KC Kingsoft Cloud

Nicole Shan IR Manager
Yulin Wang CEO
Haijian He CFO
Kyna Wong Credit Suisse
Alexia Quadrani JPMorgan
Thompson Wu UBS
Leping Huang CICC
Thomas Chong Jeffries
Elsie Cheng Goldman Sachs
Call transcript
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Ladies and gentlemen, thank you for standing by and welcome to Kingsoft Cloud Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. I would now like to turn the call over to your host today, Ms. Nicole Shan. Thank you. Please go ahead Nicole.

Nicole Shan

operator. you, Thank thank and joining today. us Hello, you everyone, for as fiscal earnings is release Kingsoft as on Cloud distributed XXXX and quarter well, at and fourth was services. year earlier IR website global on newswire our available today

from Haijian He, and On Mr. accompanying have our and Mr. highlights, operations who and Wang financials will followed Cloud, CEO, the Kingsoft we Mr. Yulin will Mr. discuss guidance. call Wang; business by today He. CFO, review our

answer to follows. of available communicating We questions a during party original that be will In consecutively any are session Q&A your then in All language There third case the management purpose only. translation be will will discrepancy for prevail. translator while translation.

as of company SEC. result as The update undertake statements, law. may achievements under company's information operating except any forward-looking risks, not those current cause this of forward-looking current within control, results, These performance other and management's actual other or Before we begin, to to or applicable this Private regarding unknown I or U.S. forward-looking company's U.S. the does upon are the are would Act many with that which filings call the and the forward-looking beyond statements information, statements conference like expectation in of a predict events the meaning included known required to Litigation you difficult and condition to company's the which of from future and materially Further Reform Securities based uncertainties all XXXX. otherwise, and to any new of differ the in are events statements. contains obligation which involve relate market factors, and that risks are remind

our this ahead. Finally, in call Wang. Mr. are It's that pleasure otherwise during mentioned conference unless go stated, Renminbi. please now to CEO, figures my Yulin introduce all note Please,

Yulin Wang

fiscal and fourth call. all thank year for joining [Foreign quarter you, you And Nicole. Thank XXXX Language] our earnings

generated in year in to revenues of billion the the RMBX.XX representing solid are pleased quarter quarter, performance the from have and closed total same We XXXX. increase with we the fourth XX.X%

business, XXXX, as the net provider of to increase service our We result as interest with an for billion, with of successful the our year-over-year. able average strategy than industry grew turn of avoid continued thrust additional For revenues customers enhance dependent reached our our in a faster of leading our full conflict year and dedication RMBX.XX the cloud are cloud potential XX.X% our to we position, customers. premium execution which brings mutual the

[Indiscernible] sectors of We meet technologies and across we sectors, the demands. it continue services to explore deeply include these strategically and and financial services, sectors healthcare refund to our insights improved customer selecting into have vertical to key delve public the

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are first internal initiatives I on would now our pass [Foreign over of to the expect go report and Haijian the to to call working the Language] you. the publish ESG We ESG our near financial future. quarter. in over Thank

Haijian He

year for everyone, earnings the RMB. for first Hello Please are financial recorded numbers our our be full reminded Language] I also now results. and release detailed XXXX. [Foreign here all refer discuss quarter that to performance will in Please financial

several I would with, to points. begin So highlight like to

were pleased of RMBX.XX that XX.X% XXXX two, revenue growth our this RMBX.XX are for well First the of to up drive billion total XXXX cloud billion XXXX, cloud the growth. we China. of were quarter representing of all, the industry which our was XX.X%, above increasing Number year-over-year enterprise of demand growth services in total revenue revenue financial year a report from

customers revenue services RMBX.XX Enterprise RMBXXX.X premium of XXX.X% of year-over-year was been compared increase XX.X% that three, accounting for XX.X% revenue this see pleased were cloud are we services revenue customer to an Number of total year. and XXX.X% multi-year Our enterprise commitment our us. million, many large with strategy, year-over-year. from with our making have benefiting up XXXX very last quarter billion cloud

for, reached are improving let XXXX. happy agreement you. of already finalized our the have enterprise a we haven't and part at backlog foundation our to our in have believe order the revenue base of started beginning our in and process with continuously. existing the not revenue RMBX.X existing our each of market orders share our are year. recurring will billion customer shareholders solid amounts and yet We revenue been of a side very or feedbacks The projects the understanding of orders revenues orders large four, Even mix better from certain project a that of Number a to including credit form of hearing diversification number client project on very we bidding

same the period premium revenue revenue year. total example, top customers this from of our quarter last XX% in For around with compared XX contributed XX%

of are trend We premium customers. our seeing the major diversification across

services, year. for our as our straight services also computing include addition, for and of negative period the improvement an improvement narrowed month in also adding X.X% this etc. functions, period cloud total same Adjusted In last Net was fourth the from which image XX% the The negative margin quarter two in delivery has also to approaching quarters contributed same was representing Adjusted year. significant margin last five, EBITDA quarter revenue value was a EBITDA of also enhancement such in quarter. of X.X% negative coding, which adjusted quarters. of services compared been margin for margin with XX contribution EBITDA X.X% Number X.Xpercentage our the cloud seen improvement consecutive breakeven points. XX.X% increased. single negative below have this last loss year encoding

Number Our the from of is in moment sufficiently $X.XX at our period end share this quarter six, as significantly this funded of same share was business improving per $X.XX EPS earnings aka year. XXXX. negative per last December negative

RMBX.XX was billion. position cash Our

Russell Lastly, November major in year, the in Large in December Index the we last end MSDI FTSE respectively. Capital at indices Global were of China included two and

go Now results. I through the of will our financial details

Our year-over-year increased services public billion. RMBX.XX XX.X% revenue to cloud by

further explore our rate We meanwhile was are customers in committed to of conglomerates XXX%, internet engaging net XXXX new with retention are opportunities. certain dollar we strategy. premium to our The premium customer

quarter cloud RMBXXX.X by million. enterprise During to the revenue first XXX.X% increased

RMBXX premium XXXX up XXXX. number billion to by from quarter. percentage as in to in increased of XXXX customers XXX in of from revenue million total million premium customers accounts. of also Our XX The reached Cost increased XX.X% ARPU cost RMBXX.X year-over-year increased RMBX.XX XX.X% XX.X% by IDC a year year-over-year to in revenue last total QX RMBX.X to XX.X% decreased this in of billion.

public from other was and and and achieving resource great were channel this scale year. cloud RMBXXX.X associated at in both million costs million. RMBXX.X Depreciation equipment enterprise are efficiency. costs costs Adjusted costs economic The X.X% million. costs profit third-party software purchases, enterprise with to RMBXX.X margin costs million and the consist amortization costs million We starting relatively and around increased sourcing Other well remain of improving as cloud all growth stable adjusted gross Other RMBXXX.X was related last services. were QX XX.X quarter. as

from savings healthcare, for excluding cost continued expenses gross our of Total on offsetting as business costs million. RMBXXX.X ongoing new investment financial projects. into from by scale compensation leverage RMBXXX.X the and incurred adjusted expenses were margin operating X.X% QX down benefit adjusted Our such last and verticals million services R&D economy decreased to strategic based year share opportunities

Adjusted QX revenue to quarter. year last QX quarter. expenses expenses a percentage of and year as X.X% from in As percentage G&A in X.X% decreased percentage X.X% last quarter. revenue in XX.X% to marketing X.X% last a decreased from X.X% of a year to this selling decreased this this Adjusted total as revenue from QX

EBITDA RMBXX.X X.X% year. adjusted compared approaching was million with the in first Our single for it QX RMB million also EBITDA quarter. and Adjusted negative RMBXX.X margin were was month negative negative breakeven last

of a equivalent and cash cash As we had billion. a RMBX.XX XXXX, end December of

percentage economic expenditures XX.X% quarter was CapEx from XXXX XXXX. efficiency RMBXXX.X of a improving XX% million. decreased to scale this Thanks IT in and total to in revenue During as capital of

Moving to outlook. the

change. Lunar of billion. the are we and process revenue XXXX, current To on is the holiday total quarter late first quarter of first sector and each and XXXX which compared growth reflects major pattern first Year subject preliminary last company the of revenue continued with expect Mainland and For add, billion between expects relatively public the market in RMBX.XX of the sequentially. based Chinese also New cloud of to and the public timing to in implementation conditions the enterprises Meanwhile, forecast the our of the accompanying views operation of be It in clients procurement also quarter typical year. year and the RMBX.XX will believe China

Nicole Shan

This attention. preparation. your for concludes Thanks our

Operator We go questions. please you. ahead. are now happy to Thank your take


your Ladies and Kyna Please [Operator the and comes first gentlemen of question from Suisse. question we ask will question. Credit Wong the session. Your now line answer begin of Instructions]

Kyna Wong

increasing Thanks especially for if, margin my taking question. for tell questions. and have And the I EBITDA to wanted congratulations two I [Indiscernible]

the actually Year some the like do like year-over-year First, see the it's parts going growth about be EBITDA Chinese because the and New guidance holiday also pushed revenue to first somehow we quarter XX% certain is and impact on out.

all are are second project caused more is the competition And will they we like, service that term to So or maybe actually enterprise we XQ into these fragmented, we on that that like things giant can the we like the and where near also the expectation? aggressively this is in like have any on color cloud issue related with cloud see on see the noted and better your moving competition on will mean, do what intellect offering push and perfect sometime of like quite certain that pricing all affect I but customers also kind the maybe out side by cloud and provider hand got premium area. like others that’s other the to enterprise is are my things question you the will competition more original they because in actually there's compete

think I Thanks. So that's questions. my two

Haijian He

question the to color you and the and Kyna definitely second remarks early. [Foreign I take in be important think will that probably I I Language] to Thank addition very going share prepared I the one. address Kyna, more will it's want to first also question

QX point, kind what on just happened I I recap in of XXXX. want back think first to the

out lay will answer that of think assumption my below. I

major are year carried affect carried QX for few over actually an that cloud year. XXXX, over of it in the there in think when pattern of know which also XXXX for all factors this we actually for I year. was last that actually that the XXXX and three unique the public base increased quarters Obviously that usage side and happened COVID-XX

also of the bidding public the I terms relatively And mentioned pretty base didn't we was year, X.XX also also on to low for implementation in sector was and patient billion. Lunar actually typically process. numbers. if season also all is the revenue. holiday form That revenue QX positive our clients New as some Year And much few XXXX, the QX much of of this last factor major to affect QX the early. a think going share about was you be remember, In too for is total Chinese

QX. and up look XX% of or about of worth of XXXX half around second that So you revenue half last around the if the late XX% in revenue about second the percentage of as at part is And year and a half range. of the roughly split X.X XX% total is or the XX% its first around

So year, if XX%. to of the split XX% is half this last similar to for revenue which the half same due this is year the around half for first the first target about guidance the actually and half of you look at second with so to is around second splits XX% the the assuming around year, and XX% mathematical very

out laid So analytical that's perspective. from comparison kind I think the an of

for now, revenue of the we considerations we right without RMBX.X billion start. public of cloud process session two only we the in is kind the the excluding as projects year However, already have ahead. especially even all the this just backlog current Even finished revenue, to Mainland, shared meetings we of as China that about mentioned bidding major enterprise backlog and cloud

recurring backlog example that we from financial high major I out foundation sector nature of already sum revenue public the and for seeing our clients. will certain and form healthcare the cities carry from accounts, of services the in especially think revenue and that quality to

think So the quarters take and will and feature factors the the second overall, year-over-year it's unique similar for and on is we you potential the same very Kyna for actually across we given trend the we and question. that pattern very QX two year pattern revenue mentioned. carrying Thank this

the Kyna, and I changes. competitions, the things also second question for haven't Okay any we think for few seen major think I

neutrality the we us to may our alternatives other to in I more are that great and understand market there the getting strategy will the -- be making focus the players key think market. and revenue on customer efforts premium still give

total the we that know willing also we market same are use and that and also As for market trend as actually the cloud well. the clients actually that to seeing us, also the for rapidly are addressable only [Indiscernible] opportunities more in but other the peers not bandwidths

player, they three give want more ranked as the company accounts mentioned enough our budget from were become to to when as itself and cases data the have in prove the any more earning Thank concern more a may doesn’t other more and and clearly wallet have situations -- you financial public client. for per dollar market clients we that deep also I we in client spending in you a and think -- we with same the have but our wallet they especially number vendors important is that Kyna. getting true vendor who in never who may where we also a though even cloud trusted, and select considerations of way To for mutual internet and the share, key third So maybe as are some progress that party the making are few who because stats clients growing. cloud point we mentioned, also as value IDC

Kyna Wong

Thank you.


ask comes Please line question next question. your Quadrani the Alexia Your of of JPMorgan. from

Alexia Quadrani

video, the XXXX as thoughts us be cloud enterprise I cloud us strategy [Foreign share industries to video, revenue you gross form your the question to in your public outlook. based to like well exposure video the to are to the with business outlook Secondly, particularly next with business? XXXX So what the other long be gross share public cloud are revenue first view outlook my the two new you able in preliminary on key what industry Would the diversification the and driver able revenue your live guys Thank you. short regarding what years? form that drivers ask XXXX And as gross Language] including become is form implement will streaming? to industries one as public potential from new be cloud? you gross Would would for

Yulin Wang

[Foreign Thank Alex. Language] you

have mentioned. So good for XXXX, has good and as start expectations compared a with we XXXX, for have also already XXXX, Haijian we

We for from regard in rapid in strong of also big the I period. the in services, XXXX computing, cloud with financial to development the to growth computing that better And this. and XXXX still orders confidence regard we to three cloud a and have sectors hands public quite medical think number the and services, with have we have a services healthcare developed of

cloud the with the as climate question, and example, be are in they in videos and green regulatory or the our change, short applications. public with growth regulatory the using and the quite see maturing no So also of clouds public also and also e-commerce share cloud are the sectors development our and regards HD stable. in There a business and there we a with a further is some can segments business those will on the the in -- and be and customers change but video educational with based under regards expectation sectors, the business the the video XXXX the business sectors, think probably continued for these big in will also that to is to familiar start in videos their XXXX video quite we big three the think I regard And we so sectors. developments are also in measures to not business

the we read XXXX. any speaking, relevant to generously granted still for big technologies. change business not So expect to need do prospect video in with developments observe further of We and the the


of the question. UBS. next Your from of question your line Please ask Thompson Wu comes

Thompson Wu

sets two I’ve of Language] questions. [Foreign

results. is quarter first fourth The regarding

impact have the quite a trend question sequentially. and bit just the Also G&A you a decline XXXX Can bit cloud. us a the also about my bit should things fourth going and fourth both expense little about seems to of walk Can you initiative in there? through kickstarts quarter in into How think in quarter is talk Just we declined an quite just G&A expense the there? margin other for view little about outlook This for company. a and healthcare important be healthcare China the the cloud year-on-year. opportunities

Haijian He

Thank Yes. Thomas. you

happy basis very I Also to our mention year-over-year are be basis. and peers gross basis annual margin China. it's answer phase even gross I on which the X.X%, already major is in our margin on take respond very from faster will going was compared to significant CEO QX, margin was gross questions. with actually other X.X% XXXX first We question. cloud annual the to the Wang improve a to Yulin want Around if industry of in first second the XXXX, one our on will and you point that compare the

sector we made also breakthrough October, partnership and the few clients especially vertical entered example introduce a QX, [Indiscernible]. healthcare expand we part. out into mentioned especially the internally, and lay So remember for banking the look how need for few example business in we in to with so I and of into think group we QX we in that's just for if in CEC kind at perspective first cloud, major and find budgeting we technology the a actually as also industry September the our everyone And new company

healthcare technologies, services they So as native high financial we solutions need as willing are you those the quality new certain are especially cloud into of the the to the quality to be you of clients who those but high require know, seen in tailor the customer [Indiscernible] implementation clients the area know and initial technology.

the why new and on on that's will certain investment in of incur the cost QX areas those business kind margin gross into actually that. affecting we the that So line incurred have cost

a It's investing actually - number is if and new into value range QX, million compare you itself widened the not with So that's about the lot. QX those million absolute from dollar RMBXX reflecting we’re areas. actually number to RMBXX dollar

term, do term, quarter my maybe obviously So on changes. of for gross have the in But continuous margin we XXXX, on going improving little the the offerings. IPO the forward. your believe we year it’s G&A expenses QX the question to that in the third And completed so support long basis the is for fundamental second and QX and for point gross but long our in long a would say prepared term, forces long I last QX the did margins we in the our bit term, our improvement kind were also so our on and IPO

with So actually there a that's base client for we new reduced quite G&A the the transaction part some are and you down of existing reflecting needs as expense of for was and and is line external dedicated The we the into related working incurred relationships QX expenses clients. know, why internal our business those business. and are kind

introduce as kind employee basis bonuses I but relate last decline continue basis annual quarter-over-quarter for projects certain XXXX I the second will our year on last forward total will to internal, again, the decline. for think especially expenses XXXX our we on to example percentage and to on basis response the to we will continue Thank from external in basis question. a have Thomas XXXX of G&A expenses will year's certain now for the percentage little and annual because think Yulin to going to as fluctuation, So XXXX of Wang of CEO but a and revenue, a revenue you XXXX incentive may total payments believe bit for G&A

Yulin Wang

years study KC of and service safeties It's itself R&D evening. is regard into important healthcare sector involves up and services. is one security With started and or service sector Good four public you. the thank healthcare healthcare actually some social So government the to a with quite ago. some both actually section four healthcare healthcare also healthcare also Language] since the also complicated we sector entered it it we ago [Foreign the and priorities years actually our since sector, the for

after So has in it's the huge shows or provided big the the complex digitalization the and quite changes states system healthcare transport sector, healthcare sector. that a basically XXXX of

gained have to providing pioneered healthcare services advantages in actually have We cloud sector. because the the we

As you already have China in know in we and the actually services are in to provider first service CEC [Indiscernible] sector the September Sichuan with we provided class partnership or some services XXXX, are X. we we healthcare projects Phase Chongqing, cloud signed to that in the and customers for and clients provides agreements

also to very and cities future even as gained we it also growth. had contributing spectrum important recently county quickly or basically I role the in system the city have we province will to still example, [Indiscernible] the and For the sector counties, information growing in say and an projects space our to well province and one our to healthcare integrated covered whole healthcare from for from in institutions the as I we growth business income think should medical play revenue is or other


Your next CICC. question ask of your comes Please from Huang Leping question. the of line

Leping Huang

I you. Language] questions [Foreign for two have

intentions? my of CapEx company the related customers’ management going is customer the to related retention IDC premium give strategy. share second what's more premium Thank to dollar the Can and premium customers? some to the you. XXXX in these claim the is as And one of is question rate First number the

Haijian He

Thank Huang, take you the question. Yes. happy to

customers of the addition key total to and the accounts The XXX also in a regarding is is the pool RMBXX.X we is customers we million increase around contribution and quality the XXXX, which XX customers. a improvement in trend XXXX, that and execution of in have much significant decent million in to an on has revenue customer you our also increased premium So and as of from also the clients which seen of the also very have we premium the that and about say would aka of track as average premium improvement mentioned ARPU also well. the the to number diversification XXXX increased RMBXX premium within that

diversification key indicating kind are of of I the that. also customers and universe think of the not but indicators premium these the two quality dollar of kind only

CapEx. So to question your second on

for center the the complete budget being billion highly to keep as for start XXXX on Our same data of as are XXXX track on we execution think will were relatively even spending the much CapEx and on rate second though RMBX.X the our [Indiscernible] in and will CapEx well and mentioned. within I likely

the total kind Thank that around. about leasing will down very cash the will is about still still from CapEx of for flow our additional on over much on region. Chongqing you will further the data-center, around out center this also think Chongqing continue and X.X how for and important as will serve which percentage serve We seek the the years same you be may year the or construction -X.X I financing from our of total Chongqing center maybe and pricing points we X.X leverage of a as few quality perspective. percentage cloud services have And data-center revenue move for the of notice XX% IDC to can not potential that the year. go And CapEx depending sources track. So probably will incur around better data a overall, Beijing XXXX a an revenue major for Huang. of for to near ago region of has as last XX% the declined But


from line Jeffries. comes question question. Please next Your your of Chong ask of Thomas the

Thomas Chong

U.S. about it the between Can Thank how impacts impact you business our you. portfolio? our comment and the about tension to China and

Yulin Wang

or our that no computing now customer matter - services up not So seen Language] have it [Foreign impact is doesn't has U.S. the It whether impact. the to sector. China relationship cloud, from we on


your Your Sachs. ask of the next from Please Goldman Elsie Cheng question line question. comes of

Elsie Cheng

Language] [Foreign few a I And follow-up questions. have management for questions. taking thank my I

one is public the cloud on First side.

concentration. from with actually customers in secured decline continued mentioned internet companies the a have now lot we the new and you November of that Just

So then the here and second do little bit following or the storage to computing, more looking think and my X.X are public customers trend? revenue there by XXXX can the is at some second is we're with together on an customers rate backlog question then so question which guidance? delivery expect the acquisition And then success looking byproduct, so enterprise second be strategy mix into you. in is growth one is in to half as can the providing a new of quarter to apart And we bit more billion following more other we're explained and the the And into the XG the industry about more we XXXX, that actually new opportunities industry the we revenue that about our When on the penetration cloud second accelerated from understanding little the is, expect competitive and trend, public and Thank plus seasonality in this? and we here? of new then is edge actually what products cloud the the led question. into when a the have has share can will change we so enterprise multi-cloud what quarter into the about a growth cloud, up have first what

Yulin Wang

the our from sales, mostly familiar is and more cloud public existing video our video the game, from satisfaction the can So the when in retention customers them regard high. worth RMBX.X retention, as first revenue the this internet and game these and products a Language] the and also mentioned speed And these and the also also we I decrease, billion pandemic. the the new by storage, could I video high has me growth think, computing ready let businesses network regard sectors most or [Foreign growth using like win we of rate and the believe also generally will of of quarter, e-commerce high deployment center as clients. mainly customers might factors efforts also being sectors such with and to sector and with public market and such of about and to seasonal include remains customers. Haijian this already about we be all from the are clients also and customer sectors, have now growth the expanding are we they affected And business premium in and the business with are premium have premium and revenue the video and and and we have cloud cloud talk large products further there's a projects are COVID-XX from but rate customers the other most implementation these actually also With as think they and we the of the the educational so

new have rapid forward business. we growth that throughout the than the for enterprise cloud Agora, in cloud growth industry also there QX business overall the rates company. enterprise, will of rate and with Sogou acquired financial we customers Bank, [Indiscernible]consumer So Huya, average we the growth QX, new The situation Bank, considered year regards and to have and QX, the well to the be the think so as Scotia Zhihu, as public Citi the the as customers and a cloud higher is Bigo, such also looking


Your comes of [Indiscernible]. Please ask last from your question questions. the line

Unidentified Analyst

on management thank Gong This my and Citi. Hi for question. taking you behalf is Nathan Brian of from

through Tok I Thank the the follow-up cloud into infrastructure Tik strong you. of of large entering How accumulation cloud management does considering one of possibility quick have technologies. area question. So see the video consumption CDN

Yulin Wang

already the for the IT answered of our [Foreign -- internal have are with question that internal that. uses technology user our that impact Actually there resources the -- regard purchase on we there business with development the product knowledge and many no so the is to Language] to last team time is


approaching remarks. for now call the I end the Shan of the As we closing call, over now to turn will the are conference Nicole

Nicole Shan

Thank Due for Thank today. of time you the to our conclude you we us today. again operators. earnings for interest joining

contact. further to you We you with questions again quarter. any speaking nice If Thank you. next feel Have have forward free look please to a day.

Yulin Wang

you. Thank

Haijian He

everyone. Thank Bye-bye. you


conference. you for thank gentlemen and today's Ladies your participation in

Good may day. disconnect. You now