Kingsoft Cloud (KC)

Nicole Shan IR Manager
Yulin Wang CEO
Haijian He CFO
Brian Gong Citigroup
Joel Ying Nomura
Kyna Wong Credit Suisse
Thompson Wu UBS
Elsie Cheng Goldman Sachs
Call transcript
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Good morning ladies and gentlemen, and thank you for standing by for Kingsoft Cloud First Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. After managements prepared remarks, there will be a question-and-answer session.

As a reminder, today’s conference call is being recorded. I would now turn the -- host for today’s call, Miss. Manager Cloud. Relations Investor Shan, of Kingsoft Nicole Please proceed Nicole.

Nicole Shan

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

be Mr. today review Cloud, and by we then call Q&A only. Haijian consecutive purpose available He. There original prevail. in who our Mr. companies to interpretation. highlights, answer CFO, operations He, that Mr. our accompanying CEO, be reference statement, the the your guidance. the In On questions language will will discuss case all have from Kingsoft during will for Wang and session the business and of Wang; All financials any Mr. are will He will Yulin interpretation management followed follows. discrepancy and

RMB. company's beyond statements, and management's company's remind are forward-looking denominated Securities Please this Section and that statements this in of undertake that ahead. company and SEC. expectation new financial regarding Further Security call and I the CEO, upon with Act of uncertainties Yulin our current we go that XXXX in achievements condition as the the Private forward-looking results, are the mentioned in conference like events risks, as under to of company's may pleasure These difficult XXXX. to of otherwise during as risks, the are any meaning update from the events figures Reform The statements. of you are the which included future amended based materially defined filings factors contains to the now relate required are and control, other call many conference other XX-E to involve and note or market which Act within those unknown my current or all of stated, known any U.S. operating uncertainties to factors, not and Before It's unless would result introduce performance applicable Litigation as actual Exchange begin, cause forward-looking in or of statements this predict obligation otherwise, Mr. does information to information, or differ Please, except U.S. law. all Wang. a forward-looking which

Yulin Wang

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Haijian He

RMBX.X first Please Due to earnings billion. financial first customers, for points; financial Thank revenue services would robust total Please this all, to of all following of RMBX.XX for quoted with, refer cloud highlight performance you, and for in our you, consecutive relationships premium the increasing been results. also quarters. high that Thank services now will our were release billion quarter. I X reminded quality discuss Revenue revenue the our numbers were five everyone. from detailed are like here from XXXX. cloud begin services I has To our with RMB. public our to quarter public Yulin. be

representing revenue enterprise increase an million, were cloud of Our XXX.X% year-over-year. RMBXXX

of profit QX. record quarterly in Second, we gross a high achieved RMBXXX million adjusted

received to quarter, as quarter margin last X.X% was Our margin quarter. from adjusted major revenue increased margin due cloud this stable cloud from public such enterprises financial for benefits service. The a investments mainly last verticals improvement and quarter this contribution and into of services, X.X% gross to healthcare, the

our procurement By expanding New existing billion holidays. with with we our to in reflects representing XX% was December quarter process cloud reacceleration enterprise new billion amount Chinese of increase XX%, engaging It of second at customers. of success XXXX, after year-over-year our Third, the to a for year, total backlog services customer’s revenue billion and between expect be of revenue scope the and last customers RMBX.X Year RMBX.XX QX of RMBX.XX a implying XXXX. our

number new healthcare, projects addition increasing of certain in backlog above. financial mentioned keeps such backlog number to has project Our the services the been a

position at is business moment XXXX our the cash billion. our RMBX.XX Lastly, March sufficiently funded of as XX, as XXXX. was

detail. financial results Now the in I greater through will go

of the or usage compared robust due increase year. during period the billion during Our our year revenues and same significantly quarter relationship a revenue our customers COVID-XX last industry in for general. when five outbreak steadily, growth saw consecutive The a printing internet of quarters, of product increasing the year-over-year jumped high print has from increasing internet been been services moderate in first last services usage with public quality has the We with rate in reach RMBX.XX and services to faster usage daily cloud customers.

in in the mentioned health QX. efforts addition, industry education, on general many cautious internet the segments And other companies industry, are taking public weighing streaming stance the in expectation previous in tightening verticals. promotional happenings and growth than China of regulations as and particularly our in e-commerce recent a In those

Costs also in year-over-year revenue year-over-year of year. procurement and compared to a with quarter, increased impact this XXX.X% demand to the the by Year in previous the New increased of increased RMBX.X year, the partially rapid During enterprise timetable billion. billion. for holiday XX% by IDC costs cloud services growth by offset cloud the our to enterprise mainly reflecting of late RMBXXX Chinese million XX.X% the timing season RMBX.XX revenue by and

last enterprise costs RMBXX.X million cloud services. the record and adjusted and QX in economic in the As as to this well improving million same party a XX.X% it are period this and RMBXXX.X to were quarterly year, percentage cost of decrease last revenues, RMBXXX resource achieving IDC achieved costs cloud million. of our we as scale million. RMBXX related in to outsourcing year, and greater increased third Other were software Overall high XX.X% We purchases quarter. Other amortization total costs by a equipment enterprise associated and QX, consists both gross costs costs other from costs with profit million public Depreciation staffing in from quarter. RMBXXX.X were efficiency. XX.X%

to were increased improvement increase into and adjustments Our quarter as to expenses quarter year, operating favorable to insurance social cloud of financial hiring this contribution adjusted major million, quarter compensation, public last such cloud adjustments, mainly in benefits RMBXXX.X was from Total received XX.X% and policy the starting last hiring. margin The fading revenue from talent this of investment QX compared salary other gross the verticals healthcare, expenses, stable X.X% last due from share up and based X.X% services for attributed quarter. mainly of margin margin.

were compensation; share adjusted Excluding expenses based million. RMBXXX.X R&D

Adjusted As were last to marketing quarter. decreased a year from expenses percentage of revenue, selling expenses XX.X% million. XX.X% QX and this RMBXX.X in R&D

decreased to last were expenses expenses year, of RMBXX.X quarter. they year, percentage Adjusted a G&A in decreased X.X% to from percentage of selling revenue revenue, marketing last as X.X% quarter. adjusted a X.X% from this this X.X% QX million, in and As QX

in RMBXXX.X compared Our loss net year. RMBXXX.X was to year QX from of adjusted improved this a last XX.X% quarter. in adjusted negative Adjusted negative loss net million net XX% last margin million QX with

with compared Our last adjusted in EBITDA million was million RMBXX.X QX negative negative RMBXX.X year.

improved margin EBITDA year, adjusted slightly negative this in X.X% X.X% from QX to Our last negative quarter.

As XX and March we of RMBX.XX at XXXX, cash billion. cash had equivalents

decreased RMBXXX.X from quarter. of million. total a were to quarter, QX in expenditure revenue this year, XX.X% CapEx XX.X% capital percentage During this as last

and expect the on be a XX% and are we quarter change. of representing compared based our between we is quarter. market to Moving total to to a first the outlook, to billion, second XX% RMBX.XX preliminary the year-over-year of the and reacceleration billion operational XXXX revenue subject on for as our early, views current basis mentioned This which RMBX.XX on conditions with

Nicole Shan

our concludes for Thanks remarks. This prepared attention. your

now your English possible. questions Please Please We and Operator if ask are to happy your Mandarin both go questions. take ahead. in


and Thank of we the Brian you. first [Operator comes from the gentlemen Citigroup. now Ladies Instructions] question-and-answer will begin Our Gong line session. of question

is line Please ahead. open. go Your

Brian Gong

things public But I management industry management this you question us, first just my I quarter understand first whole of reissuing taking thinks partnered. thank for first slowing last for was public is sort for down we And down? is record quarter. My that year Yes, have, the some cloud base was heard the cloud a And those there year. that question. regarding high slowed and does that in

second industry, signed or for is internet just [Foreign backlog with aggressively the you And is first on Language] And some management have more price this some sector, big my the slowdown out. know cloud question. you their that question my companies, think become on shares, contracts partnership eyeing. what amount do this new personal course those or We our are competitors enterprises customers under of could And public order our [Indiscernible]

Unidentified Company Representative

Thank you Yulin.

you, for thank question. Brian, So your

that year in probably probably of public you year. run right; one the the right the was on the last growth of first look So year-over-year public this the question, when the at revenue cloud base of cloud reason high you're you're QX

of robust. engaging some our addition, in especially our made in premium also customers public end However, that with base what progress our segments. in our we is and also And from solid core highlighted top customers, has been revenue customer our cloud good we new very

has that's five growth why we result as mentioned. So expanded for a and cloud as our revenue quarters, sequentially public consecutive

However, probably QX in notice as segments, in China, and a especially and in has of quite, certain the been the few to that also the especially, examples. impact in revenue environment, public you'll in cloud industry volatile a regulatory quite has general,

short believe adopting customers of regulatory do should you education new online For made resources. analytical in perspective example, pretty indirectly see much will impact believe QX, those have we content the review that from which do year-over-year on compare, the about for actually use our from digitalization policies services, very many growth, industry. QX, been over compared term factors our we solid see has level cloud the And the kind and in has we do were with revenue the of as short seasonal is public the speaking delivered different usage, impact. acceleration public and demand cloud promotional affect And efforts, certain signal has increased actually in XXX% will also, including QX, or prudent, our some services. cautious of mentioned, And which The forward, clients, of mechanism from the as so be that coming our we which enterprise many strong, in we we'll the as know, perspective. term. streaming very also demand But to the been and the cloud impact it verticals a even healthcare verticals kind peers in across and highest financial kind of and

especially and really sales from and think a first It's the engagement, a of perspective, about compact; deliver kind competitions, capability speaking unique implementation. really and about segments. value it's strengths in the stress pricing class about I Chongqing it's all a comparative about add not not client of deployment

very alone. by year. the December And is X.X we has compared is that have backlog number new year, QX we not I competition that's why, engagement given happening think won billion have segments. cloud and this included And last robust. don't the we enterprise any this don't, enterprise demand have cloud biddings the in in know, to in And So you the as

the saw Hubei in announcement which deliver of the kind province, project number. background the as data, on been alone projects we revenue included not cloud public public in we the healthcare over for mentioned, based that example, million project RMBXX bigger recently, that in will which alone, For [Indiscernible] along has

our a around we However, going details, on basis to sensitivity that not giving the we we pipeline that forward, colors with say of through can but disclose client quarterly seen, want you. us show a helpful. competition, will growing number backlog and I existing the that that's has think well also and been backlog has Thank few implementation hopefully been come on-going the

Brian Gong

very that’s you, helpful. Thank


you. Thank

of question next of the is CICC. Our from line [Indiscernible]

open. is go Please line ahead. Your

Unidentified Analyst

my so cloud first public the is Language] And question [Foreign regarding business.

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few onwards be where Thank quarters? our you. So the gross next the margin for going will expectation for

Yulin Wang

[Foreign Language]

Unidentified Company Representative

Thank take one first the last questions. two Translate I'll these Thank for Sofia first on for a and one. you, cloud. regarding Yulin. three public the And you, the

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time, all pockets the video know, events, because direct see product and those it more lines diversify scenarios in a services, events,, those live connections over to are contents, from events in Year customers. is video And interaction demand the are lot a services. such us you connections there in we such As scalable those connections, of end our users in components not capture only helped direct peak show New maximum as and multi-line also of XX,XXX but the has there's these i.e. kind Chinese our do massive end as

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all financial technology. services it vertical, about the On is

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healthcare. the on Second,

Jiangsu, play And in we do be or given establish is quality those we areas clients, do seeing can know, good and highly and advantage have such cases over we Kind is have firsthand [ph] we trusted provinces, important the clients, important and real client capabilities. want high capability And mover card city deploy that you Gansu economic on by be into solution we know, extending China, part in those Beijing, scale, revenue healthcare enough to areas. focus for there level, from for many and playbook and cloud projects accumulated Jiangsu also given healthcare. And such experience tier itself of sure projects in experience quality complete the in the strategy the as And for do other public the recurring level provision those experience and in a province, leverageable. do believe our high to in a and in our business areas one first and third the and such do or areas, Hubei, pioneering those Wuhan as have a provinces. and we them Hubei Gansu pioneer, benefits vendor provinces deliver can and areas as you we the few the As and experiences a replicate that for two and the as those sector. the top and who the also can execution important make and the important resources

experiences and we wholesale the gain for that over feel Company's long recurring solutions. D&A trust our growth client and those there. positive the and So margin business to repeating we'll and you're confident quality think very improving a term, the the Kingsoft And been Cloud of do margin carrying more right, extending further I quality also overall. high revenues to – execution from we And Sophia, enough see mid from enterprise gross has cloud factor that and

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we regarding reason. QX our major the few right in a of winning costs in you'll projects. positive margin, point, was a on and strategic successively results, third So gross I QX investment the bit we year, see But do font-end think the you're that in as see the we discussed the and as last certain

on doing first a -- that we client version of carried skills cost that front-end the picking the right was stage, with the kind I our upfront and why improving out and investment also they certain as even think we services. last always worker, testing the year I'm they're

on improve the few a of unchanged margin company margin of keep same percentage maybe year's we certain quarters, think or point on to the gross kind quarterly margin reflecting over overall. we the volatilities four on diversification, a or year we think result, the I to compared have So perspective, value margin of this views year XXXX. over with products, regarding X% believe level gross last X% gross I can a term, dollar a do as a the for And basis, do we Sophia. basis, next fundamental client XXXX I hopefully, the diversification efficiency our long think either a as improving and to on compared And gross well. Thank you,

Unidentified Analyst

Thank you. Very clear.


you. Thank

Next from of question line Nomura. Ying is the of Joel

Your open. line is

proceed. may You

Joel Ying

my is, current three [Foreign going what what is about we from company bit customer Language] the the in question And for to market our XQ? contribution overall XXXX. a think because cloud down Chinese public sector? the So And slow from for little CDN biggest cloud the contribution first is

XXXX? my gain or to changes help will question from public especially adjusted is So better EBITDA. us structural in growth potential any second cloud strategy So about

think adjusted has December broken I EBITDA margin XXXX. it in negative still for maybe the But month, one XXXX. even in been XQ, go

market what second question competition So the about So related personnel quarter to for we third should net expenses? I that something or year full dynamics. for is expect is bonus about guess and And XXXX? my

up in last market share. year I think we market in while public China move cloud gaining quickly

competitor enterprise you. as threat well market public major as the to or competitor to to a cloud So market the Thank threat major a major market cloud to Huawei, or does cloud will for or considering be thinks peers? or Huawei that the company

Yulin Wang

Language] [Foreign

Unidentified Company Representative

translate EBITDA Thank question. you, and through question first Yulin the questions on take Joel for go margin. I'll for and three

of customers project the as stable been QX. usage our Yulin has the premium for in customers, mentioned, top So

our Given see some growth. revenue public sequentially, you cloud

percentage customers a a slower point. of as decline public as a percentage of see So top as will the cloud, percentage premium revenue total those

revenue So, a the and and across And the also seen their more on as are delivery. CDN computing and business as more lines percentage gradually customers including of as has the perspective, decline different total demands know, actually well. CDN storage diversifying revenue you

data total to QX highlight QX one X% of on declined revenue that's CDN has a to to the last about percentage as point. from revenue think I want So I year, percentage point, this year a XX% is around

Second point on the growth.

initial we actually independent new know, new given who are the for customers we And have engagement are value and confidence provider. making with our cloud the you And that independency are will these And engaging gradually with of QX, neutrality progresses conversations as new in point the public value I and a monetize the following in we QX, quarters. we efforts that a major And customers as we're the revenue landscape. in with for third sector. and cloud them. So that regarding think will result are and further position the become competitive making and gradually carry the customers seen of engaging those

And key capability the and And want the two kind part from especially the enterprise firsthand improving that, and will and our across in financial about strong. execution we capability These very for has it's experience that the market of our there's about and in strengthening also key mention technology our China is and improving solutions, really maintenance the only required services think implementation, I sectors require digitization the healthcare. been really verticals to doubt experiences. the not business. traditional are industry all no specialized and services know-how line but and and cloud

have key we confident cities the remain and client you outstanding of of a and well. with with relationships, it given think the doesn't And to as important few to all always provinces a projects on revenue. monetization for a sector the other services, enterprise in can and working trusted why challenges, know is deliver already help us sales think are and our mentioned, know-how that to peers execution we're on for them Phase resolve phase-by-phase our probably that's in really relationship their that client already and client the X can and them. the would real mentioned. as including as understand or be areas some equal public the peers But advantage great demands X. of engaging that, some working good client already with So on kind the keys But more And I and And we them have Phase questions and we I implementation areas we we cloud those of hand. we're do

pipeline robust think we only timetable. implementation I have do but also the backlog, a an not Alright. for

question for So regarding the EBITDA. last

four I -- or to think want three major reasons. I highlight four

policy certain a The first is in adjustments in Chinese China. regarding the reason regarding social -- tax

year, know, COVID-XX, government last partial favorable XXXX probably in tax for return you to either QX certain and industry in for normal announced social new however, so certain or as cities has will an for the status, make and they certain companies. given revised on the policy certain time actually the impact. year So to security taxes tax policy. basically full XXXX of They have and back nominal pay will have security that QX, policy But revised normal this back to in a certain rate

talent verticals. the higher good are more as who client our across we And extending many more people and we hiring especially them round additional certain core of experienced about of have X% human the impact lines, the hiring our in and are strategic on level you talent, X.X% and cost have of the compensation important revenue to product are second the are reason extending reflecting for will total the the base, revenue as engaged base is, different those those So the employees. know, capital. new a will of for And

one-time be impact mentioned on those the EBITDA the related So to you sequentially human capital as costs, seeing on were margin. base impact drop their But a of forward, value our result, EBITDA basis, which will that we a the better going we'll a and adding the seeing a that the dollar as more higher are means revenue impact profitability, have margin. to

our will be stay basis, same it's the I EBITDA there. for hopefully they XXXX timing impact. about will And timing think year that So about full really non-GAAP a when but profitable, get unchanged, on all the we the it's margin

margin EBITDA to executed you, are in in So as and turn high Joel. and be implemented certain will positive hopefully projects quarter we Thank year. better our this seeing and quality

Joel Ying

for much question. my very you Thank


Credit line the Thank you from go ahead. Suisse. is Next Wong of Please Kyna question of

Your open. line is

Kyna Wong

first peers look been outgrowing growth overall quarter. first at company peers, that cloud market. And in wanted product to The one the Language] their the the [Foreign is in major actually has China given

Just been new to first in see continue this if has or new about The with quarter, us been this trend the like the quarter? customers will performance wanted second question in the about some customer company is given share the needs. first

about there's cetera, on the given the -- check the company, we side? And sector so et momentum term any thing a investment long in And customer regulatory the impact like contribution. internet because CapEx the China, third the in if to in for could Thanks. tightening new the the

Yulin Wang

[Foreign Language]

Unidentified Company Representative

Thank just asked. you, you Kyna for questions

right. one, first I you're think the On

growing in been compared segment. the the have faster We peers with public cloud

think we're for in as in a For And general. even the the relatively well. market QX, business public faster grow want the of growing in already ourselves QX, one we mentioned, can think public peers, with faster than them. given still I been forward, China as cloud reasons I have player cloud the selective think market. than progression And think peers I of to looking think in certain in our we've position line We we I that industry the marginally

to we education, e-commerce localized and relatively revenue cautious. those certain from and the reasons, confidentiality clients certain accounts for services, to names. Even well for usage progress point understand may QX is, the we given talking this probably second are have spanning the as making So and in But certain live disclose and new the prudent though we're question streaming them. to video, not as are opportunity sensitive related with the and

have full have not converted opportunity. forward. it a the into has revenue for the But see will testing completed. you already the we commercial a client given and fully public Hopefully a for going we following already quarters, the some of them, So of revenue and technology reacceleration cloud relationships,

On third the the regarding question CapEx.

in QX value in CapEx last pre-judgment but including supply certain perspective, chain issues. the our that logistics was and That notice on Holiday also probably Seasons, potentially about year. QX QX, were than $X You'll impacts about including lower our

equipment QX, primarily call back that a hardware service enough We last and pre-judgment we purchased in have sufficient the year. actually

billion. in you if remember year, was $X our last why about that's So CapEx QX

for well. basically the be opportunities prepare will for leading that cloud this clients and sales for So of inventory public as enough the cloud year's infrastructure public

So for Thank And reasonable think year. a for you. also to that there's CapEx we billion for communicated. previously the plan the expect actually these will level CapEx, this are reflecting together. year's around this we level as same We be think $X.X


of Please line is ahead. The question go the UBS. of you. next from Wu Thompson Thank

open. Your line is

Thompson Wu

[Foreign Language].

your about Is and can your us Kingsoft your for growth talked you The recent third give growth. likes range domestic any in their large guidance week, been perspective? international I question guess, Thank in The business, system question Last public for Kingsoft talk first is, of a there's about cloud premium Cloud revenue a XQ we business. integration business? public is, there customer Cloud's or cloud in loss in China's, their market. distribution firmer competitive in Can enterprise cloud impact the CDN or a reseller capabilities in from developments you. you

Yulin Wang

[Foreign Language]

Unidentified Company Representative

Thank first I'll the Thompson. translate for two questions. you,

So question the regarding answer guidance Yulin the the and also breakdown.

for time, late a will situation. even the the we of back in at geopolitical of even certain have global there that you international XXXX, views So be probably that terms know volatility some as business, in part

the So with that's prudent et a approach cetera. regarding engaging that why customers, we internal made we're way budgeting, very our our regarding

in for our revenue for already business exposures small have at this footprints actual even been Cloud, early business but we planning time So, moment. though for that's very Kingsoft the certain very, regional why, and certain international has

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Thank you.

Goldman Our next the line Cheng from Sachs. question of of comes Elsie

ahead. go is open. Please Your line

Elsie Cheng

small So half half, space. second Language] question have of the the I we as the headwinds year, [Foreign a because the growth first well cloud of color see on into public the do into of public on some directional the sort just full here the as cloud cloud

we think expectations on the directional provide the can of as number? if wondering color and should about fundamental we half, the the some of additional you. Just well into Thank some drivers second how a as

Yulin Wang

[Foreign Language]

Unidentified Company Representative

drivers. question. There Yes, three this other I or reasons, think major the question major the on are

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foundation user the own demand and basically their into their for and investment customers. existing opportunity those growth their from scenarios growth business premium work, So and our

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is this one think only I example. of the

generate I translate areas think important or demand and and the where other XG of area new be IoT Thank and technology to the opportunity. we'll BI in you. can will related the see also [ph] areas revenue new the

Elsie Cheng

you. Thank


And like the to conference Please I have Thank continue. to back the you. presenters.

Nicole Shan

today. and operator joining for us again thank you you once Thank

any speaking you come Have a please to If forward next nice you. Look back. with further you free again quarter. Thank have to feel questions, day.


concludes This you. and participating. call Thank today's you conference thank for