KC - Earnings call transcript Q2 2024 | Kingsoft Cloud Holdings Limited

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Operator

Good day and Thank you for standing by. Welcome to the Kingsoft Cloud's Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Nicole Shan, IR Director of Kingsoft Cloud. Please go ahead.

Nicole Shan

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

They consecutive guidance. to your your interpretations the Vice who the On the call He. statement only. available the the and company will that from our management's financials answer operations discrepancy, purpose Kingsoft Mr. and for in questions followed prevail. be session will Zou, In Mr. original Tao; Q&A Mr. follows. There Mr. our highlights, Chairman are any business will case and have Zou convenience reference strategy, Cloud, CEO, during CFO, and interpretation. the we today, discuss and our will of He, Haijian will be All by review language the

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

all conference that mentioned our unless Please pleasure denominated note CEO, this to figures financial in otherwise during and Finally, ahead. Chairman are Zou. please Mr. Vice stated, go RMB. It's now introduce my call

Tao Zou

all second earnings everyone, am Kingsoft Kingsoft thank Cloud. you quarter Tao, joining for XXXX CEO Cloud's Zou call. and [Interpreted] welcome I Hello, of

Looking August our the back Kingsoft executed development team firmly high-quality strategy, the on and and transformation. X sustainable years has company XXXX, since entire the a has complete undergone Cloud

on in to gross XX%. steadily of turning after all, digit positive improved positive. as X% low-single from First profitability QX, increased net turn margin EBITDA we margins and are fundamentally increased to operating Adjusted well and profit to track

swiftly AIGC round as embracing of revenue cloud contribution new X industry. from AI to to opportunities, this in public figure the Second, XX%, services leading a increased

approximately services as customer in fundamentally scaled up approximately perspective of a quickly Camelot, XX% workforce, including hosting for Wuhan million, to revenues. Fifth, quarterly concentration low management costs along quarterly and expenses XX% RMB taking to firmly margin decreased leadership. as of R&D technological XX%, entire procurement, out CDN long-term by and foundation businesses, Third, approximately contribution as the phasing risk sustained aspects it, assets resolved. Fourth, XXX refined operation, with and of XX% decreased Center solid representing from revenue single laying large implementing

Composite as, capital solidifying inclusion Index by on infrastructure. well Connect, the our Hong Exchange, listing into As dual followed Stock completing Stock Kong markets Kong Hong primary and Seng Hang

us to term. our over to sincere development high-quality gratitude the like solid of cared this all to express the shareholders sustainable All in supported have and long employees future. I and have customers, our laid would who the consistently foundation and for

business the second of will you of quarter walk the through I Now, highlights XXXX.

offsetting X.X%, and X.XX pressure RMB flow. Net inflow gross new Cloud achieved a marking XXX In once million, again EBITDA increased to and XX.XX and after demonstrating significant in our of our RMB of indicators XXXX of revenue cash XX.X% a expansion billion, amounted but development scale, services by increased high-quality for services. from operating new ability year-over-year terms Kingsoft QX the has only percentage of year-over-year. sustainable from profitability positive a high-value growth products signifies of revenues XXX brought and cash-generating and and development performance increase operating added adjusted the financial proactive been breakthroughs various year-over-year. improvement. Adjusted Kingsoft has X.X%. Revenue milestone in long-term improvement of quarter, has particular, marking RMB that not reached solid growth laying a beyond. in healthy improvement operating reached million, margin also strategy Cloud's and XX.X%, X.X%, reached cash This a a about sequential margin turning Adjusted effective, in activities. The grown, of by eighth to X.X profit million, gross Adjusted of adjustment EBITDA the our phase quarter sequential consecutive reached RMB points CDN foundation our

a X%. quarter, of X.X%, public terms year-over-year billion RMB reached revenues In and cloud a of representing increase quarter-over-quarter X.XX services, this increase of

positive have X services, public priorities namely seen across for cloud AI Kingsoft and chain. and the our supply We businesses ecosystem, Xiaomi outcomes

Kingsoft strategic grasped sole within the within First firmly platform cloud serving cloud the opportunities we the and of ecosystem, all, as business ecosystem. the Xiaomi

and Kingsoft and amounting This RMB a reached witnessed to of Xiaomi XXX million from increase quarter, contribution year-over-year revenue XX.X%. XX%

continue bear businesses fruit. AI to Secondly,

doubling This cloud and public the amount accounting XXX revenue XX.X% position. million, for to RMB first quarter, of in an quarter industry-leading revenues, AI the surged

Our others. customer model further Internet also AI diversified, and including language large base companies, self-driving, applications

[ resource computing of of networking clusters the XX,XXX capable industry We supercomputing supporting have established a highlights capabilities, the chips level. at of topology substantial ] in network pool, leading large-scale a

procurement system, Central resource utilizing Thirdly, China, combination price control we expand quality. of reduced managing significantly resources securing seek supply best costs data strictly core in the intelligent the suppliers the fully to coverage comprehensive Meanwhile, chain internal are of costs, compared East. of procurement a and the a Western of built computing and center in and we centers regions data in scale and cities costs. By stable pool the

million. amounted have enterprise to public on maintenance. state-owned services, cloud, and space, actively and Moving service In services XXX operation public pursued cloud where we within RMB standardized cloud enterprise implementing opportunities to revenues

cloud market have capability in targeting leveraged share. X ranked for market markets operation from the companies reflect released the quadrant. report components ranks June China China, IDC, are the by market industry. the use such cases and the we model, core industry ranked leading XXXX enterprise service a recognition top workspace leaders' research cloud company as our service big consulting as Such e-government we the in by report data e-government collaboration, the In and public and We our product in in domains. In China in CCID,

accuracy focusing to speed. In in cooperation needs validating requirements This of hotline cloud projects, and quarter, fully potential images, ] Municipal construction business public long-term and data It and of sector, the quality efficiency health extended Changzhou commission new of the meet assist will and the we us applications, in intelligent implementing summarizing the Beijing care smart promote language and delivery services health Health established opportunities of data, in the seizing space establish business, the software Development the AI, of large AI [ has enhancing gradually for applications improving industry categorizing and invested industry project a AI projects. In scenarios expansion. care the have archive operation query Cloud and and the Of promoted and models service and which decision-making statistics has Kingsoft hotline deployments. to its started space, its Commission customers building response Housing by XXXXX business of And will and on enterprise XXXXX cloud launched the benchmark subsidiary in Urban-Rural

In a the law in taking terms joint intelligence, cooperation leap laboratory and of transformation established of strategic a China, industry law artificial in Dentons launched law industry. of a forward officially models, firm, digital firm we legal leading with

for Stack up years cleansing compared products of based to we images in cleaning, XX% uphold a fundamentals density, XXX% storage we transformation. is innovation, and enterprise sets. In space, pre-training data reduction both a Kingsoft high of have of technology for incident instant proprietary surging demand AI version and the tailored response cloud data sustainable the creation and like cleansing standard across a Galaxy summary, principles released data development and dotnet the In requirements best-in-class cloud an cost X and to the AI solution This strategy, in text, after configuration, implementation fine-tuning high-quality platform delivering the metal increase from original accommodating high-density videos. clients, the of on of low have and to offerings. In create a density. In and success Cloud's holistic multimodal terms bare object cost to product the technology, with data in maximum complete achieved per platform meet solution of undergone has to product our integrated experience of on customer core focusing space, building and

the our we our Looking enhance now will and our forward, pass second go over continuously understanding ecosystem, for such XXXX. explore and Xiaomi continue Research will generating develop cash co-operations for Center, to over new thereby the Wuhan capabilities, value quarter financials opportunities, stakeholders. I deepen creating profitability employees and shareholders, customers, call our of CFO, strengthen other and AI with Kingsoft to comprehensive to Haijian, and

Haijian He

for Thank you welcome, everyone, Mr. Zou. joining call. the And

X of would you like progress. of our areas walk through XXXX. We financial results the will I for Now, second highlight quarter to key

financial our are By in are has First, the to metrics. margin, we thinking, increases to consecutive first pleased gross over margin improvements several EBITDA led applying profit-focused in profit profit, gross committed EBITDA ongoing quarters. very and principal past the a approach that we with our

we margin our margin consecutive this adjusted RMB adjusted sustainable After XX.X hit adjusted growth, X with profit gross XX.X%, our development in quarter, and EBITDA of a a EBITDA a quarter, execution RMB while trend high-quality with in million million. last turning profit X.X% This strategy. EBITDA demonstrating gross margin, successful steady reached in positive marking XXX.X of continued quarters

increasing revenue strategy, sustainable strategically quarter-over-quarter. line our have resources development allocated this X,XXX.X million, in positive -- our Second, reverting rise reached RMB X.X% a more quality to trend revenue services. year-over-year a a with X.X% we high our and develop mix to By increase adjusting with high-value increase quarter, and

revenue, AI amount XX% last public cloud quarter. quarter, to XXX grew up RMB revenues from This our double million, our of services the making total

revenues. and with total our strategically have We to reduced In AI have computing established proportion services power to and low XX% customers response from partnership our cost supply of support growing quarter. we to a of margin, resilient revenue, a down the pressure last CDN a XX% scalable long-term chain,

recorded have a operating flow we Third, net million. amounting XXX.X cash to RMB of inflow

from secured including financial to but facilities limited support loans. leasing channels our loan not various financial also AI to Corporation, We bank Kingsoft other our business, and

public from results. last this the of services revenues financial primarily quarter, this last enterprise million from X,XXX.X the a to by RMB reached million, Revenues increase X,XXX.X X% quarter. cloud Here X,XXX.X were RMB our revenues RMB project details services from XXX.X of driven AI-related up up revenues RMB RMB Total cloud year-over-year, RMB for are XXX XXX.X growth deliveries million, due million, were quarter million accelerated X.X% to quarter which from million. in

year We year-over-year at and remained base million our strategic utility XXX.X to Total REC acquired. improve last costs have quality to and scaling from services continued costs million XX.X% optimize by enhance prices. depreciation expanding decreased million. IDC million XXX.X amortization new the control, cost RMB our down of stable in reflecting our quarter, procurement RMB XXX.X RMB period quarter-over-quarter servers XXX.X to this mainly usage. Depreciation CDN to X,XXX.X due supply X.X% of cost and of RMB revenue the the dropped quarter, to from our significantly of this year-over-year services same by increased RMB of million

XXX.X costs XX.X Camelot, RMB revenue the X.X% RMB increased from this and costs quarter, due XX.X respectively. million RMB expansion other Solution costs million, which to services was line development personnel growth. Fulfillment with RMB and million by of million in and XXX.X year-over-year to solution the were

from quarter record This XX.X% Our adjusted last new and quarters quarter. adjusted XX.X%. XX.X% X year gross improvement, increase marks margin last and for margin XXX.X a of XX.X% the profit steady RMB year-over-year, were gross of the up consecutive a an million, with

quarter-over-quarter, compensation assets, of G&A our X.X% cost adjusted long-lived and were XXX.X personnel the of and XXX.X of a terms from XXX.X from which were million X.X% expenses last expenses share-based expenses RMB total million, impairment slightly million to XXX.X representing XX.X% increase RMB RMB operating by R&D RMB total million expenses excluding million, up RMB to compared due selling of XX.X quarter XXX.X increased X.X% quarter, Adjusted adjusted and expenses, RMB revenues. In our were increase. Adjusted last last quarter. were marketing million year-over-year,

cash to and this operations expenditures a cash XXX.X June for investments. quarter totaled in infrastructure strong XXXX, XX, AI RMB our was of As for investments providing equivalents AI sustainable liquidity RMB our business. million, reflecting X,XXX.X Capital million, support and

remain we and development. to the ahead, high-quality Looking sustainable principle of committed

costs to continue you. improve enhance and will We revenue Thank profitability. and quality, reduce expenses

Nicole Shan

our This attention. remarks. prepared Thanks concludes your for

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

Operator

will is of Instructions] our Zhang [Operator We first Xiaodan take This now from CICC. line the question. from

Xiaodan Zhang

questions I've got here. X

investments? year? please the the all, next CapEx contribution on First full ROI could us could color expectation for is how AI update of us And you your the And of you X your quarters? on give guidance for your AI secondly, some for the revenue

Haijian He

Regarding the CapEx.

growth think, business relating a pointed opportunities. year, out opportunities the of -- AI or good So to which correctly. probably we investment, actually This good over us. the our of we I investments CapEx, accelerating Most area higher positive I think XX% first directly think potential even is for are in, very think a think we're I all, very of you

So year at but into areas. CapEx a X we investment, probably give this full the think can moment, different full we look I guidance while for cannot

recorded may business First the And the from of all around investment already that think this positive see quarter operations from that side, a CapEx inflow can flow. is converted for you net good cash cash million. also inflow already a of we XXX which area I is, into notice into operational RMB about you

first the actually is that So point.

is, point we channels. So expanded the financing our second also

the support group example, secured from banks the Group, support financial Kingsoft the also especially Xiaomi year, as well. potential the companies. in both you'll X we got financing quarters, we national notice, leasing as great well from banks, also last But policy from, institutions, example, including last as year the this and opportunities the for For also leasing state-owned

balance we with that in cap our do amount certain way, CapEx the a today. ourselves only investments, of limit to actually cash the So just not of looking

the So opportunity my can additional very channels, of have financing and capability can those we support financial investment. we a actually point in is, given to AI ceiling reopen get high

those carefully The we've long third point sustainability moment, is the clients we investment most measure at also share of investments. the and happy the been of term, regarding profitability is, given And are our very AI to names. this well-known

client a sales market. And cash business the notice as we can second, also well recurring very from the secure upside long-term to more which same as opportunities also probably potential contract the do incoming have flow, with You on basis. side, client secure a the as from the a

quarters the few first we talked remember, profitability. recurring driver I about So important ago, most as our for

before. I are higher AI, recurring we you ICE see compare the old do revenue we only the services with old in that right given much now, the model if percentage did think so-called

serve cash And to is and will the our those revenue a the investment also just X, we capacity. Number So the cumulative long do have AI in mentioned, I cash the term think especially the we and flow client, areas market with conclusion that I good to we capacity we third very liability with and China invest increasing of more ROE today. come X to today, secure. increased can the universe be can secure dollar we limit the already the a also we recurring company ourselves very today. that have the not every in use

it have want sources you possibility this that forward. But if we line you probably from convert times on year, I sites note, The we long a I will revenue last matching mention number, ballpark think the Xiaodan, the revenues, can to growth have accelerated have, X probably with going an are for a been a quarters. term good will few compared for very with ballpark coming I last top year be total that those with and front at a number actually that. leading on the we've in think, always look the financing CapEx which to the and to

Tao Zou

So thought. opportunity AI, bit a take really about this to overall in to [Interpreted] little elaborate want of terms my I

computing in the about So dimensions. really X of my it's supply power. is One mind,

application able the obviously, -- is to financials a is which inference, the which is that And the from current Which is growth. see, second tremendous the artificial training. are the third intelligence. The the of you

and growth it XXx growth the AI from the these example, versus computing that all first the numbers year-over-year you're are Xx of currently For mostly coming revenue area quarter. But supply of seeing the power.

for do and terms revenue terms and business, far in think I However, training potential more of room future, in the models the of for of the in potential. that the application have for

for far say also of your overall the other business, to I for question the a margin which the that parts GP back factor circling that the company's contributing is of than about the the the AI to ROI. major GP have margin. improvement business of higher Now, is

I Now different supply of and the about also X second talk capabilities. of like and would to is looking inference computing AI the ahead, the it from application the is power dimensions. One

dimension, lot have in demand space, vehicles particular, is first EV the of of Now areas and a kind to opportunities. significant in all One of and to been the FSD, models. firms. autonomic since tangible poses implement launch Tesla which X autonomous for the engaging driving of a to we have own train with do driving And this, the electric and EV their intention real and of lot them

this business So our opportunity. lot a for is of space

robotics, robots which Now the empowers with is artificial intelligence. second essentially one

certain have not as a mention billion opportunities X well. do area financing be name, we there's to So in Noticeably, of recently. its having one RMB I'm company, lot secured going think we this will which

the high is very confidence space. So the in

we with being use partners that of prepared cases the the remark, for projects our are of have talked about the implemented. collaborated some Now dimension capability, or the as in some we second about inference have the model

and collaboration and these areas, one-stop Model is in progress, such to this MaaS, do as laying think solid actually space. for a foundation we the and we that the aim deepen we this provide achievements the progress in going that to Services, As elaborated be a

our last to investment has think year strategy we we been So, its owning June in of our summary, development. and in fruitful, overall do forward AI since pace continue that very and look

Operator

is our Goldman from from We'll question. This next Zhao take Sachs. now Timothy

Timothy Zhao

very And contribution regarding strong that the of total I have Xiaomi is XX% total X noticed first questions already the a there the in question from to and the as revenue quarter the past revenue contribution achieved growth was the and revenue Kingsoft Group, here. I revenue.

ask revenue is from I what as thoughts Cloud? And do as Can the may driver revenue. CDN you and line had Xiaomi more we of given question Group a outlook contribution forward? the street, on going from the business WPS well the here? And So Group. that? Kingsoft this what from as How think term, the share the the Xiaomi see And management Kingsoft this is on your into cars half the behind AI-related the revenue to the into for revenue year and proactive second of on to outlook we downscaling longer CDN the continued about monetization second revenue from is Kingsoft any

Haijian He

Tim. Thank you,

revenue The first question parties' regarding the contribution. related

you right. I Tim, are think

we a very in potential revenue think signals leading the growth future. I positive few important regarding do see the

given we and our internal all, prioritized of resources and it's with demand business as clients. I we stronger think the client Xiaomi the and a revenue allocated Kingsoft Especially more first from we Group, really, connections. mentioned,

very is As months good opportunity Kingsoft Cloud. a for actually ago, we think this mentioned I a few

alone. around XXX So Xiaomi about this Group from increased and quarter RMB year-over-year, for and quarter, contributing for to this the million Kingsoft revenue XX.X%

Kingsoft, well. of a is it capability a Xiaomi signal I including WPS is as internal important to very very including plan, given think it serve a and positive proven our

give possible cap an the very to forward, these services may applications from of the are it from So year, increase in revenue us to auto-driving related AI-related approval. this for party by is SaaS end I we maybe of and turning shareholders this financial the as going year, asking new scenario we the opportunities. And to important think have see, given also we driver a are trend

internal next share our meeting, good propose we that, shareholder to also So prove with this want revenue I you X related to higher be cap in great going news or the parties. for of from quarters the of do visibility to X to have ceiling revenue are that the a a we just happy maybe, a

revenue the The our parties I from contribution, to incremental part AI-related revenue due would the second is that to say are relating the primarily internal revenues. AI

So that's the first point.

that, second is X/X point for total the approximately of of AI revenue cloud notice this the around The it's quarter. half revenue, actually public you of as

up from parties, also half other the than Let's clients. external the say from but related are half coming more

clients, that internal and clients. equal a capability have our those have services I strikes also for good balance we think the but serve regarding capability to prove to products outside

are you in X As also, our of China space are may most them, that AI companies today. tech the notice clients Tier the model outside

and our experience sustainable, today, going can potential a in we that be model, we example, revenues, risk the clients revenues and to working and profile also can you improving are will think contracts due gross given can would dollar also carefully the potential I the also are learn also the on think especially increase, and forward. And in observe see AI notice the revenue business the and the that we our working given and from first has and AI and I to are And of those the internal contracts balance potential on to our profits from steadily, to growth secured but the space. incremental the going those last going for control, return we actually strikes gross note, business outside, business. AI-related select are question, the of from upside primarily on we visibility contribution of that the for forward. And visible we the profit risks margin past the also mention strike

for that's the part question. all think of the I first

Tao Zou

like CND business. a about types right think One this to typically [Interpreted] which business, by standard make to understand -- have of usually So value live the this between the which think And I distinction And represents higher for has to usually CDN CDN is the question higher marked are of cetera. is dynamic the business, we is acceleration, kind example, way margin. X margins, this they that acceleration, because profit added. higher et broadcasting other lower margin

lower the a is is our So on business, XXX answer to and basis maintain for that higher-margin do aim CDN quarterly be my time, not base a business and and my serves continue first overall to part expect to That RMB the minimum that that the quick the CDN million, to amount that. than I standard for of expand we as -- our invest business we'll business. it concludes answer. Yes, that

Nicole Shan

Thank concludes you. And this Q&A. our

Operator

at further no were There questions this time.

So now remarks. hand I any to will back Shan for Nicole closing

Nicole Shan

thank once joining you, again for and all Thank today. us you

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

Operator

interpreter call.] This Thank present and the you. by conference today's were on an you marked Thank disconnect. [Portions live spoken are for concludes participating, transcript that [Interpreted] you call. of may now this

Kingsoft Cloud Holdings Limited (KC) 20 Aug 242024 Q2 Earnings call transcript