Financial Data and Key Metrics - Revenue for Q1 2024 reached RMB 2,137 million, a YoY increase of 8.45% and a QoQ decrease of 7.50% [2] - Net profit attributable to shareholders was RMB 285 million, a YoY increase of 47.95% and a QoQ increase of 38.52% [2] - Adjusted net profit attributable to shareholders (excluding share-based compensation costs) was RMB 329 million, compared to RMB 236 million in the same period last year and RMB 257 million in Q4 2023 [2] - Monthly active devices for the company's office software products reached 602 million, a YoY increase of 2.21% and a QoQ increase of 0.67% [2] Business Line Data and Key Metrics - Online games and other revenue was RMB 912 million, a YoY decrease of 0.78% and a QoQ decrease of 11.02%, accounting for 42.66% of total revenue [3] - Office software and services revenue was RMB 1,225 million, a YoY increase of 16.52% and a QoQ decrease of 4.69%, accounting for 57.34% of total revenue [3] - The growth in office software revenue was driven by domestic personal and institutional subscription services, as well as institutional licensing, partially offset by a decline in advertising revenue [3] Market Data and Key Metrics - The company's flagship game "JX3" maintained steady growth, while the mobile version "JX3: Beyond Boundaries" is expected to launch in June 2024, offering a multi-platform gaming experience [7] - The sci-fi mecha game "Xianji" received a license in March 2024 and is undergoing testing and optimization in both domestic and overseas markets [7] Company Strategy and Industry Competition - The company is focusing on its "multi-screen, cloud, content, collaboration, AI" strategy, with continuous investment in AI and collaboration product development [7] - WPS AI began initial commercialization in March, and the upgraded WPS 365 platform was launched in April, providing a comprehensive AI office solution [7] - The company remains confident in its competitive position against Microsoft's Copilot, citing strong user loyalty and a solid foundation in the domestic market [9] Management Commentary on Operating Environment and Future Outlook - The company achieved steady financial performance in Q1 2024, with operating profit reaching RMB 601.6 million, a YoY increase of 31% [7] - Management emphasized the importance of user feedback and long-term operational strategies, particularly in the gaming segment [8] - The company is optimistic about the growth potential of its AI-driven office solutions and expects further advancements in both C-end and B-end markets [8] Other Important Information - The company's gross margin for Q1 2024 was 81.46%, a YoY decrease of 1.04 percentage points and a QoQ decrease of 0.62 percentage points [4] - R&D expenses increased by 7.83% YoY to RMB 713 million, driven by continued investment in AI and collaboration products [4] - Sales and marketing expenses decreased by 25.59% YoY to RMB 261 million, primarily due to reduced promotional spending in the gaming segment [4] Q&A Summary Q1: Sustainability of "Chen Bai" and WPS AI progress - The company is confident in the sustained growth of "Chen Bai" due to its deep expertise in the niche market and has raised its full-year revenue guidance for the game [8] - WPS AI's C-end testing met expectations, and the company is focusing on model optimization and B-end integration with existing clients [8] Q2: Breakdown of gaming growth and share repurchase plans - "Chen Bai" is expected to contribute significantly to gaming revenue growth, while "JX3: Beyond Boundaries" will drive user base expansion [8] - The company has a share repurchase plan of up to HKD 1 billion, with flexibility based on market conditions [8] Q3: AI competition and cost impact - The company views the reduction in AI model costs as beneficial and is considering lowering membership fees for WPS AI [9] - Management is not concerned about competition from Microsoft's Copilot, citing strong user loyalty and a solid domestic market presence [9]

Financial Data and Key Metrics Changes - In Q1 2024, Kingsoft Corporation achieved revenue of RMB 21.37 billion, representing a year-over-year increase of 8.45% but a quarter-over-quarter decrease of 7.50% [2] - The net profit attributable to shareholders for Q1 2024 was RMB 2.85 billion, showing a year-over-year increase of 47.95% and a quarter-over-quarter increase of 38.52% [4] - The adjusted net profit before share-based compensation for Q1 2024 was RMB 3.29 billion, compared to RMB 2.36 billion in the same period last year and RMB 2.57 billion in Q4 2023 [4] Business Line Data and Key Metrics Changes - Revenue from online games and other sources in Q1 2024 was RMB 9.12 billion, a slight year-over-year decrease of 0.78% and a quarter-over-quarter decrease of 11.02%, accounting for 42.66% of total revenue [2] - Revenue from office software and services in Q1 2024 was RMB 12.25 billion, reflecting a year-over-year increase of 16.52% but a quarter-over-quarter decrease of 4.69%, making up 57.34% of total revenue [2] Market Data and Key Metrics Changes - The number of monthly active devices for the main office software products reached 602 million in Q1 2024, representing a year-over-year growth of 2.21% and a quarter-over-quarter growth of 0.67% [5] Company Strategy and Development Direction - Kingsoft is focusing on a strategy centered around "multi-screen, cloud, content, collaboration, and AI," with ongoing investments in AI and collaborative product development [5] - The company aims to enhance product competitiveness through technological innovation and product iteration, while also exploring new game genres and maintaining a strong focus on user feedback [5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainable growth of the gaming business, particularly with the success of the game "Dust White Zone," and has adjusted revenue expectations for the year [7] - The company is optimistic about the future of its office software business, driven by the launch of the upgraded WPS 365 platform, which integrates AI solutions for users [5] Other Important Information - The overall gross margin for Q1 2024 was 81.46%, a decrease of 1.04 percentage points year-over-year and 0.62 percentage points quarter-over-quarter [3] - Research and development expenses for Q1 2024 were RMB 7.13 billion, reflecting a year-over-year increase of 7.83% [3] Q&A Session Summary Question 1: What is the outlook for the game "Dust White Zone" and the strategy for future games? - The board believes in the sustainability of "Dust White Zone" growth, with an adjusted revenue forecast for the year indicating a 10% increase, supported by user feedback and operational adjustments [7] Question 2: Can you break down the 10% growth guidance for games and any considerations for stock buybacks? - "Dust White Zone" is expected to contribute significantly to growth, while "Sword Network 3 Unlimited" is anticipated to drive user engagement and growth [7] Question 3: How does management view the competitive landscape in the AI sector and its impact on WPS AI? - The decrease in model costs is seen as beneficial for WPS AI, and management is confident in their competitive position against major players like Microsoft [8]

Financial Performance - For the three months ended March 31, 2024, the company reported revenue of RMB 2,136,875 thousand, an increase of 8% compared to RMB 1,970,307 thousand for the same period in 2023[3] - Operating profit for the same period was RMB 601,578 thousand, reflecting a 31% year-over-year increase from RMB 460,302 thousand[3] - Profit attributable to equity holders of the parent was RMB 284,570 thousand, up 48% from RMB 192,343 thousand in the previous year[3] - The basic and diluted earnings per share were both RMB 0.21, representing a 50% increase compared to RMB 0.14 in the same quarter last year[3] - The revenue for Q1 2024 was RMB 2,136.9 million, an increase of 8% year-on-year but a decrease of 7% quarter-on-quarter[14] - Revenue from office software and services was RMB 1,225.3 million, up 17% year-on-year, driven by growth in domestic personal and institutional subscription businesses[14] - The total revenue for Q1 2024 was RMB 2,136.9 million, reflecting an 8% year-on-year increase, with the office software and services segment generating RMB 1,225.3 million, up 17% year-on-year[29] - The operating profit for Q1 2024 was RMB 601.6 million, showing a significant year-on-year growth of 31%[29] User Metrics - The number of monthly active devices for the main product reached 602 million, a 2% increase year-over-year from 589 million[4] - The cumulative number of paying users increased to 35.49 million, an 18% rise from 29.97 million in the previous year[4] Cash Position - The company reported a net cash position of RMB 20,770,189 thousand as of March 31, 2024, compared to RMB 20,271,193 thousand at the end of the previous year[7] - The total cash and cash equivalents at the end of Q1 2024 were RMB 20,770.2 million, compared to RMB 15,703.4 million at the same time last year[9] - The company reported a strong cash position with cash and bank deposits totaling RMB 20,770.2 million, representing 59% of total assets as of March 31, 2024[25] Expenses - The cost of revenue for Q1 2024 was RMB 396.2 million, a 15% increase year-on-year, primarily due to increased server and bandwidth costs[15] - Gross profit for Q1 2024 was RMB 1,740.7 million, a 7% increase year-on-year, with a gross margin of 81%, down one percentage point from the previous year[15] - R&D expenses for Q1 2024 were RMB 712.8 million, an 8% increase year-on-year, reflecting continued investment in AI and collaborative products[16] - Selling and distribution expenses for Q1 2024 were RMB 261.3 million, a decrease of 26% year-on-year, mainly due to reduced promotional spending for online games[17] - Administrative expenses for Q1 2024 were RMB 160.3 million, a 7% increase year-on-year, driven by employee-related costs[18] Future Outlook - The company plans to continue expanding its product offerings and user base, focusing on innovation in software and services[2] - The company has not disclosed specific guidance for future performance but indicated a positive outlook based on current trends and user growth[2] - The company plans to continue investing in AI and collaboration research and development, focusing on the commercialization of WPS AI across various office scenarios[30] Profitability - Operating profit before share-based compensation for Q1 2024 was RMB 678.0 million, a 27% increase year-on-year[20] - The net profit margin excluding share-based compensation for Q1 2024 was 15%, compared to 12% in Q1 2023 and 11% in Q4 2023[24] - The income tax expense for Q1 2024 was RMB 42.3 million, a 63% increase year-on-year but a 66% decrease from the previous quarter[22] Cash Flow - The net cash flow from operating activities for Q1 2024 was RMB 329.0 million, compared to RMB 362.6 million in the same period last year[9] - The net cash generated from operating activities for Q1 2024 was RMB 329.0 million, compared to RMB 362.6 million in Q1 2023 and RMB 1,733.6 million in Q4 2023[27] Capital Expenditure - The capital expenditure for Q1 2024 was RMB 114.6 million, compared to RMB 79.6 million in Q1 2023 and RMB 131.2 million in Q4 2023[28] Product Development - The flagship game "Jian Wang 3" continues to show resilience, with the mobile version "Jian Wang 3 Wu Jie" entering multiple rounds of testing, expected to launch in June 2024[29]

Financial Performance - Total revenue for 2023 reached RMB 8,533.6 million, a 12% year-on-year increase[11] - Office software and services revenue grew to RMB 4,556.5 million, up 17% year-on-year[11] - Online games and other business revenue increased to RMB 3,977.1 million, a 6% year-on-year growth[11] - Operating profit for 2023 was RMB 2,226.9 million, a 19% year-on-year increase[11] - Gross profit for 2023 was RMB 7,030.3 million[10] - Net profit attributable to owners of the parent company for 2023 was RMB 483.5 million[10] - Proposed final dividend for 2023 is RMB 171.4 million[10] - Total revenue for 2023 was RMB 8,533.6 million, a 12% YoY increase, with office software and services contributing 53% and online games and others contributing 47%[21] - Revenue from office software and services grew 17% YoY to RMB 4,556.5 million, driven by domestic personal and institutional subscription growth[21] - Revenue from online games and other businesses increased 6% YoY to RMB 3,977.1 million, supported by strong performance of "JX3" and new game launches[21] - Revenue cost in 2023 was RMB 1,503.3 million, a 3% YoY increase, driven by server and bandwidth costs due to business expansion, partially offset by reduced channel costs for online games[22] - Gross profit in 2023 was RMB 7,030.3 million, a 14% YoY increase, with a gross margin of 82%, up by 1 percentage point YoY[22] - Operating profit before share-based compensation costs in 2023 increased by 19% YoY to RMB 2,540.8 million[27] - Net profit attributable to the parent company in 2023 was RMB 483.5 million, compared to a loss of RMB 6,049.4 million in the previous year[31] - Annual profit for 2023 was RMB 1,215,188 thousand, a significant improvement from a loss of RMB 5,341,887 thousand in 2022[111] - Total assets increased to RMB 35,194,712 thousand in 2023 from RMB 31,887,955 thousand in 2022[111] - Total liabilities rose to RMB 8,621,455 thousand in 2023 from RMB 7,731,488 thousand in 2022[111] - The company's loss attributable to owners of the parent for the year ended December 31, 2023, was RMB 483.5 million[104] Expenses and Costs - Research and development costs for 2023 were RMB 2,683.6 million[10] - Sales and distribution expenses for 2023 were RMB 1,470.5 million[10] - Administrative expenses for 2023 were RMB 661.4 million[10] - R&D costs in 2023 were RMB 2,683.6 million, a 5% YoY increase, primarily due to increased employee-related expenses and efforts to optimize AI and collaboration products[23] - Sales and distribution expenses in 2023 were RMB 1,470.5 million, an 18% YoY increase, mainly due to higher marketing expenditures[24] - Administrative expenses in 2023 were RMB 661.4 million, a 7% YoY increase, driven by higher employee-related costs[25] - Employee costs (including directors and senior management salaries) were RMB 3,765.5 million in 2023, up from RMB 3,486.7 million in 2022[108] Product and Business Updates - WPS AI, based on large language models, was launched in Q4 2023, targeting AIGC, Copilot, and Insight, and has entered public testing in China[12] - WPS 365 was upgraded for organizational clients, offering content creation, collaboration, and digital asset management, with a focus on government and enterprise scenarios[13] - Domestic third-party commercial advertising business was officially shut down in December 2023, while overseas business continued to grow, especially in desktop and large-screen users[14] - Flagship game "JX3" achieved record annual revenue in 2023, with new content updates and a global launch of the sci-fi game "Jie Xian Ji"[15] - In 2023, the company's core business advanced steadily, with a focus on digital economy opportunities and product innovation around "multi-screen, cloud, content, collaboration, and AI"[16] - Monthly active devices for WPS Office and Kingsoft PowerWord reached 598 million in December 2023, a 4% YoY increase[17] - Cumulative paying users reached 35.49 million by the end of 2023, an 18% YoY increase[17] Corporate Governance and Leadership - Zou Tao, aged 48, serves as the Executive Director, CEO, and a member of the Environmental, Social, and Governance Committee of the company. He is also the Chairman of Kingsoft Office and the Acting CEO of Kingsoft Cloud[40] - Lei Jun, aged 54, is the Non-Executive Director, Chairman of the Board, and a member of the Remuneration Committee. He co-founded Xiaomi Corporation and serves as its Chairman and CEO[41] - Qiu Bojun, aged 59, is a Non-Executive Director and a co-founder of Kingsoft. He was instrumental in developing WPS 1.0 and has held various leadership roles within the company[42] - Yao Leiwen, aged 41, is a Non-Executive Director and a member of the Nomination Committee. He is also the Deputy General Manager of the Investment Department at Tencent Holdings[43] - Wang Shunde, aged 63, is an Independent Non-Executive Director and serves as the Chairman of the Nomination Committee and the Remuneration Committee. He has extensive experience in financial management and has held key positions at Alibaba Group and Xiaomi Corporation[44][45] - Chen Zuotao, aged 53, is an Independent Non-Executive Director and has served as an independent director at Kingsoft Office. He holds multiple leadership roles in various energy and investment companies[46] - Chen has extensive investment and management experience in strategic emerging industries such as energy conservation, environmental protection, new energy, and new materials, with notable investments including Xiaomi Group (listed on HKEX in July 2018, stock code: 1810) and others[47] - Chen has received multiple awards and recognitions, including the "EY Entrepreneur Of The Year 2020 China" award in December 2020 and the "Golden Quality - Outstanding Entrepreneur" award in December 2021[48] - Wu Wenjie holds a Ph.D. in Finance from the University of Hong Kong, a Master's in Finance from the Hong Kong University of Science and Technology, and is a CFA charterholder since 2004[50] - Guo Weiwei, Senior Vice President and CEO of Seasun Holdings Limited, has been with the company since 2004 and is the producer of the "JX Online 3" series[51] - Li Yi, acting CFO and Vice President, has been responsible for the company's financial affairs since joining in 2007 and has extensive experience in financial management and investment[52] - Gong Daojun, Vice President, joined Kingsoft in 2004 and has held various positions including Vice President of Seasun and Company Secretary[52] - Peng Bo, Assistant President and Legal Director, has been with the company since 2004 and oversees legal compliance, intellectual property, and human resources[53] - Sun Hongyin, Vice President, joined Kingsoft in 1998 and has been responsible for the development and operation of multiple classic game products[53] - The company maintains high corporate governance standards, with quarterly updates to the Board on performance, status, and prospects, ensuring effective communication among directors and management[55] - The Board reviews and monitors the company's corporate governance policies, compliance with laws and regulations, and the training and development of directors and senior management[55] - The company focuses on innovation and R&D to improve products and services, emphasizing long-term business growth over short-term returns[56] - The company has established anti-corruption and whistleblowing policies, encouraging employees to report unethical behavior[56] - All directors confirmed compliance with the standard code for securities transactions during the fiscal year ending December 31, 2023[57] - The board of directors consists of 7 members, including 1 executive director, 3 non-executive directors, and 3 independent non-executive directors[60] - Independent non-executive directors constitute one-third of the board and provide professional opinions on the company's long-term development[60] - Directors have access to legal counsel and independent professional advice at the company's expense[61] - All directors participated in continuous professional development during the fiscal year to enhance their knowledge and skills[62] - The company secretary completed at least 15 hours of relevant professional training during the fiscal year[62] - The company held a total of 8 board meetings and 1 shareholders' meeting in 2023, with all directors attending 4 out of 4 board meetings and 1 out of 1 shareholders' meeting, except for Mr. Deng Yuanjun who resigned on April 20, 2023, and attended 1 out of 4 board meetings and 0 out of 1 shareholders' meeting[65] - The company's board of directors adopted a diversity policy, with 14% female representation on the board and 33% female representation among all employees[68] - The audit committee consists of three independent non-executive directors, including Ms. Wu Wenjie (Chair), Mr. Wang Shunde, and Mr. Chen Zuotao, all of whom have appropriate professional accounting qualifications or relevant financial management expertise[69] - The audit committee's responsibilities include providing opinions on the appointment, reappointment, and removal of external auditors, approving their remuneration and engagement terms, and reviewing the effectiveness of the company's financial reporting system, risk management, and internal control systems[70][71] - The audit committee held 4 meetings in 2023, with members attending all sessions except for Mr. Deng Yuanjun who attended 1 out of 4 meetings before resigning on April 20, 2023, and Mr. Chen Zuotao who attended 3 out of 4 meetings after being appointed on the same date[73] - The remuneration committee reviewed and approved the service contracts and remuneration packages (including year-end bonuses, incentive shares, and share options) for executive directors and senior management, and assessed the performance of executive directors[75] - The remuneration committee held 1 meeting in 2023, with all members attending except for Mr. Chen Zuotao who did not attend any meetings after being appointed on April 20, 2023[76] - The nomination committee recommended candidates for the position of independent non-executive directors and reviewed the board's structure, size, and composition[78] - The nomination committee held 1 meeting in 2023, with all members attending[79] - The environmental, social, and governance (ESG) committee reviewed the company's ESG policies and practices, and monitored the appropriateness and effectiveness of the overall risk management and internal control systems related to ESG[82] - The ESG committee held 1 meeting in 2023, with all members attending except for Mr. Chen Zuotao who did not attend any meetings after being appointed on April 20, 2023[83] Shareholder and Investor Relations - The company's senior management actively communicated with investors through various activities, including global analyst meetings, webcasts, and investor roadshows[95] - The company's investor relations team is dedicated to maintaining open and continuous communication with shareholders, investors, and analysts[95] - The company's website provides up-to-date information on business operations, financial data, corporate governance, annual reports, interim reports, announcements, and press releases[94] - The company proposed a final dividend of HK$0.14 per ordinary share for the year ended December 31, 2023, totaling approximately HK$189.1 million (2022: HK$176.6 million)[102] - The company's distributable reserves as of December 31, 2023, were RMB 6,161.3 million[105] - The company's total charitable and other donations for the year ended December 31, 2023, amounted to RMB 9.8 million (2022: RMB 1.4 million)[106] - The company's share registrar will suspend share registration services from May 17, 2024, to May 22, 2024, and from June 4, 2024, to June 7, 2024[103] Share Options and Incentive Plans - The 2021 Share Option Plan allows for the issuance of up to 137,020,371 shares, representing approximately 9.63% of the issued shares as of the report date[123] - The 2011 Share Option Plan expired on December 8, 2021, with 2,529,800 shares still available for issuance, representing approximately 0.19% of the issued shares[123] - The maximum number of shares that may be issued upon the exercise of all stock options granted shall not exceed 40,000,000 ordinary shares of Xishanju, unless otherwise approved by the company and Xishanju shareholders at the general meeting[124] - Under the 2011 Stock Option Plan, the maximum number of shares that may be issued to any eligible participant within any 12-month period is limited to 1% of the company's issued shares at any time. Any additional stock options exceeding this limit require shareholder approval at the general meeting[125] - The vesting period for the 2021 Stock Option Plan ranges from 1 to 5 years from the offer date, subject to early termination provisions as stipulated in the plan or determined at the discretion of the board[125] - The exercise price for stock options under the 2011 Stock Option Plan is determined by the board and cannot be lower than the highest of: (i) the closing price of the company's shares on the stock exchange on the offer date, (ii) the average closing price of the company's shares on the stock exchange for the five trading days immediately preceding the offer date, and (iii) the par value of the shares[127] - The 2011 Stock Option Plan expired on December 8, 2021, and no stock options were available for grant under this plan as of January 1, 2023, or December 31, 2023[128] - As of December 31, 2023, there were 2,529,800 unexercised stock options under the 2011 Stock Option Plan held by executive director Zou Tao, with an exercise price of HK$20.25 per share[128] - The total number of unexercised stock options under the 2011 Stock Option Plan as of December 31, 2023, was 2,529,800, with 600,000 stock options exercised during the period[128] - The weighted average closing price of the company's shares immediately before the exercise date of stock options under the 2011 Stock Option Plan (March 23, 2023) was HK$30.5[128] - The number of share options available for grant under the 2021 Share Option Scheme as of January 1, 2023, and December 31, 2023, was 131,520,371[129] - The number of shares available for future grants under the Share Award Plan as of January 1, 2023, and December 31, 2023, was 87,081,807 and 86,450,807, representing approximately 6.39% and 6.33% of the total issued shares, respectively[131] - The total number of unexercised share options under the 2021 Share Option Scheme as of December 31, 2023, was 5,500,000[129] - The total number of unexercised share awards under the Share Award Plan as of December 31, 2023, was 4,182,220[133] - The total number of unexercised share awards for the five highest-paid employees as of December 31, 2023, was 2,080,000[133] - The share price immediately before the grant date of share options on July 4, 2022, was HKD 30.60[129] - The share price immediately before the grant date of share awards on March 25, 2022, July 1, 2022, and July 19, 2022, was HKD 24.2, HKD 30.6, and HKD 27.9, respectively[133] - The total number of share awards granted to other employees during 2023 was 2,079,400[133] - The total number of share awards that expired during 2023 was 637,340[133] - The total number of share awards that vested during 2023 was 3,259,500[133] - The weighted average closing price of the company's shares before the vesting dates of the reward shares under the share reward plan in 2022 was HKD 27.86[134] - The weighted average closing price of the company's shares before the vesting dates of the reward shares under the share reward plan in 2023 was HKD 31.97[134] - The fair value of the reward shares granted under the share reward plan in 2023 totaled RMB 52,420,000, calculated based on the closing prices on the respective grant dates[134] - The number of shares that may be issued under all plans during the reporting period divided by the weighted average number of issued shares during the reporting period was approximately 0.00%[136] - The maximum number of shares authorized to be issued under the 2021, 2022, and 2023 Kingsoft Office Share Reward Plans was 870,000, 1,000,000, and 1,000,000 shares, respectively, accounting for 0.19%, 0.22%, and 0.22% of the total issued shares as of December 31, 2023[138] - The total number of shares that may be issued under the 2021, 2022, and 2023 Kingsoft Office Share Reward Plans divided by the weighted average number of issued shares during the reporting period was 0.22%[138] - The grant prices for the restricted shares under the 2021, 2022, and 2023 Kingsoft Office Share Reward Plans were RMB 45.86, RMB 45.86, and RMB 150.00, respectively[139] - The weighted average closing price of Kingsoft Office shares before the exercise dates of the restricted shares under the 2021 Kingsoft Office Share Reward Plan in 2023 was RMB 383.37[140] - During the reporting period, 279,873 restricted shares were vested, of which 248,523 were

Financial Performance - Revenue for the year ended December 31, 2023, was RMB 8,533,611,000, representing a 12% increase from RMB 7,636,743,000 in 2022[3] - Operating profit increased by 19% to RMB 2,226,882,000 from RMB 1,868,682,000 year-over-year[3] - The company reported a profit attributable to equity holders of RMB 483,457,000, a significant recovery from a loss of RMB 6,049,409,000 in the previous year[3] - Basic earnings per share improved to RMB 0.36 from a loss of RMB 4.43 in 2022[3] - The company reported a net profit of RMB 1,215,188,000 for the year, a significant turnaround from a net loss of RMB 5,341,887,000 in the previous year[8] - The company reported a profit of RMB 1,215,188 thousand for the year ended December 31, 2023, compared to a loss of RMB 5,341,887 thousand in 2022, marking a significant turnaround[9] - Total comprehensive income for the year was RMB 1,285,670 thousand, recovering from a loss of RMB 4,841,532 thousand in the previous year[9] - The group reported a pre-tax profit of RMB 1,488,852,000 for the fiscal year ending December 31, 2023, compared to a pre-tax loss of RMB 5,721,343,000 in the previous year[27][25] - The company reported a total comprehensive loss of RMB (5,579,092) thousand for the year, which includes a significant loss of RMB (6,049,409) thousand attributed to the current year[11] Dividends and Equity - The board proposed a final dividend of HKD 0.14 per share, up from HKD 0.13 per share in 2022[5] - The company declared a dividend of RMB 162,831 thousand for the year ended December 31, 2023[10] - The company's equity attributable to owners increased to RMB 10,877,319 thousand as of December 31, 2023, from RMB 10,668,902 thousand at the end of 2022[10] - The total equity attributable to non-controlling interests was RMB 5,284,224 thousand as of December 31, 2023, compared to RMB 4,653,724 thousand in 2022[10] - The proposed final dividend is HKD 0.14 per share, an increase from HKD 0.13 per share in the previous year, totaling RMB 171,374 thousand[39] - The basic earnings attributable to ordinary equity holders for 2023 is RMB 483,457 thousand, a significant recovery from a loss of RMB 6,049,409 thousand in 2022[43] Assets and Liabilities - Total current assets increased to RMB 26,893,214,000 from RMB 23,539,831,000, reflecting a growth of approximately 14%[6] - The company’s total assets less current liabilities increased to RMB 30,314,274,000 from RMB 24,999,680,000, a growth of approximately 21%[7] - The company’s total assets reached RMB 26,573,257 thousand as of December 31, 2023, reflecting growth from the previous year[10] - The company has a deferred tax liability of RMB (74,941) thousand, compared to RMB (640,114) thousand in the previous year[39] - The group’s asset-liability ratio remained stable at 24% as of December 31, 2023, unchanged from the previous year[86] Cash Flow - The net cash flow from operating activities for the year ended December 31, 2023, was RMB 3,488,746 thousand, an increase from RMB 2,573,519 thousand in 2022, representing a growth of approximately 35.5%[12] - The net cash flow used in investing activities for 2023 was RMB (6,476,034) thousand, compared to RMB 4,421,589 thousand in 2022, indicating a significant shift in investment strategy[12] - The net cash flow from financing activities for 2023 was RMB 655,863 thousand, recovering from a net outflow of RMB (619,041) thousand in 2022[12] - The total cash and cash equivalents at the end of 2023 amounted to RMB 8,707,372 thousand, down from RMB 11,018,882 thousand at the end of 2022, reflecting a decrease of approximately 21%[12] - The cash and bank deposits held by the group amounted to RMB 20,271.2 million, accounting for 58% of total assets as of December 31, 2023[86] Research and Development - Research and development costs for the year were RMB 2,683,596,000, compared to RMB 2,552,754,000 in 2022, reflecting a continued investment in innovation[8] - R&D expenses in Q4 2023 amounted to RMB 684.9 million, a 4% increase year-on-year and 2% increase quarter-on-quarter, reflecting ongoing efforts to improve products and services[59] Employee and Compensation - Employee benefits expenses, including director remuneration, totaled RMB 3,765,451,000 for the year ending December 31, 2023, an increase from RMB 3,486,739,000 in 2022[27] - As of December 31, 2023, the company employed approximately 7,199 full-time employees, an increase from 7,116 in 2022[99] - Employee costs, including compensation for directors and senior management, were approximately RMB 3,765.5 million in 2023, compared to RMB 3,486.7 million in 2022[99] Stock Options and Share Repurchase - The company has a stock option plan in place, with 2,529,800 options remaining unexercised as of December 31, 2023, at a weighted average exercise price of HKD 20.25[32] - The 2021 stock option plan allows eligible participants, including directors and employees, to exercise options over a period of 10 years, with 5,500,000 options unexercised as of December 31, 2023, at an average exercise price of HKD 31.69[33] - The share reward plan has 4,182,220 unexercised reward shares as of December 31, 2023, down from 5,999,660 in the previous year, with 2,079,400 shares granted during the year[35] - The company repurchased a total of 9,490,000 shares at a total cost of approximately HKD 244.53 million during the year ending December 31, 2023[100] - The share repurchase was conducted at prices ranging from HKD 22.2 to HKD 29.05 per share across different months[100] Future Outlook and Strategy - The company plans to continue optimizing its solutions to enhance the digital office experience for enterprise clients, which is expected to drive further growth in subscription services[57] - The company plans to continue exploring digital office service opportunities and enhance product innovation around "multi-screen, cloud, content, collaboration, and AI" in 2024[97] Compliance and Governance - The company has adopted a standard code of conduct for securities trading by directors, confirming compliance for the year ending December 31, 2023[101] - The audit committee reviewed the financial statements for the year ending December 31, 2023, and confirmed adherence to applicable accounting standards[105] - The company has established a governance framework that includes quarterly performance updates to the board, rather than monthly as per the code[106] - Forward-looking statements regarding the company's financial condition and performance are subject to inherent risks and uncertainties[107] - The company emphasizes that actual performance may differ significantly from forward-looking statements due to various risk factors[107]

Financial Data and Key Metrics Changes - Total revenue for Q3 2023 was RMB 2,060 million, representing a year-on-year increase of 12% but a quarter-on-quarter decrease of 6% [4][8] - Operating profit increased by 13% year-on-year to RMB 376 million [4] - Gross profit increased by 14% year-on-year but decreased by 8% quarter-on-quarter to RMB 1,677 million, with a gross profit margin of 81% [10][11] - Profit attributable to owners of the parent was RMB 28 million, compared to a loss of RMB 6,055 million in Q3 2022 [13] Business Line Data and Key Metrics Changes - Revenue from office software and services increased by 9% year-on-year to RMB 1,098 million, while revenue from online games increased by 15% year-on-year to RMB 961 million [8][10] - The individual office subscription business saw improvements in paying ratio and average revenue per paying user due to an optimized membership system [6][9] - Revenue from the online games segment decreased by 10% quarter-on-quarter, primarily due to a decline in revenue from JX3 Online [10] Market Data and Key Metrics Changes - The revenue split was 53% for office software and services and 47% for online games and others [8] - The company expanded its user base in micro, small, and medium-sized enterprises through WPS 365 [7] Company Strategy and Development Direction - The company will continue to focus on AI and collaboration, restructuring office software to enhance user experience [15] - The online games business will maintain its strategy of developing premium games and long-term operations [15] - Strategic cooperation with Alibaba Group and iFlytek aims to build a digital and intelligent service ecosystem [6] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the gaming business outlook, particularly for JX Online III, which typically performs well in Q4 [29] - The company plans to launch new games in the JX series and Code Break in the upcoming year, indicating a focus on both existing IP and new developments [25][30] - The AI strategy is expected to enhance average revenue per user (ARPU) and the number of paying users in the Kingsoft Office business [32] Other Important Information - The company had cash resources of RMB 23 billion as of September 30, 2023 [14] - Share-based compensation costs increased by 15% year-on-year, indicating ongoing investment in talent [11] Q&A Session Summary Question: What are the commercialization plans for JX Online III and the gaming business outlook for next year? - Management confirmed that the monetization model for JX Online III remains unchanged, focusing on fair gameplay and value-added services. The JX3 Ultimate mobile version is expected to launch in the first half of next year, enhancing user interaction [18][19] Question: What is the strategy for growth in the gaming business amid increased competition? - Management acknowledged the increased competition but welcomed the easier access to game licenses. They plan to continue developing the JX series and expand into global markets [24][25] Question: What are the user feedback and revenue impact from the upgraded WPS membership system? - Management reported improvements in both the number of paying users and ARPU, attributing future revenue growth to the AI strategy combined with the membership upgrade [31][32] Question: What is the reason for the increase in expenses this quarter? - The increase in expenses was primarily due to marketing campaigns, but management expects expenses to return to a reasonable level in Q4 [33]

[Performance Highlights](index=1&type=section&id=Performance%20Highlights) [Summary of Financial Data](index=1&type=section&id=Summary%20of%20Financial%20Data) The Group's Q3 2023 revenue grew 12% YoY to RMB 2.06 billion, with operating profit up 13% YoY to RMB 376 million, and profit attributable to owners of the parent turning profitable at RMB 28.49 million Q3 2023 Financial Summary | Metric | Q3 2023 (RMB thousands) | Q3 2022 (RMB thousands) | Q2 2023 (RMB thousands) | YoY Change | QoQ Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 2,059,679 | 1,837,127 | 2,193,490 | 12% | (6)% | | Operating Profit | 376,073 | 331,770 | 675,713 | 13% | (44)% | | Profit/(Loss) attributable to owners of the parent | 28,492 | (6,054,914) | 57,187 | Not Applicable | (50)% | | Basic earnings/(loss) per share (RMB) | 0.02 | (4.44) | 0.04 | Not Applicable | (50)% | [Summary of Operational Data](index=2&type=section&id=Summary%20of%20Operational%20Data) As of September 2023, monthly active devices for office software reached 589 million, while cumulative paying users grew 16% YoY to 33.24 million Office Software Operational Data | Metric | Sep 2023 | Sep 2022 | Jun 2023 | YoY Change | QoQ Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Monthly Active Devices (Millions) | 589 | 578 | 584 | 2% | 1% | | Cumulative Paying Users (Millions) | 33.24 | 28.56 | - | 16% | - | [Unaudited Condensed Consolidated Financial Statements](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Condensed Consolidated Statement of Profit or Loss](index=3&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss) This quarter's total revenue reached RMB 2.06 billion, yielding a gross profit of RMB 1.677 billion and an operating profit of RMB 376 million, with profit attributable to owners of the parent at RMB 28.49 million Q3 2023 Key Profit or Loss Items (RMB thousands) | Item | Q3 2023 | Q3 2022 | Q2 2023 | | :--- | :--- | :--- | :--- | | **Revenue** | **2,059,679** | **1,837,127** | **2,193,490** | | Office Software and Services | 1,098,325 | 1,004,726 | 1,120,845 | | Online Games and Others | 961,354 | 832,401 | 1,072,645 | | **Gross Profit** | **1,676,854** | **1,466,175** | **1,831,846** | | **Operating Profit** | **376,073** | **331,770** | **675,713** | | **Profit/(Loss) for the period** | **171,907** | **(5,917,334)** | **267,777** | | Profit/(Loss) attributable to owners of the parent | 28,492 | (6,054,914) | 57,187 | [Condensed Consolidated Statement of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income) The quarter's profit for the period was RMB 172 million, but after other comprehensive losses, total comprehensive income was RMB 128 million, with a loss of RMB 13.03 million attributable to owners of the parent Q3 2023 Summary of Comprehensive Income (RMB thousands) | Item | Q3 2023 | Q3 2022 | Q2 2023 | | :--- | :--- | :--- | :--- | | Profit/(Loss) for the period | 171,907 | (5,917,334) | 267,777 | | Other comprehensive income/(loss) for the period | (43,591) | 327,281 | 243,738 | | **Total comprehensive income/(loss) for the period** | **128,316** | **(5,590,053)** | **511,515** | | Attributable to owners of the parent | (13,030) | (5,746,881) | 283,296 | | Attributable to non-controlling interests | 141,346 | 156,828 | 228,219 | [Condensed Consolidated Statement of Financial Position](index=5&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of September 30, 2023, the Group reported total assets of RMB 34.08 billion, total liabilities of RMB 7.75 billion, and net assets of RMB 26.33 billion, demonstrating strong liquidity Summary of Financial Position (As of September 30, 2023) | Item | Amount (RMB thousands) | | :--- | :--- | | Total Non-current Assets | 8,457,500 | | Total Current Assets | 25,623,162 | | Total Current Liabilities | 4,222,033 | | Total Non-current Liabilities | 3,529,067 | | **Net Assets** | **26,329,562** | | **Total Equity** | **26,329,562** | [Condensed Consolidated Statement of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) In Q3 2023, net cash used in operating activities was RMB 552 million, net cash used in investing activities was RMB 3.53 billion, with period-end cash and bank balances at RMB 19.748 billion Q3 2023 Summary of Cash Flows (RMB thousands) | Item | Q3 2023 | Q3 2022 | Q2 2023 | | :--- | :--- | :--- | :--- | | Net cash flow from operating activities | (552,445) | 288,104 | 1,944,992 | | Net cash flow from investing activities | (3,530,178) | (1,409,192) | 1,596,252 | | Net cash flow from financing activities | (50,911) | (45,776) | 1,105,903 | | Net (decrease)/increase in cash and cash equivalents | (4,133,534) | (1,166,864) | 4,647,147 | | **Cash and bank balances at end of period** | **19,747,717** | **12,251,351** | **21,684,511** | - Excluding the impact of payments for Q2 collections, net cash generated from operating activities for the quarter was **RMB 447.5 million**[10](index=10&type=chunk) [Notes to the Financial Statements](index=8&type=section&id=Notes%20to%20the%20Financial%20Statements) [Company Information and Business Overview](index=8&type=section&id=Company%20Information%20and%20Business%20Overview) Kingsoft Corporation Limited, listed on the HKEX, primarily operates in two core businesses: WPS Office software and services, and PC and mobile game development and provision - The Group's core businesses are divided into two segments: office software (WPS Office) and online games[11](index=11&type=chunk) [Basis of Preparation and Principal Accounting Policies](index=8&type=section&id=Basis%20of%20Preparation%20and%20Principal%20Accounting%20Policies) These interim financial statements are prepared under IAS 34, consistent with 2022 policies, incorporating new standards effective January 1, 2023, with restated comparative data for IAS 12 amendments - The financial statements are prepared in accordance with International Accounting Standards, adopting new standards effective in 2023, with retrospective application of amendments to IAS 12 (Deferred Tax)[12](index=12&type=chunk)[14](index=14&type=chunk) [Management Discussion and Analysis](index=10&type=section&id=Management%20Discussion%20and%20Analysis) [Financial Performance Analysis](index=10&type=section&id=Financial%20Performance%20Analysis) In Q3 2023, total revenue grew 12% YoY, but operating profit declined 44% QoQ due to increased marketing and administrative expenses, while profit attributable to owners of the parent turned profitable [Revenue](index=10&type=section&id=Revenue) Q3 total revenue grew 12% YoY to RMB 2.06 billion, driven by 9% growth in office software and services and 15% growth in online games and others - Office software business grew **9% YoY**, primarily driven by individual and institutional subscription services, partially offset by a decline in institutional licensing business[15](index=15&type=chunk) - Online game business grew **15% YoY**, benefiting from revenue growth of "Jian Wang 3" and contributions from the new game "Snowbreak: Containment Zone" launched in July[15](index=15&type=chunk) [Costs and Gross Profit](index=10&type=section&id=Costs%20and%20Gross%20Profit) Q3 gross profit increased 14% YoY to RMB 1.677 billion, with a gross margin of 81%, reflecting increased staff and server costs - This quarter's gross margin was **81%**, up **1 percentage point YoY** but down **3 percentage points QoQ**[16](index=16&type=chunk) [Operating Expenses](index=10&type=section&id=Operating%20Expenses) Operating expenses significantly increased this quarter, with selling and distribution expenses surging 24% YoY and 47% QoQ due to new game marketing, and administrative expenses up 20% YoY - Selling and distribution expenses increased **24% YoY** and **47% QoQ**, primarily due to marketing and promotion for new games[18](index=18&type=chunk) - Administrative expenses increased **20% YoY**, mainly due to higher staff-related expenses[18](index=18&type=chunk) [Profit / (Loss) Analysis](index=11&type=section&id=Profit%20%2F%20%28Loss%29%20Analysis) Profit attributable to owners of the parent was RMB 28.5 million this quarter, a significant turnaround from a RMB 6.055 billion loss last year, though lower than the previous quarter - The significant loss in **Q3 2022** was primarily due to impairment provisions for the investment in **Kingsoft Cloud**[19](index=19&type=chunk) - Profit attributable to owners of the parent for **Q3 2023** was **RMB 28.5 million**, successfully turning from loss to profit[22](index=22&type=chunk) [Liquidity and Financial Resources](index=12&type=section&id=Liquidity%20and%20Financial%20Resources) As of September 30, 2023, the Group maintained a strong cash position of RMB 19.748 billion, a healthy 23% gearing ratio, and faced foreign exchange risk from RMB 3.7 billion in non-RMB deposits - As of the quarter-end, the Group's total cash resources (including cash, bank balances, and certain financial assets) amounted to **RMB 23.149 billion**[24](index=24&type=chunk) - The gearing ratio (total liabilities/total assets) was **23%**, indicating a sound financial position[24](index=24&type=chunk) - The Group holds **RMB 3.7 billion** in non-RMB denominated deposits, posing foreign exchange fluctuation risk[25](index=25&type=chunk) [Cash Flow Analysis](index=13&type=section&id=Cash%20Flow%20Analysis) This quarter saw net cash used in operating activities of RMB 552 million, a contrast to prior periods, with capital expenditure increasing to RMB 160 million - For the three months ended September 30, 2023, net cash used in operating activities was **RMB 552 million**[26](index=26&type=chunk) - Capital expenditure for the quarter was **RMB 159.7 million**, a **51% YoY increase**[27](index=27&type=chunk) [Management Overview and Outlook](index=14&type=section&id=Management%20Overview%20and%20Outlook) [Management Commentary](index=14&type=section&id=Management%20Commentary) Management reported steady Q3 core business development, with Kingsoft Office advancing AI and collaboration strategies, and online games maintaining vitality through new content and successful launches - Kingsoft Office Group focuses on "AI" and "collaboration" strategies, investing in independent R&D of small and medium models, and forming strategic partnerships with Alibaba Cloud and iFlytek[28](index=28&type=chunk) - In online games, "Jian Wang 3" launched a new expansion, "Jian Xia World: Origin" had a successful open beta, and the mobile version "Jian Wang 3: Wujie" has obtained its license, with a planned launch in the first half of next year[28](index=28&type=chunk) [Future Outlook](index=15&type=section&id=Future%20Outlook) The company plans continued R&D investment in core businesses, with Kingsoft Office focusing on AI and collaboration, and online games on developing and operating high-quality titles for sustainable growth - In the future, Kingsoft Office will focus on **AI** and **collaboration** to re-architect office software; the online game business will continue to develop high-quality titles and operate them long-term[29](index=29&type=chunk) - The company will steadfastly continue to invest in core business R&D to enhance core competitiveness and achieve high-quality sustainable development[29](index=29&type=chunk)

Financial Performance - The total revenue for the first half of 2023 reached RMB 4,163.8 million, a 12.9% increase compared to RMB 3,687.2 million in the same period of 2022[12]. - The company reported a net profit of RMB 605.7 million for the first half of 2023, compared to RMB 335.9 million in the same period of 2022, marking an increase of 80.2%[12]. - Operating profit for the first half of 2023 was RMB 1,136.0 million, representing a 23.8% increase from RMB 918.2 million in the first half of 2022[12]. - Total revenue for Q2 2023 reached RMB 2,193.5 million, a year-on-year increase of 20% and a quarter-on-quarter increase of 11%[18]. - Gross profit for Q2 2023 was RMB 1,831.8 million, reflecting a 25% year-on-year growth, with a gross margin of 84%[19]. - The profit attributable to the company's owners for H1 2023 was RMB 249.5 million, compared to a loss of RMB 42.1 million in the same period last year[44]. User Metrics - The number of cumulative paying users increased by 16% year-on-year to 33.24 million as of June 30, 2023, up from 28.56 million in 2022[8]. - The monthly active devices for key products reached 584 million in June 2023, a 2% increase from 570 million in June 2022[8]. Research and Development - Research and development costs for the first half of 2023 were RMB 1,326.7 million, an increase from RMB 1,250.5 million in the first half of 2022[12]. - R&D expenses for Q2 2023 amounted to RMB 665.7 million, a 4% increase year-on-year[20]. - The company plans to invest approximately RMB 1,900 million in the Wuhan park construction to enhance R&D capabilities, expected to be operational by 2025[57]. Cash and Assets - Cash and bank deposits as of June 30, 2023, amounted to RMB 21,684.5 million, representing 62% of total assets, with a debt-to-asset ratio of 26%[46]. - The company's total assets as of June 30, 2023, amounted to RMB 29,159,025,000, reflecting an increase from RMB 28,794,566,000 at the beginning of the year[138]. - Total non-current assets as of June 30, 2023, were RMB 8,683,650 thousand, compared to RMB 8,348,124 thousand at the end of 2022[133]. Shareholder Information - Major shareholders include Color Link Management Limited with 12.83% ownership (174,818,191 shares) and Tencent Holdings Limited with 7.84% ownership (106,784,515 shares) as of June 30, 2023[102]. - As of June 30, 2023, the total number of shares held by Lei Jun is 308,157,048, accounting for 22.61% of the issued share capital[62]. Stock Options and Incentives - The company has implemented a share option scheme in 2011, which has no options available for grant as of June 30, 2023[71]. - The total number of unexercised stock options as of June 30, 2023, is 5,500,000 shares, with an exercise price of HKD 31.69[76]. - The company aims to attract and retain talent through the 2021 stock option plan and the share award plan[74][80]. Financial Liabilities - The company's debt-to-asset ratio increased to 26% as of June 30, 2023, compared to 24% at the end of 2022[117]. - The company reported a total comprehensive income of RMB 793,541 thousand for the six months ended June 30, 2023, compared to RMB 631,874 thousand in the same period of 2022[130]. Revenue Breakdown - Revenue from office software and services was RMB 1,120.8 million, up 21% year-on-year, driven by sustained growth in personal and institutional subscription businesses[18]. - Revenue from online games and other businesses was RMB 1,072.6 million, an 18% year-on-year increase, primarily due to the continued updates and user experience improvements of "Jian Wang 3"[18]. - Revenue from software and related services sales and subscriptions reached RMB 2,099,933 thousand, up from RMB 1,715,271 thousand in the previous year, indicating a growth of about 22.4%[169]. Employee Information - The company has a total of 7,086 full-time employees as of June 30, 2023, a decrease from 7,174 employees as of June 30, 2022[106]. - Total salary costs for the six months ended June 30, 2023, amounted to RMB 1,865.2 million, compared to RMB 1,715.5 million for the same period in 2022, reflecting an increase of approximately 8.7%[106]. Tax and Compliance - The company reported a total tax expense of RMB 1,471 thousand for the six months ended June 30, 2023, down from RMB 2,304 thousand in the same period of 2022[155]. - The company is currently evaluating its risks related to the OECD's Pillar Two tax reforms, which may impact future financial reporting and tax liabilities[155].

Kingsoft Corporation Limited (OTCPK:KSFTF) Q2 2023 Earnings Conference Call August 22, 2023 7:00 AM ET Company Participants Francie Lu - Investor Relations Tao ZOU - Executive Director and Chief Executive Officer Yi LI - Acting Chief Financial Officer Conference Call Participants Xiaodan Zhang - CICC Linlin Yang - GF Securitites Hao Yang - Founder Securities Operator Good day and thank you for standing by. Welcome to the Q2 2023 Kingsoft Corporation Earnings Conference Call. At this time, all participants a ...

[Financial Data](index=2&type=section&id=Financial%20Data) [Consolidated Financial Statements](index=2&type=section&id=Consolidated%20Financial%20Statements) For the six months ended June 30, 2023, the Group's total revenue grew 13% to **RMB 4.16 billion**, operating profit increased 24% to **RMB 1.14 billion**, and profit attributable to owners of the parent turned profitable at **RMB 250 million**, with operating cash flow significantly up to **RMB 2.31 billion** Key Financial Data for the Six Months Ended June 30, 2023 | Metric | H1 2023 (RMB thousands) | H1 2022 (RMB thousands) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | **Revenue** | 4,163,797 | 3,687,167 | +12.9% | | **Gross Profit** | 3,457,239 | 2,969,986 | +16.4% | | **Operating Profit** | 1,136,015 | 918,179 | +23.7% | | **Profit for the Period** | 605,725 | 335,935 | +80.3% | | **Profit/(Loss) Attributable to Owners of the Parent** | 249,530 | (42,064) | Turned Profitable | | **Basic EPS (RMB)** | 0.18 | (0.03) | Turned Profitable | Summary of Balance Sheet as of June 30, 2023 | Metric | June 30, 2023 (RMB thousands) | Dec 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | **Total Assets** | 34,890,675 | 31,887,955 | | **Total Liabilities** | 8,978,605 | 7,731,488 | | **Total Equity** | 25,912,070 | 24,156,467 | | **Cash and Bank Balances** | 21,684,511 | 18,201,410 | Summary of Cash Flows for the Six Months Ended June 30, 2023 | Metric | H1 2023 (RMB thousands) | H1 2022 (RMB thousands) | | :--- | :--- | :--- | | **Net Cash Flow from Operating Activities** | 2,307,572 | 1,053,441 | | **Net Cash Flow Used in Investing Activities** | (1,482,629) | (456,902) | | **Net Cash Flow from/(Used in) Financing Activities** | 989,023 | (499,495) | [Summary of Notes to Financial Statements](index=9&type=section&id=Summary%20of%20Notes%20to%20Financial%20Statements) The Group primarily operates in office software and services and entertainment software and others, with the former generating **RMB 2.17 billion** revenue and **RMB 500 million** segment profit, and the latter **RMB 1.99 billion** revenue and **RMB 630 million** segment profit; no interim dividend was declared - The Group primarily engages in two main businesses: (a) designing, researching, developing, and marketing WPS Office software products and services; and (b) researching and developing games, as well as providing PC and mobile game services[9](index=9&type=chunk)[13](index=13&type=chunk) Segment Results for H1 2023 | Operating Segment | Revenue (RMB thousands) | Segment Profit (RMB thousands) | | :--- | :--- | :--- | | **Office Software and Services** | 2,172,497 | 502,912 | | **Entertainment Software and Others** | 1,991,300 | 630,418 | | **Total** | 4,163,797 | 1,133,330 | - The Board has resolved not to declare any interim dividend for the six months ended June 30, 2023[20](index=20&type=chunk) - The five-year convertible bonds with a principal amount of **HKD 3.1 billion** and an annual interest rate of 0.625%, issued in April 2020, had no conversions or redemptions during the reporting period[28](index=28&type=chunk) [Operations Summary](index=17&type=section&id=Operations%20Summary) As of June 2023, monthly active devices for office software main products reached **584 million**, a 2% year-on-year increase, with cumulative paying users growing 16% to **33.24 million** Key Operating Data for Office Software | Metric | June 2023 | June 2022 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | **Monthly Active Devices for Main Products (millions)** | 584 | 570 | +2% | | **Cumulative Paying Users (millions)** | 33.24 | 28.56 | +16% | [Management Discussion and Analysis](index=20&type=section&id=Management%20Discussion%20and%20Analysis) [Q2 2023 Performance Analysis](index=20&type=section&id=Q2%202023%20Performance%20Analysis) In Q2 2023, the Group's total revenue grew 20% to **RMB 2.19 billion**, with office software and services revenue up 21% and online game revenue up 18% due to strong 'Jian Wang 3' performance; gross profit margin improved to 84%, and operating profit significantly increased by 61% Q2 2023 Revenue Performance | Business Segment | Revenue (RMB millions) | Y-o-Y Change | Q-o-Q Change | | :--- | :--- | :--- | :--- | | **Office Software and Services** | 1,120.8 | +21% | +7% | | **Online Games and Others** | 1,072.6 | +18% | +17% | | **Total** | 2,193.5 | +20% | +11% | - The year-on-year growth in office software business was primarily driven by the sustainable growth of domestic personal and institutional office subscription businesses[32](index=32&type=chunk) - The growth in online game business was mainly due to significant revenue increase from 'Jian Wang 3' through continuous updates and user experience optimization[32](index=32&type=chunk) - The gross profit margin for Q2 was **84%**, an increase of four percentage points from the same period last year, primarily due to changes in revenue mix[33](index=33&type=chunk) - Operating profit before share-based compensation costs was **RMB 767 million**, a 59% year-on-year increase[35](index=35&type=chunk) [H1 2023 Performance Analysis](index=23&type=section&id=H1%202023%20Performance%20Analysis) In H1 2023, the Group's total revenue grew 13% to **RMB 4.16 billion**, with office software and services revenue up 21% and online games and others revenue up 5%; gross profit margin improved to 83%, and profit attributable to owners of the parent turned profitable at **RMB 250 million** H1 2023 Revenue Performance | Business Segment | Revenue (RMB millions) | Y-o-Y Change | | :--- | :--- | :--- | | **Office Software and Services** | 2,172.5 | +21% | | **Online Games and Others** | 1,991.3 | +5% | | **Total** | 4,163.8 | +13% | - The gross profit margin for H1 was **83%**, an increase of two percentage points from the same period last year[41](index=41&type=chunk) - Research and development costs increased by 6% year-on-year to **RMB 1.33 billion**, primarily due to increased employee-related expenses at Kingsoft Office Group[42](index=42&type=chunk) - Profit attributable to owners of the parent for H1 was **RMB 249.5 million**, compared to a loss of **RMB 42.1 million** in the same period last year[44](index=44&type=chunk) [Liquidity and Financial Resources](index=25&type=section&id=Liquidity%20and%20Financial%20Resources) As of June 30, 2023, the Group maintained a strong cash position with **RMB 21.68 billion** in cash and bank balances and a healthy gearing ratio of **26%**, while net cash from operating activities in H1 significantly increased to **RMB 2.31 billion** Financial Position Summary | Metric | June 30, 2023 | | :--- | :--- | | **Cash and Bank Balances** | RMB 21,684.5 millions | | **Gearing Ratio** | 26% | - Net cash generated from operating activities in H1 2023 was **RMB 2.308 billion**, a significant increase from **RMB 1.053 billion** in the same period last year[47](index=47&type=chunk) [Business Review and Outlook](index=26&type=section&id=Business%20Review%20and%20Outlook) The Group's core businesses developed steadily, with Kingsoft Office launching WPS AI and deepening digital transformation services, while flagship game 'Jian Wang 3' achieved record-high revenue and 'Snowbreak: Containment Zone' expanded globally; the Group plans to continue driving innovation - Kingsoft Office Group seized the opportunity of large language models, actively investing in R&D to launch **WPS AI**, an intelligent office assistant based on large language models, and commenced public beta testing overseas[49](index=49&type=chunk) - The office software business continues to advance government and enterprise cloud-integrated and collaborative office solutions, and incubate industry-agnostic solutions, centered on a 'multi-screen, cloud, content, AI, collaboration' strategy[49](index=49&type=chunk) - The flagship game 'Jian Wang 3' achieved record-high quarterly revenue, with both daily active users and revenue maintaining year-on-year growth[49](index=49&type=chunk)[50](index=50&type=chunk) - The self-developed anime-style shooter 'Snowbreak: Containment Zone' was simultaneously released globally on PC and mobile platforms, expanding its user base and entering overseas markets[49](index=49&type=chunk)[50](index=50&type=chunk) - Future plans include launching an upgraded performance version of 'Jian Wang 3' PC game in Q4, and the self-developed mobile game 'Jian Xia World: Origin', which has obtained a license, will also be launched in mainland China[50](index=50&type=chunk) [Other Information](index=28&type=section&id=Other%20Information) [Corporate Governance and Personnel](index=28&type=section&id=Corporate%20Governance%20and%20Personnel) As of June 30, 2023, the Group had **7,086** full-time employees with **RMB 1.865 billion** in H1 staff costs; the Audit Committee reviewed interim financial data, and the company complied with corporate governance codes, except for quarterly management reporting to the Board - As of June 30, 2023, the Group had **7,086** full-time employees, with total staff costs of **RMB 1.865 billion** for H1[51](index=51&type=chunk) - The Audit Committee has reviewed the Group's unaudited interim financial information for the six months ended June 30, 2023[53](index=53&type=chunk) - The company has complied with all applicable provisions of the Corporate Governance Code, except that management provides business updates to the Board quarterly instead of monthly as recommended by the code[55](index=55&type=chunk)