPS AI. What I can let you know in regards to the WPS AI is that we completed testing, inner testing of the WPS AI and keep in mind in 2023 final 12 months and we have now found the issues and the problems and we have now improved by way of totally different variants. Our engineers are engaged on bettering the consumer expertise within the area of WPS AI, however in time period of those capabilities, that every one the product enchancment and the ultimate launch variant, I am not going to introduce it with such a quite simple matter, and I can not introduce with one sentence or two sentences on this telephone name. I consider tomorrow our colleagues within the workplace sector; they’re additionally going have a roadshow the place you may attend and you can even have extra understanding in direction of this area. So, what I can let you know in regards to the WPS AI is that we have now concluded the testing and we have now repeatedly improved the consumer expertise. The testing enchancment of the consumer expertise has matched up our expectations and our goal that we arrange earlier than. And that is what we wish to see about WPS AI by way of causes for the enter of subscribed customers. We’re additionally seeing a rise of the subscribed customers within the earlier whereas, however what’s the cause behind it? It is perhaps as a result of AI has created a few of our highlights on the software program associated sectors, however we have now not launched the AI membership. There is perhaps another causes that synthetic intelligence may need shifted the main focus of the general public to us, and that is why we wish to pay for our software program. However these may not be the mainstream causes for the rise of our customers. At present, I believe the will increase of customers is perhaps majorly as a result of the model enchantment of WPS Workplace. A few of these customers, they’re workplace staff who get pleasure from our product they usually prefer it and suggest it to their buddies and colleagues. That is the rationale why our 9.7% year-on-year teams in our PC utilization. Let me reply the third query, which is a query in regards to the cloud-based sectors. I consider the substitute intelligence goes to maintain its momentum within the 12 months 2024, particularly after the spring first quarter. We’re seeing the discharge of the 4 extra fashions which can be delighted the entire business and supplied us extra confidence. I’ve a really optimistic outlook in direction of this area. The second a part of my reply is in regards to the adjustments within the 12 months 2024. We’ve seen the Ministry of Finance not too long ago revealed necessary governmental paperwork regarding the procurement of the information and of the computer-related sectors. This has given us crucial enterprise alternatives the place we will present our data-related and cloud-related providers to the state-owned enterprises. And I additionally consider transferring into the long run, information goes to be the long run money. And this has supplied us crucial enterprise alternatives. As soon as once more, our firm has adopted the rules the place we discover the unity between the cloud and the information. And I additionally take a really optimistic outlook in direction of the home market. The third a part of my reply is in regards to the operational factor. And that is what we recall, I consider that on the finish of final 12 months, this a part of the elements has, I’d say a few of the opponents decreased their worth whereas this 12 months, in keeping with what I’ve perceive from our opponents and from the within of the industries, that we’re all planning to extend our costs as a result of there may be extra worth added to the operational enterprise. And it is also affecting our cloud enterprise. That is my private take of the event momentum of our business. So typically talking, to wrap it up, I’d say that the substitute intelligence and likewise the information property goes to evolve fairly nicely for the cardboard associated sectors. I’ve as soon as once more illustrated that within the totally different situations that the event of synthetic intelligence and these information associated enterprise fashions can be going be very useful for our private enterprise. What I already repeated is that it has opened up the bounds for improvement of the cardboard sectors, and tomorrow we’re going to have the early course of the Kingsoft Membership the place you may get extra info from their operation. I am now going elaborate right here. Thanks.
Operator: Your subsequent query comes from the road of Daley Li from Financial institution of America.
Daley Li: Thanks, administration, for taking my query. I’ve two questions. Primary is in regards to the month-to-month lively units. We see the quantity is getting higher through the 4Q final 12 months and I do know if the important thing driver is from the AI merchandise launching in 4Q. My second query is in regards to the AI improvement technique talked about in our final earnings name you talked about, we prioritized the variety of the month-to-month lively units and the paying consumer within the output. So how is our technique proper now? Will we make any changes after we have now completed some testing about product and client suggestions? Thanks.
Tao Zou: Let me reply your query in regards to the curiosity of the numbers of enormous lively units. I’m not going — to reply the query of whether or not our progress is said to synthetic intelligence, my good friend Toh mentioned that I do not know whether or not it is due to synthetic intelligence or for the opposite causes, we’re seeing the fast progress. However I positively consider the workplace, we’re benefiting from this area. These giant language modules with empowered within the AI area positively going to deliver us extra extra experiences within the area. However the improve of the numbers is perhaps on account of very complete causes, together with we’re offering higher workplace software program experiences for the customers and unfold by month to month, the consumer quantity elevated. However AI positively empowers the sector of office-related software program and that is additionally one of many necessary causes for the expansion. And for the methods that we have now adopted within the workplace software program, clearly all of our methods, in the beginning, is designed to fulfill our finish customers, offering the satisfying product to our finish customers is essentially the most path we’re going to take as a way to improve the consumer numbers. And we have now all the time targeted on rising the numbers of the subscribed customers, rising the op values. This technique continues. I’ve talked about in regards to the technique in final 12 months’s name. And this 12 months, we’re additionally going to extend the op values. And synthetic intelligence positively brings us to the brand new area the place we’re going to empower our product with giant language fashions. This 12 months, we’re going to proceed our technique and specializing in satisfying the consumer’s effort. By bettering the consumer expertise, we’re going to harvest extra subscribed customers. That’s my reply to your query.
Yinan Li: Hello, thanks for becoming a member of us immediately. It will conclude our presentation for the 2023 fourth quarter and annual end result earnings name. Thanks.
Operator: This concludes immediately’s convention name. Thanks for taking part. You could now disconnect.
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