KINGSOFT(03888)2024-05-23 15:25Financial 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]