Financial Data and Key Metrics Changes - For the full year of 2023, adjusted gross margin increased to 12.2%, up from 5.4% in 2022, representing a significant improvement of 6.8 percentage points [6][23] - Adjusted gross profit for 2023 was RMB860 million, nearly doubling from RMB445 million in 2022 [6][23] - Normalized adjusted EBITDA improved to negative 3.4% in 2023 from negative 8.9% in 2022 [6][23] - In Q4 2023, total revenues reached RMB1.72 billion, a 6.0% increase quarter-over-quarter [7][18] - Adjusted gross margin for Q4 2023 was 15.2%, marking a 3.1 percentage point increase quarter-over-quarter [7][18] Business Line Data and Key Metrics Changes - Public cloud services revenue for Q4 2023 was RMB1.05 billion, a 3.5% increase quarter-over-quarter [7][18] - Excluding CDN business, public cloud revenue increased by 11.8% quarter-over-quarter [7] - Enterprise cloud services revenue was RMB670 million, increasing by 10.2% quarter-over-quarter [10][19] - CDN revenue decreased by nearly 10% compared to the previous quarter, contributing approximately 23% of total revenue [10][18] Market Data and Key Metrics Changes - Revenue from the Xiaomi and Kingsoft ecosystem reached 16% of total revenue, up 5 percentage points year-over-year [8] - AI business represented approximately 8% of public cloud revenues, with an 82% increase quarter-over-quarter [9] Company Strategy and Development Direction - The company is strategically adjusting its business mix and embracing AI opportunities to lay a solid foundation for sustainable development [6][16] - Focus on enhancing operational management and building strengths in technology and innovation [6][16] - The company aims to improve profitability through strict cost control and talent training [16] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the positive trend of profitability continuing into 2024, driven by synergies within the Xiaomi and Kingsoft Group ecosystems [23] - The company is optimistic about the demand for AI-related services and the potential for new customer growth [34][36] Other Important Information - The company signed a loan facility agreement with Kingsoft Corporation for RMB1.5 billion to support AI business development [9][22] - Cash and cash equivalents, along with long-term investments, amounted to RMB2.3 billion as of December 31, 2023, ensuring sufficient liquidity for operations [22] Q&A Session Summary Question: Can management provide insights on the AI strategy and CapEx plans? - Management highlighted the competitive positioning of AI products and the ongoing investment based on customer demand, though specifics on CapEx were not disclosed [25][30][31] Question: What are the drivers for gross margin improvement moving forward? - Management identified three key drivers: the stable CDN revenue contribution, cost-cutting measures, and improved project quality leading to higher margins [26][27][28] Question: What is the outlook for the enterprise cloud segment in 2024? - Management noted opportunities arising from the migration of state-owned asset companies to the cloud and the integration of digital assets with cloud services [42][45] Question: How does the company view the competitive landscape and pricing pressures? - Management acknowledged ongoing price competition but emphasized that customer satisfaction and service quality are more critical than pricing alone [46][48]

Revenue Performance - Total revenue for Q4 2023 reached RMB 1,722.5 million (USD 242.6 million), a 6.0% increase from RMB 1,625.2 million in Q3 2023, but a 19.2% decrease from RMB 2,131.0 million in Q4 2022[5] - Total revenue for the fiscal year 2023 was RMB 7,047.5 million (USD 992.6 million), a decrease of 13.8% from RMB 8,180.1 million in 2022[10] - Public cloud service revenue was RMB 4,381.7 million (USD 617.2 million), down 18.3% from RMB 5,360.3 million in 2022[10] - Industry cloud service revenue was RMB 2,664.0 million (USD 375.2 million), a decrease of 5.4% from RMB 2,817.0 million in 2022[10] - Public cloud service revenue increased by 3.5% quarter-over-quarter to RMB 1,052.0 million (USD 148.2 million), but decreased by 21.7% year-over-year from RMB 1,344.3 million[5] - Industry cloud service revenue was RMB 670.3 million (USD 94.4 million), a 10.2% increase from the previous quarter but a 14.7% decrease year-over-year[5] Profitability and Margins - Adjusted gross margin for 2023 was 12.2%, significantly up from 5.4% in 2022, with adjusted gross profit nearly doubling to RMB 859.9 million from RMB 445.2 million[4] - Gross profit reached RMB 253.1 million (USD 35.7 million), a significant increase of 56.3% compared to RMB 162.0 million in the same period of 2022, with a gross margin of 14.7% compared to 7.6% in 2022[7] - Operating loss narrowed to RMB 342.7 million (USD 48.3 million), significantly improved from RMB 804.8 million in the previous quarter and RMB 662.4 million in the same period of 2022[7] - Net loss was RMB 286.8 million (USD 40.4 million), a considerable reduction from RMB 789.7 million in the previous quarter and RMB 521.7 million in the same period of 2022[7] - The net loss for the three months ended December 31, 2023, was RMB 521,657 thousand, compared to a net loss of RMB 286,836 thousand for the same period in 2022, representing an increase in losses of 82%[26] - The net loss margin for the three months ended December 31, 2023, was -24.5%, compared to -16.7% for the same period in 2022, indicating a worsening profitability situation[27] Cost Management - Operating costs decreased by 25.4% year-over-year to RMB 1,469.3 million (USD 206.9 million), with IDC costs down 30.0% to RMB 740.4 million (USD 104.3 million)[5] - The company plans to continue strict cost control and believes there is potential for further improvement in profitability in 2024[4] - Total operating expenses amounted to RMB 595.9 million (USD 83.9 million), a substantial decrease from RMB 1,001.1 million in the previous quarter and RMB 824.3 million in the same period of 2022[7] Research and Development - The company established an AI research center and launched a Model-as-a-Service (MaaS) solution, enhancing data security features[4] - The workforce at the Wuhan research center exceeded 500 employees by the end of 2023, representing about 40% of the total R&D staff[4] - Research and development expenses were RMB 175.2 million (USD 24.7 million), further reduced from RMB 200.4 million in the previous quarter and RMB 255.5 million in the same period of 2022[7] Financial Position - Cash and cash equivalents and short-term investments totaled RMB 2,255.3 million (USD 317.7 million) as of December 31, 2023, indicating strong cash reserves[9] - Total current assets decreased from RMB 9,048,353,000 in 2022 to RMB 6,098,124,000 in 2023, a decline of approximately 32.3%[20] - Total non-current assets increased from RMB 8,267,878,000 in 2022 to RMB 8,972,154,000 in 2023, an increase of approximately 8.5%[20] - Total assets decreased from RMB 17,316,231,000 in 2022 to RMB 15,070,278,000 in 2023, a decline of approximately 12.9%[20] - Total current liabilities increased from RMB 6,658,626,000 in 2022 to RMB 6,828,590,000 in 2023, an increase of approximately 2.6%[20] - The total liabilities as of December 31, 2023, were RMB 7,824,374 thousand, slightly up from RMB 7,732,732 thousand in 2022, an increase of 1.2%[21] Future Outlook - The company is focusing on high-quality revenue expansion and improving profitability while creating value for customers, shareholders, employees, and society[4] - The company plans to hold an earnings conference call on March 20, 2024, at 8:15 AM ET[14] - The company plans to focus on expanding its public cloud services, which generated revenue of RMB 1,051,966 thousand for the three months ended December 31, 2023, compared to RMB 1,344,293 thousand in the same period of 2022, indicating a strategic shift in focus[22] Non-GAAP Metrics - The company utilizes several non-GAAP financial metrics to assess its operational performance, including non-GAAP gross profit and non-GAAP EBITDA[15] - Non-GAAP net loss was RMB 250.4 million (USD 35.3 million), compared to RMB 313.3 million in the previous quarter and RMB 552.7 million in the same period of 2022[9] - Adjusted EBITDA for the twelve months ended December 31, 2023, was RMB (726,170) thousand, compared to RMB (754,958) thousand for the same period in 2022, showing a slight improvement in operational performance[26] - The adjusted net loss for the three months ended December 31, 2023, was RMB (552,677) thousand, compared to RMB (250,410) thousand for the same period in 2022, representing a 120% increase in adjusted losses[26] - The adjusted net loss rate for the three months ended December 31, 2023, was -25.9%, compared to -14.5% for the same period in 2022, highlighting a decline in financial health[27] Cash Flow and Investments - The company reported a decrease in cash flow from operating activities to RMB 16,787 thousand for the three months ended December 31, 2023, down from RMB 370,446 thousand for the same period in 2022, reflecting operational challenges[28] - The net cash used in investing activities for the three months ended December 31, 2023, was RMB (1,414,761) thousand, compared to RMB (1,414,761) thousand for the same period in 2022, indicating a significant increase in investment outflows[28] - The company reported a net cash provided by financing activities of RMB 1,154,815 thousand for the three months ended December 31, 2023, compared to a net cash used of RMB (806,656) thousand for the same period in 2022, indicating a positive shift in financing[28] Currency and Exchange - The exchange rate used for converting RMB to USD is 7.0999 RMB per 1.00 USD as of December 31, 2023[17] - The company experienced a foreign exchange loss of RMB (132,290) thousand for the three months ended December 31, 2023, compared to a loss of RMB (74,011) thousand for the same period in 2022, indicating increased volatility in currency exchange[26]

Financial Performance - Revenue for the year ended December 31, 2023, was RMB 7,047,461 thousand, a decrease of 13.8% compared to RMB 8,180,107 thousand in 2022[2] - Gross profit for the same period was RMB 850,169 thousand, representing a significant increase of 97.9% from RMB 429,538 thousand in 2022[2] - Net loss attributable to Kingsoft Cloud Holdings Limited was RMB 2,658,184 thousand, an increase of 18.1% compared to RMB 2,176,340 thousand in 2022[2] - Adjusted gross profit for 2023 was RMB 859,926 thousand, with an adjusted gross margin of 12.2%, up from 5.4% in 2022[5] - Adjusted net loss for 2023 was RMB 1,291,121 thousand, with an adjusted net loss margin of 18.3%, improved from 24.4% in 2022[6] - Adjusted EBITDA for 2023 was RMB (265,064) thousand, with an adjusted EBITDA margin of 3.8%, compared to (754,958) thousand and 9.2% in 2022[6] - The company reported a decrease in pre-tax loss of 18.7% from RMB (2,663,915) thousand in 2022 to RMB (2,165,688) thousand in 2023[2] - Operating loss was RMB 2,108.6 million (USD 297.0 million), an improvement from RMB 2,251.4 million in 2022[17] - Net loss was RMB 2,183.6 million (USD 307.6 million), compared to a net loss of RMB 2,688.4 million in 2022[17] - The company reported a total comprehensive loss attributable to shareholders of RMB (2,074,072) for the year ended December 31, 2023, compared to RMB (1,997,228) in the previous year, marking a 3.9% increase in losses[35] Revenue Breakdown - Total revenue for fiscal year 2023 reached RMB 7,047.5 million (USD 992.6 million), a decrease from RMB 8,180.1 million in 2022[14] - Public cloud service revenue was RMB 4,381.7 million (USD 617.2 million), while industry cloud service revenue was RMB 2,664.0 million (USD 375.2 million)[14] - Revenue from public cloud services was RMB 4,381,741 (USD 617,155) for the year ended December 31, 2023[48] Expenses and Costs - Research and development expenses for 2023 amounted to RMB 784.8 million, with a total of 1,243 R&D personnel as of December 31, 2023[11] - Capital expenditures totaled RMB 1,964.7 million (USD 276.7 million) in 2023, focusing on enhancing generative AI computing capabilities[10] - Sales and marketing expenses decreased to RMB 460.2 million (USD 64.8 million) from RMB 560.1 million in 2022[17] - The company’s total operating costs for the year were RMB 6,197,292 thousand, an increase from RMB 7,750,569 thousand in the previous year, reflecting a rise of approximately 12.5%[34] Assets and Liabilities - Cash and cash equivalents amounted to RMB 2,255.3 million (USD 317.7 million), a decrease of 34.0% from RMB 3,419.2 million as of December 31, 2022[19] - Total assets as of December 31, 2023, amounted to RMB 15,070,278, a decrease of 13.0% from RMB 17,316,231 in the previous year[36] - The total liabilities increased slightly to RMB 7,824,374 from RMB 7,732,732, reflecting a 1.2% rise[37] - The total equity attributable to shareholders decreased to RMB 6,890,152 from RMB 8,801,020, a decline of 21.6%[37] - Accounts payable as of December 31, 2023, totaled RMB 1,805,083, a decrease of approximately 21.6% from RMB 2,301,958 in 2022[58] Strategic Focus - The company plans to continue focusing on product development and market expansion strategies to improve financial performance in the upcoming periods[3] - The company aims to maintain strict control over costs and expenditures to improve operational efficiency and profitability[13] - The company has expanded its business scope into selected vertical industries, including internet, public services, healthcare, gaming, AI, and financial services[9] Governance and Compliance - The company has fully complied with the corporate governance code as per the Hong Kong Stock Exchange during the reporting period[26] - The audit committee reviewed the unaudited annual results for the year ended December 31, 2023, ensuring compliance with accounting policies[29] - The company has adopted an insider trading policy to regulate all transactions by directors and employees, ensuring compliance with the standard code[27] Other Financial Metrics - The company did not recommend the distribution of a final dividend for the year ended December 31, 2023[31] - Basic and diluted loss per share for 2023 was RMB 0.61, down from RMB 0.73 in 2022, reflecting an improvement of about 16.4%[56] - The company did not declare any dividends for the years ended December 31, 2023, and 2022[57] - The company reported a net cash used in operating activities for the year ended December 31, 2023, was RMB (169,070), compared to RMB 188,974 in the previous year, indicating a significant shift in cash flow[38]

Kingsoft Cloud Holdings Limited (NASDAQ:KC) Q3 2023 Results Conference Call November 21, 2023 7:15 AM ET Company Participants Wayne Wong - IR Manager Tao Zou - Vice Chairman and CEO Haijian He - CFO Conference Call Participants Xiaodan Zhang - CICC Timothy Zhao - Goldman Sachs Katrina Chiu - Citi Operator Good day and thank you for standing by. Welcome to Kingsoft Cloud's Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, ...

Revenue Performance - Total revenue for Q3 2023 was RMB 1,625.2 million (USD 222.8 million), a decrease of 17.5% compared to RMB 1,968.8 million in Q3 2022[4] - Public cloud service revenue was RMB 1,016.6 million (USD 139.3 million), down 24.5% year-over-year from RMB 1,346.0 million[4] - Industry cloud service revenue was RMB 608.5 million (USD 83.4 million), a slight decrease of 2.2% from RMB 622.0 million in Q3 2022[4] - Total revenue for the nine months ended September 30, 2023, was RMB 5,325,011 thousand, a decrease of 12% compared to RMB 6,049,094 thousand for the same period in 2022[15] - The company’s total income from public cloud services for the nine months ended September 30, 2023, was RMB 1,993,662 thousand, down from RMB 2,031,058 thousand for the same period in 2022[15] Profitability and Margins - Adjusted gross margin reached a historical high of 12.1%, up 5.8 percentage points from the same period last year[3] - Gross profit increased by 60.3% year-over-year to RMB 196.2 million (USD 26.9 million)[4] - Public cloud services gross profit reached RMB 48.1 million (USD 6.6 million), a significant improvement from a gross loss of RMB 22.1 million in the same period last year, with a gross margin of 4.7% compared to -1.6% year-over-year[6] - Industry cloud services gross profit was RMB 147.3 million (USD 20.2 million), up from RMB 143.8 million in the same period last year, with a gross margin increase from 23.1% to 24.2%[6] - The adjusted net loss margin for Q3 2023 was -22.1%, an improvement from -27.0% in Q3 2022[20] - The normalized adjusted EBITDA margin for Q3 2023 was -5.9%, compared to -10.3% in Q3 2022, indicating a 43.1% improvement[20] Operating Expenses and Losses - Total operating expenses amounted to RMB 1,001.1 million (USD 137.2 million), compared to RMB 569.7 million in the previous quarter and RMB 626.6 million in the same period last year[6] - Operating loss was RMB 804.8 million (USD 110.3 million), compared to an operating loss of RMB 363.1 million in the previous quarter and RMB 504.2 million in the same period last year[6] - Operating loss for the nine months ended September 30, 2023, was RMB 1,892,192 thousand, compared to RMB 2,149,306 thousand for the same period in 2022, indicating a reduction in losses[15] Cash Flow and Financial Position - Operating cash flow for the quarter was RMB 20.4 million, marking the second consecutive quarter of positive cash flow[3] - Cash flow from operating activities for Q3 2023 was RMB 20,372 thousand, down from RMB 100,929 thousand in Q3 2022[21] - Cash flow from investing activities for Q3 2023 was RMB 165,089 thousand, compared to RMB 323,754 thousand in Q3 2022, showing a decrease of 48.9%[21] - Cash flow used in financing activities for Q3 2023 was RMB (1,263,894) thousand, significantly higher than RMB (130,694) thousand in Q3 2022[21] - The net cash increase for Q3 2023 was RMB (1,078,433) thousand, contrasting with an increase of RMB 293,989 thousand in Q3 2022[21] - Cash and cash equivalents and short-term investments as of September 30, 2023, totaled RMB 2,612.1 million (USD 358.0 million)[8] - The ending cash and cash equivalents for Q3 2023 were RMB 2,731,628 thousand, down from RMB 3,206,354 thousand in Q3 2022[21] Net Loss and Adjusted Metrics - Net loss was RMB 789.7 million (USD 108.2 million), compared to a net loss of RMB 498.3 million in the previous quarter and RMB 801.4 million year-over-year[6] - Non-GAAP net loss narrowed to RMB 313.3 million (USD 42.9 million) from RMB 315.0 million in the previous quarter and RMB 530.7 million in the same period last year[7] - The net loss for Q3 2023 was RMB 498,272 thousand, a decrease from RMB 801,447 thousand in Q3 2022, representing a 37.9% improvement[20] - Adjusted net loss for Q3 2023 was RMB 314,960 thousand, compared to RMB 530,680 thousand in Q3 2022, reflecting a 40.7% reduction[20] - The adjusted EBITDA for Q3 2023 was a loss of RMB 61,395 thousand, an improvement from a loss of RMB 201,994 thousand in Q3 2022, indicating a 69.6% enhancement[20] Strategic Focus and Partnerships - The company continues to deepen strategic planning and cooperation with Xiaomi and Kingsoft to meet AI and cloud demands[3] - The company has a strong focus on cloud services, leveraging advanced cloud-native products and industry-specific solutions[12] - The company is committed to expanding its market presence and enhancing its cloud infrastructure capabilities[12]

[Kingsoft Cloud Third Quarter 2023 Financial Results](index=1&type=section&id=Kingsoft%20Cloud%20Third%20Quarter%202023%20Financial%20Results) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management highlighted a successful AI strategy, improved profitability for the fifth consecutive quarter, and positive operating cash flow amid a strategic CDN scale-down - The company's AI strategy shows positive results with **rapid growth in AI business revenue** and a strong pipeline[2](index=2&type=chunk) - Kingsoft Cloud is strategically reducing its CDN business, with revenue from the largest CDN customer **decreasing to 12%** in Q3 2023 from 16% in the prior quarter[2](index=2&type=chunk) - **Adjusted gross margin reached a record high of 12.1%**, marking the fifth consecutive quarter of growth and a **5.8 percentage point increase YoY**[2](index=2&type=chunk) - The company achieved a **positive operating cash inflow of RMB 20.4 million**, its second consecutive quarter of positive operating cash flow[2](index=2&type=chunk) [Third Quarter 2023 Financial Highlights](index=2&type=section&id=Third%20Quarter%202023%20Financial%20Highlights) The company's revenue declined due to a CDN scale-down, but gross profit surged and gross margin expanded significantly, while the Non-GAAP net loss narrowed YoY Q3 2023 Key Financial Metrics (YoY) | Metric | Q3 2023 (RMB million) | Q3 2022 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenues | 1,625.2 | 1,968.8 | -17.5% | | Gross Profit | 196.2 | 122.4 | +60.3% | | Gross Margin | 12.1% | 6.2% | +5.9 p.p. | | Operating Loss | (804.8) | (504.2) | Increased | | Net Loss | (789.7) | (801.4) | Narrowed slightly | | Non-GAAP Net Loss | (313.3) | (530.7) | Narrowed 41.0% | [Revenue Analysis](index=2&type=section&id=Revenue%20Analysis) Total revenues declined 17.5% YoY, driven by a strategic scale-down in public cloud services, while enterprise cloud revenue saw a minor decrease Q3 2023 Revenue Breakdown (YoY) | Revenue Stream | Q3 2023 (RMB million) | Q3 2022 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | Public Cloud Services | 1,016.6 | 1,346.0 | -24.5% | | Enterprise Cloud Services | 608.5 | 622.0 | -2.2% | | **Total Revenues** | **1,625.2** | **1,968.8** | **-17.5%** | - The overall revenue decline was primarily a result of the company's proactive decision to scale down CDN services and phase out loss-making clients[3](index=3&type=chunk) [Cost and Profitability Analysis](index=2&type=section&id=Cost%20and%20Profitability%20Analysis) Reduced cost of revenues, particularly IDC costs, drove a significant increase in gross profit and a notable expansion in gross margin across both segments - Cost of revenues fell 22.6% YoY, with Internet Data Center (IDC) costs **decreasing significantly by 31.6%** from RMB 1,078.3 million to RMB 737.7 million[4](index=4&type=chunk) Q3 2023 Gross Profit and Margin by Segment (YoY) | Segment | Gross Profit (RMB million) | Gross Margin (%) | | :--- | :--- | :--- | | **Public Cloud (Q3 2023)** | **48.1** | **4.7%** | | Public Cloud (Q3 2022) | (22.1) | -1.6% | | **Enterprise Cloud (Q3 2023)** | **147.3** | **24.2%** | | Enterprise Cloud (Q3 2022) | 143.8 | 23.1% | [Operating Expenses and Losses](index=3&type=section&id=Operating%20Expenses%20and%20Losses) Operating loss widened due to a significant one-time asset impairment charge, though core operating expenses decreased YoY from cost control measures - The company recorded an **impairment of long-lived assets of RMB 468.5 million**, mainly attributable to the public cloud asset group[9](index=9&type=chunk) Q3 2023 Operating Expenses (YoY) | Expense Category | Q3 2023 (RMB million) | Q3 2022 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | Selling and marketing | 116.4 | 143.4 | -18.8% | | General and administrative | 215.7 | 235.1 | -8.3% | | Research and development | 200.4 | 248.1 | -19.2% | [Net Loss and EBITDA](index=3&type=section&id=Net%20Loss%20and%20EBITDA) Non-GAAP net loss and Normalized Non-GAAP EBITDA loss both narrowed significantly, indicating improved underlying profitability despite the reported GAAP net loss Q3 2023 Profitability Metrics (YoY) | Metric | Q3 2023 (RMB million) | Q3 2022 (RMB million) | | :--- | :--- | :--- | | Net Loss | (789.7) | (801.4) | | Non-GAAP Net Loss | (313.3) | (530.7) | | Normalized Non-GAAP EBITDA | (44.1) | (202.0) | - Basic and diluted net loss per share was **RMB 0.22**, the same as in the third quarter of 2022[11](index=11&type=chunk) - As of September 30, 2023, the company had cash, cash equivalents, and short-term investments totaling **RMB 2,612.1 million**[11](index=11&type=chunk) [Financial Statements](index=7&type=section&id=Financial%20Statements) The unaudited statements detail the company's financial position, performance showing improved gross profit, and positive operating cash flow [Unaudited Condensed Consolidated Balance Sheets](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets and liabilities compared to year-end 2022, with cash and equivalents at RMB 2.6 billion Key Balance Sheet Items | Account | Sep 30, 2023 (RMB thousands) | Dec 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | 2,612,058 | 3,419,166 | | Total current assets | 6,568,591 | 9,048,353 | | Total assets | 14,110,374 | 17,316,231 | | Total current liabilities | 5,610,196 | 6,658,626 | | Total liabilities | 6,621,315 | 7,732,732 | | Total equity | 7,489,059 | 9,583,499 | [Unaudited Condensed Consolidated Statements of Comprehensive Loss](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) The income statement reflects improved gross profit, but a significant asset impairment led to a substantial operating and net loss for the quarter Q3 2023 Income Statement Highlights (RMB thousands) | Line Item | Three Months Ended Sep 30, 2023 | | :--- | :--- | | Total revenues | 1,625,208 | | Gross profit | 196,240 | | Total operating expenses | (1,001,075) | | Impairment of long-lived assets | (468,535) | | Operating loss | (804,835) | | Net loss | (789,718) | [Unaudited Condensed Consolidated Statement of Cash Flows](index=13&type=section&id=Unaudited%20Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) The company generated positive cash from operations for the second consecutive quarter, though cash used in financing led to a net decrease in cash Q3 2023 Cash Flow Summary (RMB thousands) | Activity | Three Months Ended Sep 30, 2023 | | :--- | :--- | | Net cash generated from operating activities | 20,372 | | Net cash generated from investing activities | 165,089 | | Net cash used in financing activities | (1,263,894) | | **Net decrease in cash** | **(1,078,433)** | [Reconciliation of GAAP and Non-GAAP Results](index=9&type=section&id=Reconciliation%20of%20GAAP%20and%20Non-GAAP%20Results) This section reconciles GAAP to Non-GAAP results, highlighting key adjustments like asset impairment that show a narrower Non-GAAP net loss Q3 2023 Reconciliation of Net Loss to Non-GAAP Net Loss (RMB thousands) | Description | Amount | | :--- | :--- | | Net Loss (GAAP) | (789,718) | | Add: Share-based compensation | 28,102 | | Add: Foreign exchange loss (gain) | (20,200) | | Add: Impairment of long-lived assets | 468,535 | | **Adjusted Net Loss (Non-GAAP)** | **(313,281)** | Q3 2023 Reconciliation to Normalized Adjusted EBITDA (RMB thousands) | Description | Amount | | :--- | :--- | | Adjusted Net Loss (Non-GAAP) | (313,281) | | Adjustments (Interest, Tax, D&A) | 267,879 | | Adjusted EBITDA | (45,402) | | Add: Loss on disposal of property | 1,324 | | **Normalized Adjusted EBITDA** | **(44,078)** | [Supplementary Information](index=4&type=section&id=Supplementary%20Information) This section provides details on Non-GAAP measures, exchange rates, forward-looking statements, and conference call information - The company uses Non-GAAP measures such as Non-GAAP gross profit, Non-GAAP net loss, and Non-GAAP EBITDA to evaluate operating performance, excluding items like share-based compensation and impairment charges[15](index=15&type=chunk) - The RMB to US$ exchange rate used for convenience in this report is **RMB 7.2960 to US$ 1.00**, the rate on September 29, 2023[17](index=17&type=chunk) - The report includes a safe harbor statement, cautioning that forward-looking statements are subject to inherent risks and uncertainties[18](index=18&type=chunk)

Financial Performance - For the six months ended June 30, 2023, revenue decreased by 9.3% to RMB 3,699,803,000 compared to RMB 4,080,307,000 in the same period of 2022[8]. - Gross profit increased significantly by 176.1% to RMB 400,791,000, up from RMB 145,162,000 year-over-year[8]. - Loss before income tax improved by 19.7%, with a loss of RMB 1,100,722,000 compared to RMB 1,370,437,000 in the previous year[8]. - Net loss decreased by 18.9% to RMB 1,107,093,000 from RMB 1,365,284,000 year-over-year[8]. - The company reported a net loss attributable to Kingsoft Cloud Holdings Limited of RMB 1,106,333,000, a decrease of 18.4% from RMB 1,356,246,000 in the previous year[8]. - Total revenue reached RMB 3,699.8 million (USD 510.2 million), with public cloud service revenue at RMB 2,313.2 million (USD 319.0 million) and industry cloud service revenue at RMB 1,385.2 million (USD 191.0 million)[13]. - Adjusted EBITDA loss was RMB 191.9 million (USD 26.5 million), a 37.7% improvement from RMB 307.9 million in the same period last year, with an adjusted EBITDA margin of -5.2% compared to -7.5%[13]. - The total comprehensive loss attributable to shareholders for the six months ended June 30, 2023, was RMB 973,265,000, compared to RMB 897,537,000 for the same period in 2022, reflecting an increase of approximately 8.4%[90]. - The net loss for the first half of 2023 was RMB (1,107,093) thousand, compared to RMB (1,365,284) thousand in the same period last year, reflecting a reduction in losses[12]. Revenue Breakdown - Revenue from public cloud services decreased by 13.4% year-on-year to RMB 2,313.2 million (USD 319.0 million) from RMB 2,670.0 million, mainly due to the reduction of CDN services[20]. - Industry cloud services revenue recognized at a point in time was RMB 371,724,000 for the six months ended June 30, 2023, up from RMB 351,374,000 in the same period of 2022, indicating an increase of approximately 5.8%[126]. - Industry cloud services revenue recognized over time was RMB 1,013,428,000 for the six months ended June 30, 2023, compared to RMB 1,057,709,000 in the same period of 2022, showing a decrease of about 4.2%[126]. Operational Efficiency - The company aims to improve operational efficiency and reduce losses through strategic initiatives and cost management[10]. - The cost of sales decreased by 16.2% to RMB 3,299.0 million (USD 455.0 million) from RMB 3,935.1 million in the same period of 2022, reflecting enhanced cost control measures[21]. - Operating expenses totaled RMB 1,361.8 million (USD 187.8 million), an increase from RMB 1,230.0 million in the same period of 2022, driven by higher general and administrative expenses due to impairment losses[22]. - Operating loss improved to RMB 961.0 million (USD 132.5 million) from RMB 1,084.9 million in the same period of 2022[22]. Research and Development - Research and development expenses amounted to RMB 409.3 million (USD 56.4 million), with a total of 1,176 R&D personnel as of June 30, 2023[17]. - Research and development expenses were RMB 409.3 million (USD 56.4 million), a decrease from RMB 467.6 million in the same period of 2022, due to improved efficiency and personnel adjustments[22]. - The company emphasizes research and development as a key focus area[181]. Market Strategy - Kingsoft Cloud is exploring new product development and market expansion strategies to enhance revenue streams[10]. - The company has expanded its market presence by developing industry-specific solutions across various verticals, including video, public services, healthcare, gaming, and financial services[14]. - The company plans to continue its market expansion and product development strategies to enhance its competitive position in the cloud services sector[90]. Cash and Liquidity - As of June 30, 2023, the company's cash and cash equivalents amounted to RMB 3,708.7 million (USD 511.5 million), representing an increase of 8.5% from RMB 3,419.2 million as of December 31, 2022[24]. - The company plans to use cash generated from operations and financing activities to meet future working capital and capital expenditure needs[24]. - The cash flow from financing activities resulted in a net cash outflow of RMB (214,796) thousand for the six months ended June 30, 2023, compared to RMB (118,773) thousand in the previous year[100]. Shareholder Information - Major shareholders include Kingsoft Software with 1,423,246,584 shares (37.40%) and The Bank of New York Mellon with 1,326,206,020 shares (34.85%) as of June 30, 2023[37][38]. - Xiaomi Group holds 449,701,000 shares (11.82%) and the Canada Pension Plan Investment Board holds 306,114,735 shares (8.04%) as of June 30, 2023[37][38]. - The company has not proposed an interim dividend for the six months ending June 30, 2023[79]. Corporate Governance - The company emphasizes high standards of corporate governance to protect shareholder interests and enhance accountability[69]. - The company has fully complied with all provisions of the corporate governance code as per the Listing Rules during the reporting period[70]. - The audit committee, consisting of three independent non-executive directors, has reviewed the unaudited interim consolidated financial statements for the six months ending June 30, 2023[77]. Accounting Policies - The company operates under the US GAAP accounting standards[181]. - The company has maintained its accounting policies consistent with those used in the audited financial statements for the year ended December 31, 2022[102]. - The company has adopted new accounting standards that did not have a significant impact on its interim financial statements[123]. Legal and Compliance - There were no significant litigations or arbitrations involving the company during the reporting period[71]. - The company has no ongoing legal or administrative proceedings that could have a material adverse effect on its business, financial condition, or operating results[160].

Kingsoft Cloud Holdings Limited (NASDAQ:KC) Q2 2023 Earnings Conference Call August 21, 2023 8:15 AM ET Company Participants Nicole Shan - IR Manager Tao Zou - Vice Chairman and CEO Henry He - CFO Conference Call Participants Xiaodan Zhang - CICC Timothy Zhao - Goldman Sachs Allen Li - JPMorgan Operator Good day and thank you for standing by. Welcome to Kingsoft Cloud's Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now ...

香港交易及結算所有限公司及香港聯合交易所有限公司對本公告的內容概不負責，對其準確性 或完整性亦不發表任何聲明，並明確表示概不就因本公告全部或任何部分內容而產生或因倚賴 該等內容而引致的任何損失承擔任何責任。 Kingsoft Cloud Holdings Limited 金山云控股有限公司 （於開曼群島註冊成立的有限公司） （股份代號：3896） （納斯達克股票代碼：KC） 內幕消息 截至二零二三年六月三十日止三個月的 未經審核財務業績 本公告乃根據香港聯合交易所有限公司證券上市規則第13.09條及證券及期貨條例 （第571章）第XIVA部刊發。 金山云控股有限公司（「本公司」）董事（「董事」）會（「董事會」）欣然宣佈本公司、 其子公司及併表聯屬實體（統稱「本集團」）根據美國證券交易委員會（「美國證交 會」）適用規則刊發的截至二零二三年六月三十日止三個月未經審核簡明綜合業績 （「第二季度業績」）。 第二季度業績乃根據美利堅合眾國公認會計準則（「美國公認會計準則」）編製，其 有別於國際財務報告準則。 本公告附件一為本公司於二零二三年八月二十二日（美國東部時間）就第二季度業 績刊發的新聞稿全文，其中部分內容可能構 ...

Financial Performance - Total revenue for the six months ended June 30, 2023, was RMB 3,699.8 million, a decrease of 9.3% compared to RMB 4,080.3 million in the same period of 2022[2]. - Gross profit for the same period was RMB 400.8 million, representing a significant increase of 176.1% from RMB 145.2 million year-over-year, with a gross margin of 10.8% compared to 3.6% in 2022[2][6]. - Adjusted EBITDA loss for the six months ended June 30, 2023, was RMB 191.9 million, a reduction of 37.7% from RMB 307.9 million in the prior year[6]. - The net loss attributable to Kingsoft Cloud Holdings Limited for the six months ended June 30, 2023, was RMB 1,356.2 million, down 18.4% from RMB 1,106.3 million in the same period of 2022[2]. - The adjusted net loss for the six months ended June 30, 2023, was RMB 727.4 million, compared to RMB 910.6 million in the same period of 2022[5]. - The company reported a net loss margin of -29.9% for the six months ended June 30, 2023, compared to -33.5% in the prior year[5]. - The adjusted EBITDA margin improved to -5.2% for the six months ended June 30, 2023, from -7.5% in the same period of 2022[5]. - Operating loss for the six months ended June 30, 2023, was RMB 1,361,773 thousand, compared to an operating loss of RMB 1,230,030 thousand for the same period in 2022[31]. - Operating loss was RMB 961.0 million (USD 132.5 million), an improvement from RMB 1,084.9 million in the same period of 2022, while net loss decreased to RMB 1,107.1 million (USD 152.7 million) from RMB 1,365.3 million[17]. Revenue Breakdown - Public cloud service revenue was RMB 2,313.2 million, while industry cloud service revenue was RMB 1,385.2 million for the reporting period[6]. - Public cloud services revenue was RMB 2,313.2 million, down from RMB 2,669.9 million year-over-year, representing a decline of 13.4%[12]. - Revenue from public cloud services decreased by 13.4% year-on-year to RMB 2,313.2 million (USD 319.0 million) from RMB 2,670.0 million in the same period of 2022, mainly due to the reduction of CDN services[15]. - Total revenue reached RMB 3,699.8 million (USD 510.2 million), a decrease of 9.3% compared to RMB 4,080.3 million in the same period of 2022, primarily due to the active reduction of services provided to CDN customers and the elimination of unprofitable customers[15]. Cost and Expenses - Research and development expenses for the first half of 2023 were RMB 409.3 million (approximately USD 56.4 million), compared to RMB 467.6 million in the same period of 2022, reflecting a decrease of 12.4%[10]. - Operating expenses totaled RMB 1,361.8 million (USD 187.8 million), an increase from RMB 1,230.0 million in the same period of 2022, with R&D expenses decreasing to RMB 409.3 million (USD 56.4 million) from RMB 467.6 million[17]. Cash and Liquidity - Cash and cash equivalents amounted to RMB 3,708.7 million (USD 511.5 million) as of June 30, 2023, representing an increase of 8.5% from RMB 3,419.2 million as of December 31, 2022[18]. - The company’s cash and cash equivalents at the end of the period were RMB 3,823,087, an increase of 37.6% from RMB 2,776,770[36]. - Net cash used in operating activities improved to RMB (206,157) from RMB (282,401), a reduction of 27%[36]. - The company reported a net cash inflow from investing activities of RMB 576,486, a significant turnaround from RMB (1,257,570) in the previous period[36]. Employee and R&D Development - The company has approximately 101,000 servers and achieved EB-level storage capacity as of June 30, 2023[9]. - The Wuhan R&D center has grown to about 400 employees, accounting for over one-third of the total R&D team, with 50% holding master's degrees[10]. - The company had 9,752 employees as of June 30, 2023, with most located in China and the remainder overseas[23]. - The company had a total of 9,752 employees, with 78.0% in solution development and services[24]. Corporate Governance and Compliance - The company has complied with all corporate governance codes as per the Hong Kong Stock Exchange during the reporting period[25]. - There were no significant litigations or arbitrations involving the company during the reporting period[26]. - The audit committee reviewed the unaudited consolidated financial statements for the six months ended June 30, 2023[27]. - The board of directors did not recommend the payment of an interim dividend for the six months ended June 30, 2023[28]. Strategic Initiatives - The company emphasized a commitment to high-quality, sustainable development and customer-centric operations during the reporting period[6]. - The company aims to enhance profitability and maintain sustainable high-quality development in the second half of 2023[11]. - The company continues to focus on cost reduction and efficiency improvement to enhance overall profitability and long-term competitive advantage[9]. - The company launched a new version of its Galaxy Cloud, enhancing usability, compatibility, security, and intelligence for enterprise customers[9]. - The object storage product based on all-flash media improved read and write performance by approximately 100%, suitable for high-performance storage needs[9]. Financial Position - Total assets amounted to RMB 16,133,874, a decrease of 6.8% from RMB 17,316,231 on December 31, 2022[34]. - Total liabilities increased to RMB 7,845,106, up 1.5% from RMB 7,732,732[35]. - Shareholders' equity decreased to RMB 8,288,768 from RMB 9,583,499, reflecting a decline of 13.5%[35]. - The company’s accumulated losses increased to RMB (11,208,569) from RMB (10,102,236), indicating a worsening financial position[35]. - The company’s total equity attributable to shareholders decreased to RMB 7,932,983, down 10% from RMB 8,801,020[35].