Earnings call transcript Q1 2023

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Kingsoft Cloud First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there is going to be a question-and-answer session. [Operator Instructions]

I’d now like to hand the conference over to the IR Manager, Nicole Shan. ma’am. ahead, go Please

Nicole Shan

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

by the from business Mr. He. followed we your and discuss Company Zou review session our Kingsoft Q&A On operations will have and and Chairman highlights; that Haijian Vice during call questions will CFO, He, Tao Mr. Mr. today strategies, the the guidance. CEO, follows. the the answer Zou; be Cloud, who our Mr. and our will to available financials They

of consecutive are statement our integrations management be will and in for our will original reference integration, discrepancy In any language in covenants There case prevail. your purpose only.

current to well begin, conference this or Litigation defined factors, beyond actual those of Exchange of Before upon These and as you performance the like the call on XXXX. from in risks, may Reform XXE demand the contains and would conditions management’s Act of based we which statements remind known cause predict other meaning Private statements market forward-looking or and Securities the are the Securities Company’s U.S. expectations within XXXX Section materially to all that results, current uncertainties of that are and difficult Act the I of in which forward-looking as which differ are operating unknown of achievements to and many related forward-looking and statements. Company’s to control,

information, and does forward-looking events filings the included or law. except any to not other required U.S. a new this SEC. as otherwise, future any uncertainties risks, information are Company’s Company applicable or with as of update in under undertake obligation result The statements the Further factors regarding

that are in during mentioned note RMB. this all stated, unless denominated please conference call Finally, otherwise financial figures

Vice our go Zou. pleasure Chairman Please and you. CEO, to ahead. It’s introduce Thank now my Mr.

Tao Zou

Cloud’s first thank [Interpreted] Hello, and Language] earnings [Foreign XXXX everyone, quarter for Kingsoft call. joining you all

We continued enhance forge the management. our uphold development, sustainable business with build and centricity and technology of throughout principles and entire the operations to success business customer and our on based process innovation, reputation high-quality

the fourth further RMBX.XX guidance. points margin. gross sequential percentage than with to recorded a Adjusted improved. profitability same quarter, This X.X During in and consecutive XX.X%, the our we that line reached margin historical adjusted billion, year. have quarter Revenue also period gross the high in our is last a increased improvement higher

a points EBITDA last a XXX% profit of than high gross negative reached improvement X.X X.X%, Normalized up higher million, historical year-over-year. and adjusted quarter. the is RMBXXX.X Adjusted margin percentage was significant which

progress Next, update. and and our I business provide key cloud, four will latest on across enterprise technology some product cloud, public areas: updates

ecosystems, I’ll start supporting billion, strategy, X.X% margin services. with margin goals and namely profile. our cost our services, for same a improving and gross cloud overall higher emphasized main public the in Kingsoft of with RMBX.XX customer Revenue X.X%, the Xiaomi public optimizing significantly period negative gross was XXXX. cloud the three Upholding and of efficiency the we the than structure

and reputation. On the sustainable supporting the ecosystems Xiaomi firmly and first are original to drive and first-class with profit and fundamental vision we revenue, point, our committed products Kingsoft that of technologies help

accordingly. out increased healthy to to portion a year-over-year, understand total our of revenue represented our revenues proactively respected customers reached reputation, better quarter, with margin. an we Xiaomi and our and increasing we and can adjust from maintain services To how we that ensure improve this In experiences the ecosystems Kingsoft services

build component structure and differentiated of strategy our customer critical approach our optimizing business Second, boost to is a profitability.

larger customer on our customers. loss-making strategically for withdrawing projects medium-sized We businesses, from base among focused expanding have

of growth service medium-sized dozens Sesame. During VXX sector EV deals Black for also such provider, the as companies technology [indiscernible] quarter, we customers, vehicle-to-everything, as example, negotiated including with signed known or

cost reduction initiatives supply implemented improvement we Third, and and efficiency strong enhanced chain management.

rigid During consolidating utilization we minimum commitments [IDC]. bandwidth reducing the by increased rate and quarter, eliminating relocating and redundancies, our resource

build business our profitability. We quarter. a directly relies nimbly improving computing power enabling the assets, leveraged and of on diverse foundation public provided a clients also channels performance resource that initiatives a while different us elasticity financial a for to demand for owned of protecting this pool to the match strong cloud leased combination our of These

year. in enterprise last Revenue to was margin RMBXXX on of same from with cloud XX%, gross the services. a improvement million, XX% Moving period significant a

We business in reuse of profit customer continued margins. core and capabilities and measures strict project to terms quality, of management implement sustainability, accumulation

Our public further. services cloud businesses expanded

quarter, Public ninth Beijing the contract the Shandong, expanded we Shanghai cloud other year for regions. our the Services footprint for renewed and During to and the

projects. After years we healthy for built generates wealth cloud that margins a and a mature public development, services model data of of opportunities have gradually business of and value-added sustainable

deploy, health, business healthcare region model into the with opportunities differentiated regional cloud we tap we image and model. the integrated the digital medical the and strengthening hospital namely smart our models market capabilities. the model, These the to five model, us cloud are models approach, In model, integrated accumulate reuse organization healthcare allow

through also and market Data-as-a-Service China the to adapting quarter, penetrating known data the national we milestone hospital on systems and R&D platform, in During major product made as a progress our information management integration. project in biology DaaS leading made our portfolio

clients finance Bank, focused technical unique in strength ahead, Looking advantages healthcare CITIC we and and have business where and as areas product financial on for such data. and institutions In expect and big endeavors as platforms our technical the to delivered challenges CITIC the such space. big existing industrial or new data we China we to completed in solve such helped sector, leverage major bank

innovation, In rapidly offerings. building our core terms innovation success and up of and live and of best-in-class on on to by a experience constantly customer product across model our providing our based iterating technology products we

enabling to on- reduce benefit of resources, the on- XX%. and cloud the and usage. in started into support own hosting officially by elastic instances unified scaling data management clusters container off-cloud smooth container our scaling off-cloud ensuring This computing, can around cloud spikes solution of In centers, cost during a customers

So more Top IDC product such as by [indiscernible] XX it efficiency, cloud storage share XXXX, market solutions. object doubling In innovation of XXXX. and storage report gaining compared fourth with In performance the is with and cost more recognition our cloud native jumping is honored achievements the its fourth place. one in China’s software-defined Research, quarter storage, to of published from market,

storage suited providing with tiered an AIGC computation a launched efficiency. top high-cost the doubles which line application big storage scenarios also read particularly performance write product, array and in as of all-flash data, We solutions performance, storage separation of well and to such object and at the

and cloud multiple that enterprise is a management Stack point better customers. view the availability to terms The result safety provides customer cloud and pin enriched solve of Galaxy upgraded more In usage for zones experience usability, a management unified, in across convenient enterprise space, we resource and intelligence.

which quarter. address in in the heated of particular, AI the to would sector, developments recent continued has I since be the In to X.X China’s first like debut GPT

have market comprehensively deployed a have proactively space to trends. and We on this close respond resources to kept eye

strategically in WPS AI. the with Kingsoft approach manner, a support coordinated Xiaomi key and as we for providing the platform Kingsoft strategic in only First, offices AI companies Cloud Xiaomi and ecosystems programs, cloud and Kingsoft ecosystems, including

position of trust stand us enables Second, strictly space. use model neutral preference that and the many companies independent language large we This retain our to full the platform. in AI

Third, assets, our to resources combination customer’s directly leased to a meet able of and sufficient needs. with owned offer are we GPU server

few quarters the over past summary, is demonstrate results In our results. yielding our strategy that

we on, prepare this on to challenges strategy customers, nimbly we and As meet opportunities head society. create for will shareholders, value and to future employees our execute

our will over Thank I first over you. quarter for of the to now financials the go Henry, our pass to call CFO, XXXX.

Henry He

Thank Zou, for and the joining you, welcome, Tao call. everyone,

by for will through I pleased profitability strategy, financial the are results the quarter you first the high-quality see sustainable we in Now to our the development further improved first quarter. Guided and walk steadily that XXXX.

consecutive grow margin by profit record of adjusted of gross adjusted and year-over-year, achieved increased representing gross for continued the a fourth high XX.X%. XXX% RMBXXX.X quarter million, Our to

expenses the normalized quarter negative margin in X.X% our from X.X% period and quarter. last this with improved year adjusted our last Along the same to a in XX.X% control, strict EBITDA negative negative

impact were structure in to the million million from our quarter, cloud previous this Within were of public which with line clients period as revenue our compared CDN RMBX,XXX.X with that, in well year. total of RMBX,XXX.X from mainly million same adjustments our outlook. The due revenue services as was Our adjustments. the last business was RMBX,XXX.X decrease proactive

product the Revenue compared due same impact period and the with from last mainly decrease quality cloud million RMBXXX.X January was The million seasonality was the of COVID-XX, infection of control. in to year. enterprise RMBXXX

by decreased to enhance decreased RMBXXX.X RMBX,XXX.X cost XX.X% measures. significantly million RMBX,XXX.X cost XX.X% IDC to from control revenue our costs million. by this million We year-over-year of quarter. year-over-year Total to continue

decreased RMBXXX.X from by million Depreciation period the this and X.X% amortization in RMBXXX.X last to of year quarter. million costs same

XX% RMBXXX.X were RMBXX.X million Solution million quarter. this costs and services development decreased costs RMBXXX to costs RMBXXX.X other million Fulfillment from and and this million by quarter.

profitability The quarter this development. project adjustment period and success by last XXX% cloud the to strong the compared and improvement significant and high-quality commitment cost mix, reaffirm our control efficient of of million, of our gross revenue adjusted sustainable and profit measures same our representing strategic in year. margin XX.X% increased improving gross enterprise Adjusted of our optimized X.X% selections with to delivering RMBXXX.X of margin demonstrates

in help profit loss market gross enterprise separately Within year. public the of cloud improved gross business gross To period and nature. business to our RMBXX.X the cloud margin of profitability, which path same we disclosed in profit understand million from our better was business our was for our the gross the investors and public reflect services million, line, significantly and and to order better last health of RMBXX.X

period services XX.X%, of in Gross down period Gross same in margin period to last services the to The last of the services last due more was compared cloud X.X% our with of the million same scaling RMBXXX.X from product of improvement mainly stringent X.X% was cloud strategy. year. the proactive XX.X% RMBXXX with CDN services improvement enterprise same margin our year. of profit cloud adjustments mainly client enterprise and enterprise public due of selection was in year. million cloud was improved of were negative Gross compared structure. The

In terms of expenses.

adjusted last selling million, total by of decreasing last share-based expenses RMBXXX.X from operating was our decreasing quarter. from compared quarter. Within assets, expenses compensation expenses was long-lived impairment by quarter. million million, million last Adjusted adjusted R&D XX.X% with marketing and RMBXXX.X RMBXXX.X that and were million XX.X% Excluding [RMBXXX.X] [RMBXXX.X]

Adjusted to from RMBXXX.X quarter expenses decreased G&A the RMBXXX.X by last million. million largely XX.X%

million, RMBXX.X and sufficient us a capital equivalents primarily operations. providing of to billion, service. XX, for cash XXXX, this quarter and As of was and The our significant RMBX.X for March which cash amounted investments short-term liquidity consists for payments expenditure

our the We such taking of for have service control procurement CDS business. been of traditional as used being ones

been AIGC not While expenditure service, the recent needed, our have ways for various including to, high-performance model. in popular areas, especially with suppliers cooperating actively to but access in the resources capital we limited

included the leasing, will be service, for will will reflecting Meanwhile, following payment but service the in operational purchases, earlier not was which used be be certain we ordered to schedule, in will in for which business, our this due also the the cash CapEx, model. We quarters. year payments in OpEx amounted sequentially payment gradually AIGC be including

practice. report from recently ESG the We’ve ESG certain progress company’s the recognition very review from our in increased noticed ESG agencies well-known scoring for the that Lastly, of present we and in-depth released agencies. XXXX, also last in company of year to a the rating have

great advocating have the ESG standards. in We pride taken highest

cloud thereby to society and our and partners strengthen our continuously our industry with impact our shareholders. ESG delivering will the positive in amplify long-term for value the We governance engage

Looking synergies ahead, Kingsoft our we and will Xiaomi continue strategies high-quality and Group’s development ecosystems. to the within pursue the unlock

of in era billion to opportunities XXXX. the be While our we expect RMBX.X technology advances, between AI agent revenue new capture RMBX.XX second billion for total staying to to the of new quarter

long-term. new firmly we view the in especially above opportunities, conditions, on preliminary on areas subject the Thank initiatives market that current change, effect time, ongoing are to are these you. continue based and AIGC and our and reflect of While and our to the will and commitment forecasts results amplify financial operational business believe mid to in the our given strategy the which which, the comments

Nicole Shan

Mandarin now prepared This in your are and we you. our Thank ask ahead. Chinese remarks. Thank for Operator, Thanks questions. your take you. if and possible. Please attention, please go your question happy to both English concludes

Operator

ahead. from Ladies will Xiaodan And the Zhang CICC. session. and gentlemen, question begin are question-and-answer go we We [Operator Please from now now the first first Instructions] the question. taking

open. line Your is

Xiaodan Zhang

[Foreign announced that their service months. few price noticed catch Language] our past pricing products in first So my question their is have cloud the on strategies. on We providers several

please accordingly? And make you on So our to price the to we could views onwards? adjustments share going trend going are your pricing strategies

my our And on is second margin. GP question

a profit seen improvement margin in the the have for sequential first We meaningful gross quarter.

is is sustainable? expectation margins profit in to you. what And our improvement So long-term? for this segmental the the Thank mid- gross

Tao Zou

Language] [Foreign [Interpreted] Okay.

have a price it cut. have So large-scale noticed we tier indeed, analyzed players we carefully. so-called our And

products I to our that of services terms our and products impact In services. conclusion, would there’s impact say and current actually limited its and material are offerings of no current to

in not in action. that that that is tier whether to industry the are product similar do anything we limited. take as And we has impact future, it Now close now. material pricing catalog any we a the cut also actually in specific should at price as think say look have to included strategy, of will we If terms the this just the players of

is that towards our feeling So is this purposes. you. geared PR Thank more action

Henry He

Thank you, Xiaodan. take Happy gross second the to question profit. regarding on the

we also expanding see our the very half have the last of are year, actually. I to the a quarters happy profits, which But recent six important can to mentioned, into the in to starting especially put you results. adopted the want results past has gross from see quite you very initiatives data achieved second positive context that company probably in the As

which you At growth back the on QX reasons of It’s important quarters, remember, in margin especially time, X% to And combination actually If a was only drivers. gross was – company XXXX. a of the of you level increasing and XX.X%, our last few gross XXXX. is year, the half the we’re the of to lowest than QX about sequentially X% almost if remember about X.X%. to Xx margin Xx that second today’s point a past reflecting on margin six in the higher the

mix of First the and Cloud the increasing well, clients terms a positioning the to the profit also and the of certain which better giving is we better is margin in back really with actually low efforts and pricing and our our terms medium-sized clients top terms including the products, of diversification commercial products as negotiated cutting Kingsoft the power customers.

well. the bandwidth cutting the cabinets is back certain from resources And our lower the to second utilized efforts and service, as

the combination to more of efficiency execute how very we can quality importantly, those efforts So actually But deliver, our we a take we control, how managing role our internal of really gross impact sure all terms enterprise the strategy project and cloud are we and margin. of in in cloud. coming make the office good the a cost PMO it’s those how as and management of enterprise in how terms the

public separate That’s cloud quarter, this and to enterprise why on first margin are we time the of cloud. gross

see that you happy to and As margin are positive going both business trend gross can are see a making we lines forward.

asking, three think, we’re is things. the key you’re point second trying to the trend see On I

all, on to and basis, gross company margin Cloud combined the happy see quarter a basis. to on were a of a over improving as we’re Kingsoft hopefully of sequentially quarter First

confident think do see see good and trend things I we forward, So continue that giving result the going to we are to already the that. few the

propelled more of will potential the expansion Second, gross the I be compared public cloud the cloud. enterprise margin think of with

to will margin going taking – expansion potential expansion we’re more obvious on role the make the company. terms a So we’re of margin the of cloud sure in of public

to relatively expand and as the keep same a on enterprise time, will sure rational will of margin pacing make at gross well. sustainable a want also the But basis cloud we

keep well. hopefully, of continue grow things, level can company will we margin So by doing as the the gross to two

take the And very regarding point, think the growth the I we profitability. versus last also a very, careful view

opportunities make make only will sure reflecting invest. So resources very also to one it opportunities the we’re pricing you. decision that to recent and same terms we’re going focus, And our a any And keep to to are also doesn’t things in the of say going enough where Thank that on have the on the terms AI CEO balancing follow rationale to but margin we example, is time, we our trying growth in gross sure the factor margin. our potential risk cuts of and we improve. rationale gross mentioned, trends of make margins will continue a not other

Operator

for your you Thank question.

Please We are now question. go the next next ahead. taking Gong from from Citi. Brian the And question

Brian Gong

taking my myself. [Foreign Thanks, translate for management, Language] will question. I

AI accelerate to will cloud that cloud future? public should Tao follow-up Henry’s to from in seen Cloud, profitability to our have mentioned Just from any large the [indiscernible] on enterprise the management do Kingsoft versus balance the have And can amount When see we growth Kingsoft future? third-party enough And on you. in again will and elaborate also, just point the Cloud we also ahead. Zou model meet the already we impact cloud? language growth Thank

Tao Zou

Language] Okay. [Foreign [Interpreted]

Internet a customers. AI, as cloud of of I’m or since So for is And you good Internet your also opportunities you both mentioned serve for cloud. itself mainly current wave the wave cloud answer us. and quality we public enterprise the public know, question question, AIGC you mentioned separately as or the customers In space, in the very the to it in going second

AI is to Kingsoft of the to fact leverage As strategic good. we manifested our our developers. number that also and And coordinated effect have commented large well on, Xiaomi with ecosystem a we independent with very which able neutrality and the we’re also is engage the will continue positioning, in of approach

this opportunities. cloud about public our is So

namely to verticals, public terms different you cloud, three and have answer to I’m digital enterprise finances, of services, going separately. major In because health basically main we

the part first cloud. is services public the And

actually of terms is in focus shrink in a to bit Our line little geographical this overall of and strategy locations first. to business

in will you So core some example, project the number might of – of profitability projects be provinces. Beijing of on will focusing the be regions, increasing but terms see the number, for core we and and decreasing, Hubei the

that approach, to our of to enhance to is technology which We way and the such long-term first in believe growth. healthier and namely medium then to expand a shrink in services capabilities and

in we digital not it profitability, digital pushing of prepared but we of models the in remarks, of commented as enhancing we And are secondly, and revenue health, only see are of We five forward business. the in also terms scale. health terms terms in accelerating

side. basically about the cloud enterprise So that’s

all second As of I model is how our to platform. running language of due apologize, that many companies to answer we as such large question that transactions. our amount are to first confidentiality And cannot are your have stage this I to for we providers, on negotiating in say we And consideration potential fact a the customers. detail. question for indeed your secondly, large our currently, the that still companies have

your question it’s reserve, is our the As to conclusion have about definitely third chips the and short good GPU answer more.

great seeing the been on business. expand such to have enthusiasm AI-related customers expecting We and

the supply chip essentially directly leasing assets. tight that combined [indiscernible] satisfy such And that secondly, to of and such you XXX on by such see first in will are service; very And terms know we also needs. adopting as been GPU and As flexible USI. banned include owning or market, earlier, I all in commented the has of market. But we channels

in to our to our is and can needs customers’ potential meet say try that we we and what best satisfy regard. need definitely So that such existing

Henry He

Zou. you Tao for Brian, thank And the question. you, Thank

Just add only points. two

publishing results. all, of QX today, First our we are

part As topic actually was in the you emerged April. remember, AIGC in QX, of early back

in not of definitely was quite remember know, quarters affected you was part given the keep affected current QX, of well in many on as COVID the back the growth regarding in results. in and positive we sessions, you the bidding prospect timing. actually giving the process And if two China as it’s So the March, the

promised probably quarters earlier. two So we actually as one or

and cloud our the coming disclose first gross other things. backlog on enterprise with in are step, numbers going separately margin So step, cloud. we’ll hopefully our of to and quarters, public quarter, disclose And this second the we the also

control potential So growth of pacing the in those and the are opportunities the we growth time of as I AIGC to coming the the and going some which combination a are to money how well, and the be we think the balance growth and we spend actually and quarter profits. of see opportunities going

some number CapEx a of low. you in But little the also second point QX, that our noticed is was maybe

new category, but reflecting think servers, implication ordered on that’s our of those well. the and flow timing we haven’t in spending I the and are of has flow in and not of a growth terms opportunities coming QX April not on opportunities the on also those because are items in May the cash payments accounts the actually actually as cash had we the on working many

can points helpful two these for think I hopefully you. are the be

kind we For growth give more way coming see the backlog regarding in next color quarter, you quantitative you. and the opportunities hopefully, can the of more can Thank you a forward.

Brian Gong

very you. Thank That’s helpful.

Operator

Thank question. further back remarks. will questions. I for no to There you Nicole Shan for the hand your conference closing are

Nicole Shan

again for Thank Thank operator. once you joining us you, today.

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

Operator

participating. the That for conference you today. concludes for Thank

You may disconnect. all

Nicole Shan	Investor Relations Manager
Tao Zou	Vice Chairman and Acting Chief Executive Officer
Henry He	Chief Financial Officer
Xiaodan Zhang	CICC
Brian Gong	Citi

Kingsoft Cloud Holdings Limited (KC) 23 May 232023 Q1 Earnings call transcript