Core Viewpoint - Kingdee International Software Group Limited reported a revenue of approximately 3.192 billion RMB for the six months ending June 30, 2025, representing a year-on-year increase of about 11.2%. The loss attributable to equity holders was approximately 97.74 million RMB, a reduction of about 55.1% year-on-year [1][2]. Financial Performance - The company's revenue from customer contracts was 3.192 billion RMB, up from 2.870 billion RMB in the previous year [2]. - Gross profit for the period was approximately 2.095 billion RMB, compared to 1.815 billion RMB in the prior year [2]. - The administrative expenses surged by approximately 39% to about 346 million RMB, primarily due to personnel restructuring and increased severance payments [7]. - The company has incurred cumulative losses of approximately 1.379 billion RMB over the past five years, continuing to report losses in the first half of 2025 [5][7]. Strategic Initiatives - Kingdee has increased its marketing efforts and raised sales and promotion expenses significantly over the years, with expenses reaching approximately 2.503 billion RMB in 2024 [7]. - The company has been investing in research and development, with R&D costs amounting to approximately 776 million RMB in the first half of 2025, a decrease of 3.9% year-on-year [7]. - Kingdee's cloud transformation has been ongoing for over a decade, with cloud service revenue now accounting for 81.6% of total revenue [8]. Market Position and Challenges - Despite the growth in cloud subscription revenue, which was approximately 1.684 billion RMB in the first half of 2025, the growth rate has shown a decline over the years [8]. - The company has established an international business department and expanded into the Middle East, but overseas revenue remains low, accounting for only 1.3% of total revenue in the first half of 2025 [8]. - Kingdee's stock price fell by 8.41% to 16 HKD per share following the mid-term performance announcement [3]. Shareholder Activity - On August 4, 2023, BlackRock reduced its stake in Kingdee by selling 2.791 million shares at an average price of 18.4159 HKD per share, amounting to approximately 51.4 million HKD [9].

Kingdee International Software Group Company (00268) H1 2025 Earnings Call August 11, 2025 10:00 PM ET ModeratorDistinguished investors, analysts and our friends from the media, good morning, and I'd like to welcome you to join us for 2025 interim result announcement. First of all, please allow me to introduce the management team with us here today, Mr. Xu Xiaochuan, Chairman of the Board and the CEO of the company. Zhang Yong, the President of QNT. Executive director and the CFO of the company, Mr. Lin Bo, ...

Financial Data and Key Metrics Changes - In H1 2025, revenue increased by 11.2% year-over-year, reaching RMB 3,192 million [4] - The gross profit margin grew by 2.4%, reaching 65.6% [7] - Operating cash flow was significantly decreased, but the company expects it to exceed RMB 1 billion for the year [10][38] - The loss from the same period last year was reduced from RMB 280 million to RMB 98 million [10] Business Line Data and Key Metrics Changes - Cloud subscription revenue grew by 22.1% year-over-year, with an annual recurring revenue (ARR) growth of 80.5% [13] - The contract liability of cloud subscriptions increased by 24.7% [13] - The gross profit margin for cloud subscriptions was 96.2%, a 0.9 percentage point increase compared to last year [13] Market Data and Key Metrics Changes - The company reported that cloud subscription revenue now accounts for over 50% of total revenue, with a significant contribution from the Kinky Cloud and Constellation platforms [16][23] - The net total retention rate for Constellation subscriptions was 108% [15] Company Strategy and Development Direction - The company is adjusting its strategy to seek more opportunities while controlling internal risks, particularly in the context of persistent macroeconomic challenges and the rise of artificial intelligence [3] - The focus is on transforming from a traditional one-time license model to a subscription-based model, emphasizing cloud services and AI integration [21][24] - Future plans include strengthening SaaS offerings and expanding AI capabilities, with a goal for AI revenue to account for 30% of total revenue by 2030 [39][68] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the volatility of the external environment but expressed confidence in achieving profitability and strong cash flow growth in the coming years [12][96] - The company aims for a sustainable margin of around 8% and expects to maintain a high gross profit margin due to the growth of the subscription business [97] Other Important Information - The company has introduced various AI-powered products, receiving positive feedback from clients, particularly for the Gold Key financial report analytics app [48][49] - The company is actively expanding its international presence, with plans to consolidate its foothold in Southeast Asia and the Middle East, and aims for international revenue to reach 5% to 10% of total revenue in the next three to five years [104] Q&A Session Summary Question: What is the trend of demand for large, medium, and small enterprises? - Management noted that large enterprises are integrating their business lines for better supply chain management, while medium-sized enterprises seek faster deployment and lower costs [42][44] Question: What is the pricing model for AI products and customer feedback? - The company received positive responses for AI products launched in May, with large companies interested in pilot testing and mid-sized companies needing full systems [43][46] Question: What is the sustainability of the cloud business transformation? - Management expressed confidence in sustainable growth, with a target for subscription business to increase from 50% to 80-90% of total revenue [70] Question: What are the plans for international business? - The company plans to localize products for different regions and aims to expand into Africa, Europe, and Japan starting in 2026 [77][104] Question: How will team optimization impact project implementation? - Management clarified that team optimization aims to improve efficiency without sacrificing customer experience, with implementation services being outsourced to certified partners [58][60]