Kingsoft Cloud Holdings Limited (NASDAQ:KC) Q4 2021 Earnings Conference Call March 24, 2022 8:00 AM ET Company Participants Nicole Shan - IR Manager Yulin Wang - CEO Haijian He - CFO Conference Call Participants Brian Gong - Citi Liping Zhao - CICC Thomas Chong - Jefferies Joel Ying - Nomura Kyna Wong - Credit Suisse Operator Good day, and welcome to Kingsoft Cloud's Fourth Quarter and Fiscal Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's pr ...

Kingsoft Cloud Holdings Limited (NASDAQ:KC) Q3 2021 Earnings Conference Call November 24, 2021 7:00 AM ET Company Participants Nicole Shan - IR Manager Yulin Wang - CEO Haijian He - CFO Conference Call Participants Brian Gong - Citigroup Liping Zhao - CICC Thomas Chong - Jefferies Kyna Wong - Credit Suisse Operator Good day. Thank you for standing by and welcome to the Kingsoft Cloud Third Quarter 2021 Earnings Conference Call. [Operator Instructions] I must advise you that this conference is being recorded ...

Financial Data and Key Metrics Changes - The company reported total revenues of RMB2.17 billion for Q2 2021, marking a 41.6% year-over-year increase and a significant acceleration from the 30.4% increase in Q1 2021 [6][19]. - Public Cloud services revenues reached RMB1.55 billion, an increase of RMB159 million from Q1 2021, representing the sixth consecutive quarter of revenue growth since the IPO [6][19]. - Enterprise Cloud services revenues were RMB622.1 million, reflecting a 152.8% year-over-year increase, accelerating from 131.3% in Q1 2021 [6][19]. Business Line Data and Key Metrics Changes - Public Cloud services continued to show strong performance with stable existing customer usage and significant new customer acquisition [7][10]. - The company entered a partnership with ByteDance's Volcano Engine to jointly provide services, enhancing its market position [8]. - In the Enterprise Cloud segment, the company is actively engaging with major sectors such as financial services and healthcare, with notable projects underway [13][14]. Market Data and Key Metrics Changes - Kingsoft Cloud maintained its position as the third-largest internet cloud service provider in China, with a market share of 7.1% [12]. - The company is focusing on premium customer relationships and expanding its customer base to drive growth in both Public and Enterprise Cloud segments [20][21]. Company Strategy and Development Direction - The company aims to strengthen relationships with existing customers while diversifying its customer base to sustain growth [12][26]. - The acquisition of Camelot is expected to enhance implementation capabilities and expand the Enterprise Cloud service offerings [16][38]. - The company is committed to maintaining a disciplined approach in selecting verticals, minimizing exposure to sectors facing regulatory headwinds [21][25]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth of the Public Cloud segment for the second half of the year, citing stable relationships with top customers and a disciplined vertical focus [31][32]. - The regulatory environment is seen as beneficial, allowing the company to leverage its neutral positioning to penetrate further into the market [32][46]. - Future revenue guidance for Q3 2021 is projected between RMB2.58 billion and RMB2.7 billion, indicating a year-over-year increase of 49% to 56% [26]. Other Important Information - The company has established an ESG taskforce to improve transparency and corporate governance [27]. - Kingsoft Cloud is preparing for its first Investor Day, targeting mid-October 2021 [27]. Q&A Session Summary Question: Growth outlook for Public Cloud in the second half of the year - Management is confident in the growth of Public Cloud revenue, citing a stable relationship with top customers and minimal impact from regulatory headwinds [31][32]. Question: Details on cooperation with ByteDance - The cooperation involves integrating Kingsoft Cloud's iOS products with Volcano Engine's PaaS and SaaS offerings, but significant revenue contributions are not expected in the short term [33][34]. Question: Update on Camelot acquisition and future targets - The Camelot acquisition is expected to enhance implementation capabilities, with consolidation anticipated by Q4 2021 [36][38]. Question: Guidance on EBITDA margin - Management expects EBITDA margins to improve as the company continues to manage expenses efficiently, with a goal of approaching breakeven by the end of the year [40][41].

[Second Quarter 2021 Financial Performance](index=1&type=section&id=Second%20Quarter%202021%20Financial%20Performance) Kingsoft Cloud reported strong Q2 2021 financial performance, driven by significant revenue growth in public and enterprise cloud services, improved profitability, and a positive Q3 outlook [Key Financial Highlights](index=1&type=section&id=1.1%20Key%20Financial%20Highlights) Kingsoft Cloud reported strong Q2 2021 financial results with significant year-over-year revenue growth driven by both public and enterprise cloud services, with gross profit and margins also seeing increases Q2 2021 Financial Highlights | Metric | Q2 2021 (RMB million) | Q2 2021 (US$ million) | YoY Change (%) | Q2 2020 (RMB million) | | :-------------------------- | :-------------------- | :-------------------- | :------------- | :-------------------- | | Total revenues | 2,173.7 | 336.7 | 41.6% | 1,534.8 | | Public cloud services revenue | 1,550.8 | 240.2 | 20.5% | 1,287.1 | | Enterprise cloud services revenue | 622.1 | 96.4 | 152.8% | 246.1 | | Gross profit | 118.5 | 18.4 | 46.8% | 80.7 | | Gross margin | 5.5% | N/A | +0.2 pp | 5.3% | | Non-GAAP gross profit | 121.4 | 18.8 | 44.9% | 83.8 | | Non-GAAP gross margin | 5.6% | N/A | +0.1 pp | 5.5% | [Management Commentary](index=1&type=section&id=1.2%20Management%20Commentary) Management highlighted strong Q2 performance with accelerated year-on-year growth across all segments, driven by premium customer relationships and strategic enterprise cloud execution - The company delivered a very strong second quarter with **accelerated year-on-year growth** for the Company as a whole and for each business segment[2](index=2&type=chunk) - In public cloud services, Kingsoft Cloud **solidified relationships with existing customers** and successfully engaged new customers like Meituan, emphasizing its strategic focus on serving premium customers, neutrality positioning, and technical prowess[2](index=2&type=chunk) - In enterprise cloud services, the company focused on **top-notch execution and implementation of benchmark projects** in select industry verticals and regions, leveraging this experience and reputation to scale the business, with synergies expected from the Camelot integration[2](index=2&type=chunk) - Total revenues of **RMB 2.17 billion** in Q2 set a new quarterly revenue record, representing approximately **42% year-over-year growth**, an acceleration from 30% year-over-year growth in Q1 2021[2](index=2&type=chunk) - Public Cloud Services revenue was **RMB 1.55 billion**, marking the **sixth consecutive quarterly revenue increase** since the IPO[2](index=2&type=chunk) - Enterprise Cloud Services revenue was **RMB 622.1 million**, representing approximately **153% year-on-year growth**, a significant acceleration compared to 131% year-on-year growth in Q1 2021[2](index=2&type=chunk) [Detailed Revenue Analysis](index=1&type=section&id=1.3%20Detailed%20Revenue%20Analysis) Total revenues reached **RMB 2.17 billion**, an accelerated **41.6% YoY increase**, driven by **20.5% growth in public cloud** and **152.8% surge in enterprise cloud** services Q2 2021 Revenue Breakdown | Revenue Segment | Q2 2021 (RMB million) | Q2 2021 (US$ million) | YoY Change (%) | Q2 2020 (RMB million) | | :------------------------ | :-------------------- | :-------------------- | :------------- | :-------------------- | | Total Revenues | 2,173.7 | 336.7 | 41.6% | 1,534.8 | | Public cloud services | 1,550.8 | 240.2 | 20.5% | 1,287.1 | | Enterprise cloud services | 622.1 | 96.4 | 152.8% | 246.1 | | Other revenues | 0.8 | 0.1 | N/A | N/A | - Increase in public cloud services revenue was mainly due to **stable relations with top premium customers** and **more comprehensive PaaS capabilities**, such as real-time communication and edge computing[3](index=3&type=chunk) - Increase in enterprise cloud services revenue was mainly due to **strong market demand** and capabilities to provide **industry-specific solutions**, especially in financial services and healthcare industries[3](index=3&type=chunk) [Cost of Revenues and Operating Expenses](index=2&type=section&id=1.4%20Cost%20of%20Revenues%20and%20Operating%20Expenses) Cost of revenues increased by **41.3%** in line with revenue growth, while operating expenses saw mixed changes, primarily influenced by share-based compensation adjustments Q2 2021 Cost of Revenues and Operating Expenses | Metric | Q2 2021 (RMB million) | Q2 2021 (US$ million) | YoY Change (%) | Q2 2020 (RMB million) | | :------------------------------ | :-------------------- | :-------------------- | :------------- | :-------------------- | | Cost of revenues | 2,055.2 | 318.3 | 41.3% | 1,454.0 | | IDC costs | 1,255.5 | 194.5 | 28.3% | 978.4 | | Depreciation and amortization | 183.1 | 28.4 | -15.9% | 217.5 | | Selling and marketing expenses | 96.1 | 14.9 | -12.5% | 109.8 | | General and administrative expenses | 110.6 | 17.1 | -35.1% | 170.4 | | Research and development expenses | 232.3 | 36.0 | 0.7% | 230.8 | - Decrease in selling and marketing expenses and general and administrative expenses was mainly due to a **decrease in share-based compensation expenses**[5](index=5&type=chunk) - Research and development expenses remained flat primarily due to an **increase in salaries and social insurance fees**, partially offset by a **decrease in share-based compensation expenses**[5](index=5&type=chunk) [Profitability and Loss Metrics](index=2&type=section&id=1.5%20Profitability%20and%20Loss%20Metrics) The company significantly narrowed its operating loss by **25.5%** and net loss by **47.5% YoY**, with Non-GAAP net loss remaining stable and improved loss per share Q2 2021 Profitability and Loss Metrics | Metric | Q2 2021 (RMB million) | Q2 2021 (US$ million) | YoY Change (%) | Q2 2020 (RMB million) | | :-------------------------- | :-------------------- | :-------------------- | :------------- | :-------------------- | | Operating loss | (320.5) | (49.6) | -25.5% | (430.3) | | Net loss | (220.6) | (34.2) | -47.5% | (420.1) | | Non-GAAP net loss | (235.6) | (36.5) | -0.9% | (237.7) | | Non-GAAP EBITDA | (55.3) | (8.6) | -54.0% | (35.9) | | Non-GAAP EBITDA margin | -2.5% | N/A | +0.2 pp (QoQ) | -2.3% | | Basic and diluted net loss per share | (0.07) | (0.01) | -63.2% | (0.19) | [Balance Sheet and Cash Position](index=2&type=section&id=1.6%20Balance%20Sheet%20and%20Cash%20Position) As of June 30, 2021, Kingsoft Cloud maintained a stable cash and short-term investments position, with total assets increasing slightly from December 31, 2020 Selected Balance Sheet Items (as of June 30, 2021) | Metric | Jun 30, 2021 (RMB million) | Jun 30, 2021 (US$ million) | Mar 31, 2021 (RMB million) | | :--------------------------------------- | :------------------------- | :------------------------- | :------------------------- | | Cash and cash equivalents and short-term investments | 5,474.9 | 848.0 | 5,455.8 | | Outstanding ordinary shares | 3,355,861,263 | N/A | N/A | Selected Balance Sheet Items (in thousands) | Metric | Dec 31, 2020 (RMB thousands) | Jun 30, 2021 (RMB thousands) | Jun 30, 2021 (US$ thousands) | | :--------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total assets | 11,929,214 | 12,329,295 | 1,909,564 | | Total liabilities | 3,689,164 | 4,526,357 | 701,045 | | Total equity | 8,240,050 | 7,802,938 | 1,208,519 | [Business Outlook](index=2&type=section&id=1.7%20Business%20Outlook) For the third quarter of 2021, Kingsoft Cloud anticipates total revenues to be between RMB 2.58 billion and RMB 2.7 billion, projecting an accelerated year-over-year growth rate of 49% to 56% - For the third quarter of 2021, the Company expects total revenues to be between **RMB 2.58 billion and RMB 2.7 billion**[5](index=5&type=chunk) - This forecast represents an **accelerated year-over-year growth of 49% to 56%**[5](index=5&type=chunk) - The forecast reflects the Company's current and preliminary views on market and operational conditions, which are subject to change[5](index=5&type=chunk) [Non-GAAP Financial Measures and Reconciliations](index=3&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) This section details the company's use of Non-GAAP financial measures and provides reconciliations to their U.S. GAAP equivalents [Use of Non-GAAP Financial Measures](index=3&type=section&id=2.1%20Use%20of%20Non-GAAP%20Financial%20Measures) Kingsoft Cloud uses Non-GAAP measures (gross profit, gross margin, EBITDA, net loss, and their respective margins) as supplemental tools to assess operating performance and formulate business plans, acknowledging their limitations compared to U.S. GAAP - Non-GAAP measures used include **Non-GAAP gross profit, Non-GAAP gross margin, Non-GAAP EBITDA, Non-GAAP EBITDA margin, Non-GAAP net loss, and Non-GAAP net loss margin**[7](index=7&type=chunk) - These measures are used by management to **evaluate operating performance and formulate business plans**, and to facilitate investors' assessment[7](index=7&type=chunk) - Non-GAAP gross profit excludes **share-based compensation** allocated in the cost of revenues[7](index=7&type=chunk) - Non-GAAP net loss excludes **share-based compensation, foreign exchange (gain) loss, other gain, and other (income) expense, net**[7](index=7&type=chunk) - Non-GAAP EBITDA excludes **interest income, interest expense, income tax expense, and depreciation and amortization** from Non-GAAP net loss[7](index=7&type=chunk) - These non-GAAP measures have **limitations as analytical tools**, do not reflect all items of income and expense, and may differ from those used by other companies[7](index=7&type=chunk) [Reconciliation of Gross Profit and Margin](index=6&type=section&id=2.2%20Reconciliation%20of%20Gross%20Profit%20and%20Margin) The reconciliation shows adjustments made to GAAP gross profit to arrive at Non-GAAP gross profit by excluding share-based compensation expenses, resulting in a Non-GAAP gross profit of **RMB 121.4 million** and a Non-GAAP gross margin of **5.6%** for Q2 2021 GAAP to Non-GAAP Gross Profit Reconciliation (in thousands) | Metric | Jun 30, 2020 (RMB thousands) | Mar 31, 2021 (RMB thousands) | Jun 30, 2021 (RMB thousands) | Jun 30, 2021 (US$ thousands) | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Gross profit | 80,744 | 116,503 | 118,482 | 18,350 | | Share-based compensation expenses | 3,009 | 5,499 | 2,961 | 459 | | **Adjusted gross profit** | **83,753** | **122,002** | **121,443** | **18,809** | GAAP to Non-GAAP Gross Margin Reconciliation | Metric | Jun 30, 2020 | Mar 31, 2021 | Jun 30, 2021 | | :---------------------- | :----------- | :----------- | :----------- | | Gross margin | 5.3% | 6.4% | 5.5% | | **Adjusted gross margin** | **5.5%** | **6.7%** | **5.6%** | [Reconciliation of Net Loss and EBITDA](index=8&type=section&id=2.3%20Reconciliation%20of%20Net%20Loss%20and%20EBITDA) The reconciliation details adjustments from GAAP net loss to Non-GAAP net loss and subsequently to Non-GAAP EBITDA, with Q2 2021 Non-GAAP net loss at **RMB 235.6 million** and Non-GAAP EBITDA at **RMB -55.3 million** GAAP to Non-GAAP Net Loss Reconciliation (in thousands) | Metric | Jun 30, 2020 (RMB thousands) | Mar 31, 2021 (RMB thousands) | Jun 30, 2021 (RMB thousands) | Jun 30, 2021 (US$ thousands) | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Loss | (420,056) | (382,209) | (220,598) | (34,167) | | Share-based compensation expenses | 175,148 | 123,113 | 76,092 | 11,785 | | Foreign exchange loss (gain) | 2,883 | 48,375 | (71,277) | (11,039) | | Other gain | — | (5,782) | (15,357) | (2,378) | | Other expense (income), net | 4,342 | (1,926) | (4,464) | (691) | | **Adjusted net loss** | **(237,683)** | **(218,429)** | **(235,604)** | **(36,490)** | Non-GAAP Net Loss to EBITDA Reconciliation (in thousands) | Metric | Jun 30, 2020 (RMB thousands) | Mar 31, 2021 (RMB thousands) | Jun 30, 2021 (RMB thousands) | Jun 30, 2021 (US$ thousands) | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Adjusted net loss | (237,683) | (218,429) | (235,604) | (36,490) | | Interest income | (20,937) | (17,746) | (18,927) | (2,931) | | Interest expense | 1,791 | 3,866 | 6,689 | 1,036 | | Income tax expense | 1,697 | 3,286 | 3,469 | 537 | | Depreciation and amortization | 219,227 | 180,466 | 189,123 | 29,291 | | **Adjusted EBITDA** | **(35,905)** | **(48,557)** | **(55,250)** | **(8,557)** | Non-GAAP Margin Reconciliation | Metric | Jun 30, 2020 | Mar 31, 2021 | Jun 30, 2021 | | :---------------------- | :----------- | :----------- | :----------- | | Net loss margin | -27.4% | -21.1% | -10.1% | | Adjusted net loss margin| -15.5% | -12.0% | -10.8% | | Adjusted EBITDA Margin | -2.3% | -2.7% | -2.5% | [Company Information and Disclosures](index=3&type=section&id=Company%20Information%20and%20Disclosures) This section provides essential company background, forward-looking statement disclaimers, exchange rate details, and contact information [About Kingsoft Cloud Holdings Limited](index=3&type=section&id=3.1%20About%20Kingsoft%20Cloud%20Holdings%20Limited) Kingsoft Cloud Holdings Limited is a leading independent cloud service provider in China, offering a comprehensive and reliable cloud platform with extensive infrastructure, cutting-edge products, and industry-specific solutions across public and enterprise cloud sectors - Kingsoft Cloud Holdings Limited (NASDAQ: KC) is a **leading independent cloud service provider in China**[11](index=11&type=chunk) - The company has built a **comprehensive and reliable cloud platform**[11](index=11&type=chunk) - The platform consists of **extensive cloud infrastructure, cutting-edge cloud products, and well-architected industry-specific solutions** across public cloud and enterprise cloud[11](index=11&type=chunk) [Safe Harbor Statement](index=3&type=section&id=3.2%20Safe%20Harbor%20Statement) The announcement contains forward-looking statements subject to risks and uncertainties, made under the 'safe harbor' provisions of the U.S. Private Securities Litigation Reform Act of 1995, with no obligation to update them - This announcement contains **forward-looking statements** made under the 'safe harbor' provisions of the U.S. Private Securities Litigation Reform Act of 1995[10](index=10&type=chunk) - Forward-looking statements involve **inherent risks and uncertainties**, and a number of factors could cause actual results to differ materially[10](index=10&type=chunk) - Kingsoft Cloud does not undertake any obligation to update any forward-looking statement, except as required under applicable law[10](index=10&type=chunk) [Exchange Rate Information](index=3&type=section&id=3.3%20Exchange%20Rate%20Information) All Renminbi (RMB) amounts translated into U.S. dollars (US$) in this press release are for convenience, using a rate of RMB 6.4566 to US$1.00 as of June 30, 2021 - Translations of certain Renminbi (RMB) amounts into U.S. dollars (US$) are provided solely for the **convenience of the reader**[9](index=9&type=chunk) - The translation rate used is **RMB 6.4566 to US$1.00**[9](index=9&type=chunk) - This rate was the **noon buying rate in effect on June 30, 2021**, as certified for customs purposes by the Federal Reserve Bank of New York[9](index=9&type=chunk) [Conference Call Information](index=2&type=section&id=3.4%20Conference%20Call%20Information) Kingsoft Cloud scheduled a conference call on August 25, 2021, to discuss Q2 financial results, with details provided for registration, dial-in, and replay access - A conference call was held on **Wednesday, August 25, 2021, at 8:00 A.M. Eastern Time** to discuss the financial results[6](index=6&type=chunk) - Participants could register online to receive **dial-in numbers, a direct event passcode, and a unique registrant ID**[6](index=6&type=chunk) - A telephone replay of the call was available through September 2, 2021, and a live and archived webcast was accessible on the Company's investor relations website[6](index=6&type=chunk) [Investor and Media Inquiries](index=3&type=section&id=3.5%20Investor%20and%20Media%20Inquiries) Contact information for investor and media inquiries is provided, including direct contacts for Kingsoft Cloud Holdings Limited and Christensen in both China and the US - For investor and media inquiries, contact **Kingsoft Cloud Holdings Limited (Nicole Shan) or Christensen (Mr. Eric Yuan in China, Ms. Linda Bergkamp in US)**[13](index=13&type=chunk) [Unaudited Condensed Consolidated Financial Statements](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated balance sheets, statements of comprehensive loss, and statements of cash flows for the specified periods [Balance Sheets](index=4&type=section&id=4.1%20Balance%20Sheets) The unaudited condensed consolidated balance sheets present the company's financial position as of December 31, 2020, and June 30, 2021, showing increases in accounts receivable and short-term bank loans, and goodwill recognition Unaudited Condensed Consolidated Balance Sheets (Selected Items, in thousands) | Metric | Dec 31, 2020 (RMB thousands) | Jun 30, 2021 (RMB thousands) | Jun 30, 2021 (US$ thousands) | | :--------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | **ASSETS** | | | | | Cash and cash equivalents | 3,424,674 | 2,954,619 | 457,612 | | Accounts receivable, net | 2,334,871 | 3,461,127 | 536,060 | | Short-term investments | 2,693,019 | 2,520,325 | 390,349 | | Goodwill | — | 112,751 | 17,463 | | Total assets | 11,929,214 | 12,329,295 | 1,909,564 | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | | | | Short-term bank loans | 278,488 | 590,019 | 91,382 | | Accounts payable | 2,057,355 | 2,651,795 | 410,711 | | Total liabilities | 3,689,164 | 4,526,357 | 701,045 | | Total equity | 8,240,050 | 7,802,938 | 1,208,519 | [Statements of Comprehensive Loss](index=5&type=section&id=4.2%20Statements%20of%20Comprehensive%20Loss) The unaudited condensed consolidated statements of comprehensive loss detail the company's revenues, costs, operating expenses, and net loss for the three and six months ended June 30, 2020, and 2021, showing total revenues of **RMB 2.17 billion** and a net loss of **RMB 220.6 million** for Q2 2021 Unaudited Condensed Consolidated Statements of Comprehensive Loss (Selected Items, in thousands) | Metric | Jun 30, 2020 (RMB thousands) | Mar 31, 2021 (RMB thousands) | Jun 30, 2021 (RMB thousands) | Jun 30, 2021 (US$ thousands) | | :--------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Public cloud services revenues | 1,287,139 | 1,391,833 | 1,550,777 | 240,185 | | Enterprise cloud services revenues | 246,081 | 420,032 | 622,145 | 96,358 | | Total revenues | 1,534,755 | 1,813,532 | 2,173,687 | 336,661 | | Cost of revenues | (1,454,011) | (1,697,029) | (2,055,205) | (318,311) | | Gross profit | 80,744 | 116,503 | 118,482 | 18,350 | | Total operating expenses | (511,024) | (468,639) | (438,947) | (67,983) | | Operating loss | (430,280) | (352,136) | (320,465) | (49,633) | | Net loss | (420,056) | (382,209) | (220,598) | (34,167) | | Basic and diluted net loss per share | (0.19) | (0.11) | (0.07) | (0.01) | [Statements of Cash Flows](index=10&type=section&id=4.3%20Statements%20of%20Cash%20Flows) The unaudited condensed consolidated statement of cash flows summarizes cash activities for Q2 2021, reporting net cash used in operating activities of **RMB 263.7 million**, net cash used in investing activities of **RMB 56.4 million**, and net cash generated from financing activities of **RMB 502.4 million** Unaudited Condensed Consolidated Statement of Cash Flows (Selected Items, in thousands) | Metric | Jun 30, 2020 (RMB thousands) | Jun 30, 2021 (RMB thousands) | Jun 30, 2021 (US$ thousands) | | :--------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | (2,568) | (263,650) | (40,834) | | Net cash used in investing activities | (2,673,218) | (56,366) | (8,730) | | Net cash generated from financing activities | 4,006,944 | 502,448 | 77,819 | | Net increase in cash and cash equivalents| 1,331,158 | 182,432 | 28,255 | | Cash and cash equivalents at end of period | 3,310,487 | 2,954,619 | 457,612 |

Kingsoft Cloud Holdings Limited. (NASDAQ:KC) Q1 2021 Results Earnings Conference Call May 18, 2021 8:00 AM ET Company Participants Nicole Shan - IR Manager Yulin Wang - CEO Haijian He - CFO Conference Call Participants Brian Gong - Citigroup Joel Ying - Nomura Kyna Wong - Credit Suisse Thompson Wu - UBS Elsie Cheng - Goldman Sachs Operator Good morning ladies and gentlemen, and thank you for standing by for Kingsoft Cloud First Quarter 2021 Earnings Conference Call. At this time all participants are in a li ...

Taxation - The company reported a statutory income tax rate of 25% for its PRC entities, with a preferential rate of 15% for certain qualified entities from 2019 to 2021 [475]. - The company did not make any provisions for Hong Kong profit tax for the years ended December 31, 2018, 2019, and 2020 due to no assessable profits [474]. Revenue Recognition - The company adopted ASC 606 for revenue recognition, applying a five-step model to account for contracts with customers [478]. - Revenue from public cloud services is recognized over time based on monthly utilization records, reflecting simultaneous consumption and delivery of services [481]. - The company provides customized cloud-based solutions with revenue recognized at a point in time upon customer acceptance, while maintenance revenue is recognized over time [482]. - Revenue is allocated to each performance obligation based on standalone selling prices, with contract assets and liabilities recognized in the balance sheets [479]. - The company provides integrated cloud-based services and recognizes revenue over time based on monthly utilization records [481]. - The enterprise cloud services include customized solutions with revenue recognized at a point in time upon customer acceptance and over time for maintenance services [482]. Financial Performance - The company recorded a net loss of RMB962.2 million (US$147.5 million) for the year ended December 31, 2020, compared to RMB1,111.2 million in 2019 [504]. - Adjusted EBITDA for the year ended December 31, 2020 was RMB(119,098) [502]. - The company's accumulated deficits increased to RMB5,864.4 million (US$898.8 million) as of December 31, 2020 [504]. - Revenues increased by 66.2% from RMB 3,956.4 million in 2019 to RMB 6,577.3 million (US$1,008.0 million) in 2020 [453]. - Revenues from public cloud services rose by 49.4% from RMB 3,458.8 million in 2019 to RMB 5,166.9 million (US$791.9 million) in 2020, driven by increased average revenues per customer [454]. - Revenues from enterprise cloud services surged by 182.3% from RMB 486.3 million in 2019 to RMB 1,372.7 million (US$210.4 million) in 2020, attributed to a rise in the number of premium customers [456]. - The adjusted net loss margin improved to (12.5%) for the year ended December 31, 2020, compared to (24.2%) in 2019 [502]. - The gross margin for 2020 was 5.4%, an improvement from 0.2% in 2019 [502]. Cash Flow and Investments - As of December 31, 2020, the company had cash and cash equivalents of RMB3,424.7 million (US$524.9 million) and short-term investments of RMB2,693.0 million (US$412.7 million) [503]. - The company incurred net cash used in operations of RMB290.4 million (US$44.5 million) for the year ended December 31, 2020 [504]. - Net cash used in operating activities was RMB290.4 million (US$44.5 million) in 2020, compared to RMB439.1 million in 2019 and RMB383.1 million in 2018 [508][510][511]. - The net cash generated from financing activities in 2020 was RMB6,124.2 million (US$938.6 million), significantly higher than RMB64.5 million in 2019 and RMB2,435.8 million in 2018 [514][515]. - The net cash used in investing activities in 2020 was RMB4,314.0 million (US$661.2 million), primarily due to short-term investments and property purchases [512]. - Capital expenditures increased to RMB1,591.6 million (US$243.9 million) in 2020, up from RMB999.7 million in 2019 and RMB1,096.2 million in 2018 [516]. Shareholder Equity and Compensation - The Series A convertible preferred shares are classified as permanent equity, while Series B, C, D, and D+ shares are classified as mezzanine equity due to potential redemption [486]. - Share-based compensation is accounted for under ASC 718, with fair values determined using the binomial option-pricing model [490]. - The company has not recognized any beneficial conversion features for preferred shares as the fair values were less than the conversion prices during the periods presented [488]. - As of March 31, 2021, options to purchase a total of 83,962,324 ordinary shares are outstanding under the 2013 Share Option Scheme [543]. - The maximum aggregate number of ordinary shares available for exercise under the 2013 Share Option Scheme is 209,750,000 [543]. - The company has entered into employment agreements with each executive officer for an indefinite duration [540]. - The company granted 47,000,000 awards to Yulin Wang with an exercise price ranging from nil to $0.86978, expiring on January 20, 2030 [555]. Employee and Labor Relations - The company employed 2,166 full-time employees as of December 31, 2020, with 59% in research and development, 25% in sales and marketing, and 12% in general administration [570]. - The company has not experienced any material labor disputes and maintains a good working relationship with its employees [572]. - The company participates in various employee social security plans under PRC law, contributing specified percentages of salaries and bonuses [572]. Corporate Governance - The audit committee consists of three independent directors, including Mr. Mingto Yu, who qualifies as an "audit committee financial expert" [561]. - The compensation committee is responsible for reviewing and approving compensation for executive officers and incentive compensation plans [563]. - The nominating and corporate governance committee assists in selecting qualified individuals for the board and evaluating board performance [564]. Market and Customer Insights - The total revenues from Premium Customers increased from RMB 2,114.2 million in 2018 to RMB 6,449.2 million (US$ 938.4 million) in 2020, accounting for 95.3%, 97.4%, and 98.1% of total revenues in those years respectively [442]. - The number of Premium Customers grew from 154 in 2018 to 322 in 2020, with the average revenue per Premium Customer increasing from RMB 13.7 million to RMB 20.0 million [443]. - The net dollar retention rate for Public Cloud Service Premium Customers was 161% in 2018, decreasing to 146% in 2020 [443]. - Public cloud services generated revenues of RMB 5,166.9 million (US$ 791.9 million) in 2020, representing 78.5% of total revenues [445]. - The company plans to continue investing in technology, talent, and infrastructure to enhance its cloud services capabilities [438]. - The company aims to capture market opportunities in traditional industries and public service organizations through its enterprise cloud services [440]. - The total number of Public Cloud Service Premium Customers increased from 139 in 2018 to 191 in 2020 [443]. - The company is focused on enhancing the quality and efficiency of its products and solutions to retain existing customers and acquire new ones [436]. Impairment and Asset Management - The company evaluates long-lived assets for impairment based on future undiscounted cash flows, recognizing impairment losses when necessary [484]. - Impairment of long-lived assets is evaluated based on future undiscounted cash flows, recognizing impairment losses when necessary [484]. Miscellaneous - There are no known trends or uncertainties that could materially affect the company's financial condition for the year ended December 31, 2020 [521]. - The company has not entered into any financial guarantees or derivative contracts that would affect its financial obligations [523].

Kingsoft Cloud Holdings Limited (NASDAQ:KC) Q4 2020 Earnings Conference Call March 17, 2021 8:00 AM ET Company Participants Nicole Shan - IR Manager Yulin Wang - CEO Haijian He - CFO Conference Call Participants Kyna Wong - Credit Suisse Alexia Quadrani - JPMorgan Thompson Wu - UBS Leping Huang - CICC Thomas Chong - Jeffries Elsie Cheng - Goldman Sachs Operator Ladies and gentlemen, thank you for standing by and welcome to Kingsoft Cloud Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. I would ...