Release Date: November 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kingsoft Corp Ltd (FRA:3K1, Financial) reported a strong revenue growth of 42% year on year and 18% quarter on quarter, reaching RMB2.915 billion.
- Operating profit hit a record high of RMB1.14 billion, marking a 204% increase year on year and a 44% increase quarter on quarter.
- The Kingsoft Office Group maintained its leadership in domestic office software, with a 17.2% year on year increase in domestic individual office subscription revenue.
- The gaming business showed robust performance, with a 78% year on year increase in revenue, driven by the success of JX3 Online and JX3 Ultimate.
- The company has a strong cash position with RMB25 billion in cash resources as of September 30, 2024.
Negative Points
- R&D costs increased by 28% year on year and 60% quarter on quarter, primarily due to increased headcount and performance-based bonuses.
- The company recorded other losses of RMB63 million for the quarter, compared to gains in the previous year.
- Share of losses from associates increased to RMB428 million, up from RMB307 million in the third quarter of 2023.
- Despite strong revenue growth, the net profit margin excluding share-based compensation costs was only 16% for the quarter.
- There is uncertainty regarding future shareholder returns, as the company has not yet decided on dividend enhancements.
Q & A Highlights
Q: Regarding the gaming business, what is your view on its growth resilience in the upcoming quarters? Could you also share your outlook on the individual and institutional business within the office software sector?
A: (Tao Zou, CEO) We have three to five games in the pipeline for next year, with three already certified. Our office software business is focusing on AI enhancements to improve user experience and increase customer engagement. Institutional subscriptions are seeing strong growth, particularly with WPS 365 offerings.
Q: Has the office software business felt the recovery brought about by the improvement of the macro environment? Does WPS AI product and commercialization progress meet expectations?
A: (Tao Zou, CEO) The macro environment recovery is benefiting us, especially with government investments. Our AI products are meeting expectations, and we are focusing on incremental improvements to enhance customer experience.
Q: What are the prospects for office software and gaming businesses to expand overseas?
A: (Tao Zou, CEO) Our overseas gaming revenue is increasing, with significant growth potential in markets like Southeast Asia. For office software, we see strong growth potential, especially in the PC segment, despite not having focused on it during the COVID-19 period.
Q: What are the reasons for the strong performance in terms of profits?
A: (Li Yi, Acting CFO) The strong profit performance is driven by the exceptional results of JX3 Online, particularly during its 15th Anniversary celebration, and the efficient cost management in our gaming operations.
Q: Could you give us some guidance on the game business for Q4 and next year? What about the losses of affiliate companies?
A: (Li Yi, Acting CFO) We expect annual growth of around 30% in the gaming segment. We have five games planned for next year, which are generating excitement in the market. Regarding affiliate losses, we anticipate some one-time impacts but are managing these strategically.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
