KINGSOFT(03888)2023-11-22 01:57Financial 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]