KINGSOFT CLOUD(US:KC)2025-04-15 10:45Customer Metrics - The total number of Premium Customers decreased from 537 in 2022 to 486 in 2023, with a slight recovery to 492 in 2024[533]. - Average revenues per Premium Customer decreased from RMB 14.9 million in 2022 to RMB 14.2 million in 2023, and further to RMB 14.0 million in 2024[542]. Revenue Performance - Public Cloud Services revenues were RMB 5,360,282 thousand in 2022, decreasing to RMB 4,381,741 thousand in 2023, but projected to rise to RMB 5,007,251 thousand in 2024, representing 64.3% of total revenues[544]. - Enterprise Cloud Services revenues were RMB 2,816,976 thousand in 2022, slightly declining to RMB 2,663,993 thousand in 2023, with a forecasted increase to RMB 2,777,777 thousand in 2024, accounting for 35.7% of total revenues[544]. - Revenues increased by 10.5% from RMB7,047.5 million in 2023 to RMB7,785.2 million (US$1,066.6 million) in 2024, driven by strong demand from AI business and enterprise cloud projects[559]. - Revenues from public cloud services rose by 14.3% from RMB4,381.7 million in 2023 to RMB5,007.3 million (US$686.0 million) in 2024, primarily due to AI business demand[560]. Profitability and Losses - Gross profit increased by 57.7% from RMB850.2 million in 2023 to RMB1,340.9 million (US$183.7 million) in 2024, with gross profit margin improving from 12.1% to 17.2%[563]. - Operating loss decreased by 17.5% from RMB2,108.6 million in 2023 to RMB1,739.0 million (US$238.2 million) in 2024, with operating loss margin improving from 29.9% to 22.3%[567]. - Net loss decreased by 9.4% from RMB2,183.6 million in 2023 to RMB1,979.0 million (US$271.1 million) in 2024, with net loss margin improving from 31.0% to 25.4%[574][575]. - The adjusted net loss for Kingsoft Cloud decreased from RMB 2.69 billion in 2022 to RMB 1.98 billion in 2024, indicating an improvement of about 26%[603]. - The adjusted EBITDA is projected to turn positive in 2024, reaching RMB 638.9 million, compared to a loss of RMB 755 million in 2022[603]. - The adjusted gross margin improved from 5.3% in 2022 to an estimated 17.2% in 2024, showing a significant increase of 224%[601]. Expenses - Research and development expenses were RMB 971,216 thousand in 2022, decreasing to RMB 784,807 thousand in 2023, and projected to rise to RMB 845,989 thousand in 2024[551]. - Research and development expenses increased by 7.8% from RMB784.8 million in 2023 to RMB846.0 million (US$115.9 million) in 2024, mainly due to rising personnel-related expenses[564]. - Operating expenses increased from RMB 2,680,952 thousand in 2022 to RMB 2,958,720 thousand in 2023, with a forecast of RMB 3,079,936 thousand in 2024[551]. - General and administrative expenses decreased by 21.2% from RMB1,060.0 million in 2023 to RMB834.9 million (US$114.4 million) in 2024, primarily due to reduced credit loss expenses[566]. Cash Flow and Financing - The company generated net cash from operating activities of RMB628.4 million (US$86.1 million) in 2024, contrasting with a net cash outflow of RMB169.1 million in 2023[619][620]. - Net cash used in investing activities was RMB3,620.4 million (US$496.0 million) in 2024, primarily due to the purchase of property and equipment amounting to RMB3,672.1 million (US$503.1 million)[623]. - The company recorded net cash generated from financing activities of RMB3,255.4 million (US$446.0 million) in 2024, mainly from short-term borrowings of RMB2,465.9 million (US$337.8 million)[626]. - Kingsoft Cloud's accumulated deficit reached RMB14,292.0 million (US$1,958.0 million) as of December 31, 2024, with net current liabilities of RMB2,318.6 million (US$317.7 million)[614][617]. - Kingsoft Cloud made a capital contribution of RMB 431.3 million (US$59.1 million) to its WFOEs in 2024[605]. - The company provided loans amounting to RMB 219 million (US$30 million) to the VIEs in 2024, while repaying RMB 50 million (US$6.9 million)[606]. Taxation and Regulatory - Kingsoft Cloud's PRC entities benefit from a preferential income tax rate of 15% as High New Technology Enterprises, which will continue until 2026 for several subsidiaries[595]. - The company is required to set aside at least 10% of its after-tax profits each year for statutory reserve funds, which limits the distributable profits available for dividends[611]. - Kingsoft Cloud's management believes the likelihood of incurring double taxation due to non-deductible transfers is remote, despite potential tax planning challenges[610]. Market and Competitive Landscape - The competitive landscape remains challenging, with increased competition potentially affecting the company's financial condition and results of operations[539]. - The company aims to enhance the quality and efficiency of existing products and solutions to retain and acquire new customers[534]. - The company plans to continue investing in technology and infrastructure to enhance product capabilities and expand resources[537]. Asset Management - The fair value of the Cloud service and solutions reporting unit as of September 30, 2024, was RMB4,205.0 million (US$576.1 million), exceeding its carrying amount by RMB1,169.9 million (US$160.3 million) or 39%[644]. - Impairment losses for long-lived assets associated with the public cloud asset group were recognized at RMB919.7 million (US$126.0 million) for the year ended December 31, 2024[651]. - The company entered into a non-cancelable one-year IDC service agreement with total contractual minimum purchase commitments of RMB600.0 million (US$82.2 million)[636]. - The remaining purchase commitment for IDC services as of December 31, 2024, was RMB252.9 million (US$34.6 million)[636]. - As of December 31, 2024, financial lease liabilities were RMB1,182.0 million (US$161.9 million), primarily related to electronic equipment and data center machinery[634]. Borrowings and Liabilities - As of December 31, 2024, short-term third-party borrowings amounted to RMB2,225.8 million (US$304.9 million) and long-term borrowings were RMB1,660.6 million (US$227.5 million), both with fixed annual interest rates ranging from 2.70% to 5.97%[631]. - Kingsoft Cloud has not declared or paid any dividends and intends to retain available funds for business operations and expansion[607]. - The company experienced net operating cash outflows in 2023, highlighting ongoing liquidity challenges despite improvements in cash generation in 2024[614][620]. - Kingsoft Cloud's future working capital and capital expenditures will be financed through cash generated from operations and potential additional financing, with a focus on maintaining prudent capital management[615]. - Capital expenditures for 2024 reached RMB4,124.7 million (US$565.1 million), with property and equipment purchases accounting for 99.7% of total capital expenditures[630].