KINGSOFT(03888)2024-04-19 09:34Financial 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 HK189.1 million (2022: HK20.25 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