Good day, and thank you for standing by. Welcome to the Q1 2024 Kingsoft Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Yinan Li, IR Director of Kingsoft. Please go ahead. Thank you, operator. Ladies and gentlemen, good evening and good morning. I would like to welcome everyone to our 2024 first quarter earnings call. I'm Yinan Li, the IR director of Kingsoft. I would like to start by reminding you that some information provided during the earnings call may include forward-looking statements, which may not be relied upon in the future for various reasons. These forward-looking statements are based on our information and information from our sources, which we believe to be reliable. Please refer to the other publicly disclosed documents for detailed discussion on risk factors, which may affect our business and operations. Additionally, in today's earnings call, the management will deliver prepared remarks in both Chinese and English. A third-party interpreter will provide a consecutive interpretation into English. During the Q&A session, we will accept questions in both English and Chinese, with alternating interpretations provided by the third-party interpreter. On-site translation is solely to facilitate communication during the conference call. In case of any discrepancies between the original remarks and the translation, the statements made by the management will prevail. Having said that, please allow me to introduce our management team who joined us today, Mr. Tao Zou, our Executive Director and CEO, and Miss Yi Li, our Acting CFO. Now I'm turning the call to Mr. Tao Zou. [Foreign language] Hi, now we are turning the call to translator. Yes. So we are come to our achieving double growth in both total income and profit in the first quarter. The total income amounted to CNY 2,136 million, representing a year-on-year increase of 8%. The operating profit amounted to CNY 602 million, representing a year-on-year increase of 31%. The attributable to shareholders of the parent company amounted to CNY 280 million, representing a significant year-on-year increase of 48%. In particular, the revenue of Kingsoft Office Group reached CNY 1,225 million in the first quarter, representing a year-on-year increase of 16.5%. The revenue generated from the games business and other amounted to CNY 912 million. Now, I would like to summarize our performances in the first quarter of 2024. In this quarter, Kingsoft Office Group has maintained it's a solid operation, focusing on the strategy of multi- screen, cloud, content, collaboration, AI. Kingsoft Office Group continued to invest in R&D of collaboration and AI, and strengthened the competitiveness of its products through technical innovation, product integration, performances, enhancements, other initiatives. For the first time, the MAUs of our key products exceeded 600 million and reached 602 million, representing a year-on-year increase of 2.2%, of which the number of monthly active devices of the PC version product amounted to 270 million, representing a year-on-year increase of 7.1%. In terms of individual subscription, we have continuously enriched membership benefits to enhance user stickiness and paying conversion, and realized the revenue of CNY 734 million in the quarter, representing a year-on-year increase of 24.8%. The pricing of the WPS AI product was announced at the end of March, which is under gray box testing, marking its initial steps towards commercialization. In terms of institutional subscription, we have continued to improve the product offerings, enhance the service experience, broaden their eco-channels, and actively promoted application of the cloud and collaboration in office with the sales module of institutional subscription, entering the stage of transformation, achieving the revenue of CNY 242 million in this quarter, representing a year-on-year increase of 13.6%. In terms of institutional licensing, the institutional licensing business achieved growth, driven by increased purchase orders on localization solutions. We achieved the revenue of CNY 194 million in the first quarter, representing a year-on-year increase of 6.31%. To align with development trends of application of the cloud and positions. On April 9, we launched the upgraded new quality productive force in Office WPS 365, covering the upgraded WPS Office, WPS AI for enterprises, and WPS Collaboration, offering a one-stop AI office solution for users. The WPS AI Enterprise Edition, designed it as an enterprise brand for client. Intelligent document library and Copilot for enterprise smart assistants. AI Hub reduces the threshold for enterprises to deploy large modules and integrates the AI capabilities of mainstream large modules in China, such as MiniMax, Zhipu AI, Ernie Bot, SenseNova, and Qwen. Our position in the field of large models is the application provider, and we have accommodated hundreds of models in China to achieve the basic AI services out of the box, which also allows users to overcome the difficulties in the selection of large models, and greatly reduces the threshold for use. AI Docs solves, absorbs the user's pain points of digital asset management, transferring the traditional cloud document library into an intelligent document library through one-click upgrade. So that the source of the intelligent collection has a basic, and the completed document authorization system guarantees that the information is not overstepping the authority. Copilot Pro can automate tasks through natural languages, optimize users' workflow, help operational staff to analyze data using BI products driven by natural languages, and use WPS 365 API, APIs, and enterprises-owned APIs to address the new, the needs for office automation. WPS AI for enterprises provides feature support for customers to improve their collaboration efficiency, manage their R&D projects, and set up low-cost approval processes, et cetera. In terms of online games business, under the overall guiding principle of prime game strategy, we focuses on cultivating and expanding the classical JX series, and actively exploring new market segments, so as to venture into innovative game genres. To flagship game, JX3 Online showed strong vitality, maintaining steady development. They conducted multiple rounds of testing the mobile version of JX3 Ultimate for research, elaboration, adjustment, and optimization with users, so that the game quality continues to improve. The game will be launched in June, which will bring about multi technical integrated experience for players. Achieving accessibility of JX3 Online, our flagships through all platforms, while deeply involving the cultivation of the martial arts genre. We have also made incremental progress in exploring new game genres. Since the official launch of the anime shooter game, Snowbreak: Containment Zone, on July 20 last year, we have adhered to the tenet of putting users first, engaged in sincerely co-communication with users to other product experience, attached great importance to user feedback and suggestions. After improving its graphics and gameplay, so the number of the active users and income in the first quarter achieved a significant quarter-on-quarter growth, indicating a continuous rise in popularity. The sci-fi main game, Mecha Break, has received the license approval in March 2024, and has been tested and continuously optimized in mainland China and overseas regions. It has still been ranked in the top 100 of Steam wish lists since it was first exposed last December, attracting exclusive interviews for internationally renowned gaming media such as IGN, PC Gamer, and Famitsu. Looking ahead, Kingsoft Office will continue to adhere to the strategy of multi-screen, cloud, content, collaboration, AI, firmly invest in AI and elaboration and development, and continuously explore the application of WPS AI in office scenarios in various industries. In terms of online games business, we will certainly adhere to the strategy of producing prime games, and strive to achieve effective implementation of the strategy of expanding new genres. We will continue to actively listen to the voices of players, striving to provide better gaming experience. Also, we will remain dedicated to the product's philosophy of putting users first, being technology-based, upholding innovation. Strive to create sustainable and long-lasting value for our customers, shareholders, and employees. Now, let's give it up for Mrs. Yi Li to present financial results for the first quarter 2024. Thank you. Thank you. Good evening, everyone. I will now discuss the first quarter financial results. Use RMB as currency. Revenue increased 8% year-on-year and decreased 7% quarter-on-quarter to RMB 2,137 million. The revenue split was 57% for office software and services, and 43% for online games and others. Revenue from the office software and service business increased 17% year-on-year, and decreased 5% quarter-on-quarter to RMB 1,225 million. The year-on-year increase was mainly due to the growth of domestic individual office subscription business, institutional subscription business, and institutional licensing business of Kingsoft Office Group, partially offset by the decreased internet advertising business. The growth of domestic individual office subscription business was mainly attributable to the increases in both the user stickiness and the paying ratio, resulting from enriched membership benefits. The growth of domestic institutional subscription business was mainly because we continuously promoted the transformation to a subscription model at the launch of the WPS 365, the new productive forces in office. The increase of institutional licensing business was mainly driven by purchase orders on localization solutions. The decrease of internet advertising business was mainly due to the shutdown of our domestic third-party advertising business at the end of 2023. Revenue from the online games and others business decreased 1% year-on-year and 11% quarter-on-quarter to CNY 912 million. The slightly year-on-year decrease was primarily due to a natural decline in revenue from certain existing games, partially offset by revenue contribution from titles released in the second half of 2023. The quarter-on-quarter decrease mainly reflected the natural decline of certain existing games, partially offset by the growth from proactive operation of the anime short game, Snowbreak: Containment Zone. Cost of revenue increased 50% year-on-year and decreased 4% quarter-on-quarter to CNY 396 million. The year-on-year increase was primarily attributable to cloud, server, and bandwidth costs, as well as higher service costs of institutional clients, both of which were associated with the business growth of Kingsoft Office Group. Gross profit increased 7% year-on-year and decreased 8% quarter-on-quarter to CNY 1,741 million. Gross profit margin decreased by 1 percentage point year-on-year and quarter-on-quarter to 81%. Research and development costs increased 8% year-on-year and 4% quarter-on-quarter to CNY 713 million. The year-on-year increase primarily reflected the continued investment in AI and collaborative products and service of Kingsoft Office Group. Selling and distribution expenses decreased 26% year-on-year and 31% quarter-on-quarter to CNY 261 million. The decreases mainly reflected declined promotion spending on online games. Administrative expenses increased 7% year-on-year and decreased 6% quarter-on-quarter to CNY 160 million. The year-on-year increase was mainly due to personal related expenses of Kingsoft Office Group. The quarter-on-quarter decrease was largely due to a one-off expense in the fourth quarter of 2023. Share-based compensation costs increased 5% year-on-year and decreased 1% quarter-on-quarter to CNY 76 million. The year-on-year increase was mainly due to the grants of awarded shares to the selected employees of certain subsidiaries of the company. Operating profit before share-based compensation costs increased 27% year-on-year and decreased 14% quarter-on-quarter to CNY 678 million. Net other losses were CNY 4 million for this quarter, compared with gains of CNY 44 million and CNY 80 million for the first quarter and fourth quarter of 2023, respectively. Share of losses of associates of CNY 169 million were recorded for this quarter, compared with losses of CNY 231 million and CNY 286 million for the first quarter and the fourth quarter of 2023, respectively. Income tax expenses increased 53% year-on-year and decreased 66% quarter-on-quarter to CNY 42 million. As a result of the reasons discussed above, profit attributable to owners of the parent was CNY 285 million, compared with the profit of CNY 192 million and CNY 205 million for the first quarter and the fourth quarter of 2023, respectively.... Profit attributable to owners of the parent, excluding share-based compensation cost, was CNY 329 million, compared with a profit of CNY 236 million and CNY 257 million for first and fourth quarter of 2023 respectively. The net profit margin, excluding the effect of share-based compensation cost, was 15%, 12% and 11% for this quarter, the first quarter and the fourth quarter of 2023 respectively. The group had a strong cash position towards the end of the reporting period. As at March 31, 2024, the group had cash resources of CNY 23 billion. Net cash generated from operating activities was CNY 329 million, CNY 363 million, and CNY 1,734 million for this quarter, the first quarter, and the fourth quarter of 2023. Capital expenditure was CNY 150 million, CNY 80 million, and CNY 131 million for this quarter, the first quarter and fourth quarter of 2023. That's all for the brief on our first quarter operational and financial results. Thank you all. Now, operator, we are ready for the Q&A section. Thank you. Thank you. As a reminder, to ask a question you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by while we compile the Q&A queue. Our first question comes from the line of Xiaodan Zhang from CICC. Please go ahead, your line is- [Foreign language] So thanks management for taking my questions, and I got two questions here. So first is regarding the gaming business. The new version of Containment Zone launched in April has become a hit in the market. So how should we think of its performance going onwards, and what is your operational strategies for the anime game sector? And second is on WPS AI. So could you please update us with the commercialization progress of your individual oriented products as well as the enterprise version? Thank you. [Foreign language] I think this, this, but today at the meeting I also expressed my viewpoint. I said this is since Jianxia Qingyuan Three. I said our entire Xi'an district in a new category's success, and it is in a new category, after going online, through continuous making friends with users, continuous improvement, continuous iteration optimization, taking a game and starting to do it again from the beginning, making it successful another example. This should be said to be considered as advancing this, this, this game milestone another monument. Okay, this is the game side. Please translate it. Hi, translator, please translate for Mr. ZOU. OK, so actually from this angle perspective is that we constantly is kind of improve ourselves, and so this afternoon we just finished the meeting with the Kingsoft board of directors at the board meeting and talk for this question. We also have raised this, so today during the call, CFO, the Mr. Chris is on site. So our conclusion is that according to the Chris feedback, he thinks that we're going to continue to do it. It's not just a short time, we're going to make it as a long term. We got to constantly to ask ourselves and our team actually for this eight years of the development we have to get into the third generation. From this, initially, we started to do this game, to this publishing and until we have so many games comes out, we're going to have this eight years of this exploration and experience collection. We believe that for the game industry, the competition is quite heavy, but we probably can see is that we have find a dedicated classification, which is suitable for us. We have the confidence that in this trial, currently we are quite competitive enough, which is kind of showing from the data of April and May, which can prove ourselves. Also for this whole total annual income, we also have an update. We're going to have a very big increase and we got to do some adjustments, which we can think that probably we can make it around 10% of increase compared with the... If, of course, the other game is going to launch in time, so the results will be much better. From the strategy perspective, last year, since the game has launched, the 20th last July, we constantly to cooperate to communicate with our clients, with players, especially from this February. We have listened the suggestions and ideas from the players, and this year we our team has found the true feeling that we need to base on those users to continue to do the optimization. So we need to firstly make friends with our users and then constantly have different generations comes out to optimize it constantly. So this is we can see that this kind of a milestone for us. [Foreign language] OK. So actually from this WPS AI is, C-end's progress and also the strategy from this gray scale testing, we have make a conclusion that we have realized our expectation. If we need to expand it to describe it like from this the users module, and also the AI scenarios application, and also for this activities for the users to stick with the AI, which has realized our gray testing expectation. But we will still spend a very long time, especially for this customer experience, to have different function optimized. We're going to constantly to optimize it, including that some different optimization for different scenarios. From this C-end call point, we think that we already have some existing customers, and then we would like to have a deep connection with them to have a innovation together. So what does that mean is that we all know that for the AI big module, since this comes out into the market the last year, for this C End, we have discussed quite a lot, it's like AIGC or whatever, these type of things. So from the C End perspective, we constantly to have practice, and also for the B End, for the enterprises, how they're going to use it? For the whole industry, we are constantly trying to understand it, trying to touch it, to get into a certain perspective. But we believe that for the big module, for this enterprises, they gonna have some value added, it's going to be very powerful, but which is going to be the correct road for it? And in the future, how we going to use this big module to make the small module, to have the industrial module, to have these private customers scenarios to integrate them together. So from last Q3, we have discussed with our customer that we need to create together. We already have some practices, so we're going to have some localize it. So from the B End perspective, we think that we're going to have the communication with our customers together, target for this big module to have this creation together. So generally speaking, that for the B End, what exactly the industry is going to have a very good future, a very good result is, is hard to say, but for the AI industry to have some value added, it's going to be a very big trend, and the market will be very big. Operator, we are ready for the next question. Thank you. Please stand by. Our next question comes from the line of Linlin Yang from Guangfa. Please go ahead, your line is open. [Foreign language], my first question is about the growth of game. Can you break down the 10% growth for us? How much incremental growth does Snowbreak: Containment Zone, JX3 Ultimate, each contribute? My second question is about the dividend and share buyback. As the bottom line tends to improve, will you consider to increase the amount of the dividend payout and share buyback? Thank you. [Foreign language] OK, so actually for this, Chen Bai and Jian Wang 3 is, is for this contribution for our growth, we need to discuss it from different perspective. If for this the income and also the profit, of course, Chen Bai is are being met and also Jian Wang 3, which is going to be better. The reason is that for the Jian Wang 3 is going to be an RPG game, from this test perspective, we believe that the focus, the future is going to be much better. But for this Jian Wang 3, which is the Wu Jie is the mobile version for this total users quantity for this, the Kingsoft the game is going to have a much bigger percentage from this the financial feedback, and also for Chen Bai is going to be much better. So the Kingsoft users to the quality, we think that for Jian Wang 3, which is going to be much better, which this is according to our expectation. OK, the second question, yeah, is that actually, like you said, our overall distributor side profit is indeed improving. The main reasons, first, are that both Office and games, their revenue and profit, their growth are relatively good. Second, it is also true that Cheetah Mobile and Kingsoft Cloud's own losses are narrowing, are narrowing. So, overall, when you put it all together, as Kingsoft Corporation Group, from this perspective, the profit, this improving trend, yes, it has indeed already emerged. OK, what you just asked about is the strength of the buyback. Actually, we just finished the board meeting today, and just did an approval for the new share buyback quota. Currently, the board authorization is HKD 1 billion, HKD 1 billion for this quota. In fact, last year, last year we bought back HKD 310 million, right? Of course, regarding the buyback topic, I still want to express my view, which is, I may have talked about this in previous occasions, that we, we, we definitely believe that the current valuation of Kingsoft Corporation is seriously undervalued. Yes, this is actually a question we answer every Q. So, however, the overall market environment is also a factor we consider, just, just, just, just, if the overall market environment, if the trend is improving, then our, our, our, our buyback strength and frequency may be relatively lower. On the other hand, if it further deteriorates, then our buyback strength and frequency will be relatively higher, right? So, I am also being very candid with everyone here. In fact, this is also what we have done in the past. So, in summary, there are really two points. Overall, right now, it is definitely seriously undervalued, but in fact, the frequency and strength of the buyback still depend on the overall environment. OK, please translate. So from this actually the profits of the entire Kingsoft, Kingsoft where the whole group from this the office and also game, the goods performances is quite good. And also for Cheetah and Kingsoft, this type of the products we have for this reduction of the losing. So from this Kingsoft group, the whole profit is going to get into a better performances. And also for the repurchase intensity, and because today we have the board of meeting and also discussed about the total amount of this the stocks, so we can the, the board of director have the board of meeting has authorized of the HKD 1 billion this amount, and last year the total the repurchase limit is going to be this HKD 310 million. So regarding this topic, my opinion is that I think currently for this Kingsoft, Kingsoft Group, our whole evaluation has been reduced quite a lot, has been evaluated quite low, because every Q we going to answer this question. The whole market situation is a very important part we need to consider. If the whole market is going to get into a better performances, then of course the repurchase amount limitation, the no matter for the amount and also for the frequency, is going to be higher. But if the whole economy of this whole market is going to be getting worse and worse, then our repurchase limits quantity and also the frequency will be higher. So this is just a very frankly view to express myself. So comparatively speaking is that, so comprehensively for the conclusion is that our evaluation has been considered lower than the market, and also for this repurchase limit, mean the total amount and also the frequency is depends on the whole market. operator, we are ready for the last question. Thank you. Please stand by. Our last question comes from the line of Bing Duan from Nomura. Please go ahead, your line is open. [Foreign language] Thank you, management, for giving me the opportunity for the last question. So, a follow up on AI, how do you think about the competition landscape? First, the large language models' pricing is declining. Will that affect our WPS AI's cost positively? The other one is how do we think about other like Copilot, Microsoft's Copilot product or Kimi Chat in China will affect the competition landscape for WPS AI. Thank you. OK, [Foreign language] So from this industry, that is correct, that's for this Wenxin, and also their, like, their cost is quite low, and also for Alibaba and Baidu, they are also followed up with the Tongyi. For this Kingsoft Office perspective, we are actually the portal to explore their third parties, and also we are charging for these members, for our users from the AI perspective. So for the model itself, of course, the cost is gonna be decreased, that is gonna be good for us. But if we're gonna really explore this whole situation to make sure that the cost is lower from this price to the users, and also from this great task, we also have to do the adjustment of quality to reduce the price, and this is only for the office itself. From this industry perspective, lastly, we have already got that. Everybody is trying to do it because they are trying to get a lower price to grab this market. And finally, everybody is thinking that it is impossible that we're gonna have such a lot of the big models existing. I personally think that one or two big models existing in the market should be good enough. In the third one is probably not possible. And also for this is very similar like the search engine. And so the search engine initially is supposed to be a very heavy competition, but currently, and there's only one company or several companies existing in the market, and also for like a comprehensive media's competition, is also the same thing. It's like there's a, the TikTok and also the Toutiao. They are the, they are the C one or two very big ones. This is from a C perspective. Of course, from B perspective, it's different. Different industries have different models. From the AI perspective, my understanding is that for the Office products, the AI competition is quite hard. We are discussing about this, the two companies. One is for the software, the other is for the teams. Actually, these are internal discussions. We are not worried about Microsoft yet. Up till now, even we are doing this Office AI, value added, we are not later than Microsoft, especially after so many years development. Up till today, we have a very solid customer foundation. Our AI have a very quickly updating for the Chinese market. We are not worried about that. And also for the Kimi, this is a very, like hot topic. We are also just discussing it. Kimi is actually our partner. My understanding is that it is different than WPS. This is different product type. My understanding is that for this Kingsoft, we have three main parts: the AIGC, the Cloud, and Insight. And we have this, the documentations, Excel, PowerPoint, et cetera, to have the multiple documentations profile. And we, for Kimi, that is mostly like, like insight, reading, understanding. Of course, their AIGC is quite strong, but for WPS, it's based on this document. We're gonna have this innovation for the document, sharing, collaboration to have the value added, value function added. So probably everybody is thinking that we are competitors. It's like Visio privacy, but actually we are completely different. WPS is kind of addition for the document, just sharing, the reading and top discussing for this topic, and for the office thing, it's become everybody thinks that it's gonna be a competitors. But my, our perspective, our understanding, and our idea is that Visio is different. We are definitely much better than Visio, but Office, this is a very general concept. So basically is that we're gonna based on this, the Office, to have some collaboration, to have the creation for the boards, and we're gonna have using the digital platform. Right now, AI is coming, so we're gonna have AI to value add on it. In that case, it's gonna be easier for us to have a division of different products. So Kimi would like to cooperate with us, with us, so they would like us to do this, the addition for this documentation. So while we are partners, we are not competitors. Hi, thank you for joining us today, and this will conclude our Presentation for the 2024 First Quarter Earnings Call. Thank you. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.