Kingsoft Corp Ltd Adr

good day and thank you for standing by welcome to the 2023 fourth quarter and annual 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 this session you will need to press star 1 and 1 on your telephone you will then hear an automated message advising your hand is raised To withdraw your question, please press star 1 and 1 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. Please go ahead.

Thank you, Operator. Ladies and gentlemen, good evening and good morning. I would like to welcome everyone to our 2023 fourth quarter and annual results earnings call. I'm Li Yinan, the ad 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 reliable in the future for various reasons. These forward-looking statements are based on our information and information from other 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 consecutive interpretation into English. During the Q&A session, We will accept questions in both English and Chinese with alternating interpretation 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 statement made by the management will prevail. Having said that, please allow me to introduce our management team who joined us today. Mr. Zhou Tao, our executive director and CEO, and Ms. Li Yi, our acting CFO. Now, I'm turning the call to Mr. Zhou.

Hello, everyone. In 2023, the overall business of the Group will maintain a steady growth. We actively promote core business for sustainable development in the future. to build a solid foundation. Jinshan Office Group continues to invest in the development of AI and co-operative fields around multi-level, cloud, content, cooperation, and AI strategies, using the integration of large models to continue to provide better office experience for users. WPS AI completed the backup in the fourth quarter and officially launched the project, further enhancing the new scene of the smart office, to develop the user's AI office habits, to open up the user's smart office experience, and to build a good foundation for the subsequent promotion of the commercialization process. At the same time, at the beginning, we continue to explore with our leading customers how PSAI can be implemented in the current office scene, such as providing AI machine generation in the public domain, individualized knowledge storage, data, intelligence analysis, and other services. Promote new generation office software to speed up delivery, achieve new productivity, and actually land in the office scene of thousands and hundreds of pages. Network game business, stick to the elite strategy. At the same time as growing the martial arts game category, there is also a gradual progress in the exploration of new channels. In 2023, the company's business lines will continue to grow steadily. The company's total revenue of RMB85.3 billion will increase by 12%. The office software and service business will maintain a stable business status. Under the guidance of domestic personal and institutional subscription business growth, the annual revenue of RMB45.6 billion 17% increase in net game and other business revenue, RMB 3.9.8 billion, a 6% increase in net profit, mainly due to the strong growth drive of Jianwang 3. In 2023, the operating profit of this group, RMB 22.3 billion, a 19% increase in net profit, Hello everyone.

In the year 2023, the group's overall performance maintained solid growth despite challenges. We actively promoted our co-business to lead a solid foundation for sustainable development in the future. Focusing on the strategy of multi-screen, cloud, content, collaboration, and AI, King's Soft Office Group continued to invest in R&D of AI and collaboration and strengthen the competitiveness of our project through technological innovation, project evaluation, performance enhancement, and other initiatives. In terms of online games business, we adhere to the original intention of creating Prime games and insisted on long-term operation. As developing Wuxia games, we are also making incremental progress in exploring new game genres. In 2023, the group's business demonstrated growth resilience with the group's total revenue of RMB 8,534 million, representing a year-on-year increase of 12%. The office software and service business maintained solid operation with annual revenue of RMB 4,557 million, representing a year-on-year increase of 17%, driven by the growth of domestic individual and institutional subscription businesses. Revenue from online games and other business amounted to RMB 3,977 million, representing a year-on-year increase of 6%, mainly driven by the strong growth of GX3 online. Operation perfect of the group amounted to RMB 2,227 million in 2023, increasing by 90% year-on-year. These results reflected our efforts to adhere to the technological driven businesses, continuously invest in product and technology, and adhere user experience. Now, I'm going to turn the call to Ms. Li Yi.

Thank you. Good evening and good morning, everyone. Keysoft Office Group has released DoubleCase AI, an intelligent office application powered by large language models, focusing on the development of three strategic directions, AI-generated content, copilot, and insights. DoubleCase AI officially launched public beta testing in the Chinese mainland in the fourth quarter, laying a solid foundation for further commercialization. We have also upgraded the WPS office to improve user experience. In addition, we continue to improve the end-to-cloud integration experience and enhance user activity in the cloud. When adhering to long-term membership strategy, we have upgraded the membership benefits structure, launched the super membership system to meet the needs of corporate users through a flexible combination of benefits. For institutional customers, we have upgraded WPS 365 new productive forces in Office to provide content creation, Office collaboration, open ecosystem, and digital asset management capabilities. We continue to promote the end-to-cloud integration and collaboration process, and focus on the business scenarios of government and premium customers of state-owned and private enterprises. We deepened product capabilities to serve industries such as finance, transportation, energy, publishing, healthcare, consumer retail, high-end manufacturing, and internet. Incubated secure and efficient solutions that can be applied across the industry and continue to replicate typical cases for widespread adoption. Meanwhile, we have been continuously collaborating with premium customers to explore feasible solutions for the implementation of WSAI in government and enterprise office scenarios to advance its application in various industries and office data. In the field of public cloud service, we encourage customers to use cloud and collaboration applications enabling them to manage their digital assets and expanded market reach with China partners. By highlighting the features of our products, we attracted enterprise customers and increased the use engagement and payment retention. We have closely monitored the localization industry policy changes and customer demand, and taking the initiative to tap local government markets in advance. Under the localization industry, starting from the replacement needs of the customers, such as finance, energy, and operators, we promoted the adoption of the new license mode and deepened the cloud and collaboration office process. We put users first and officially shut down our domestic third-party advertising business in December 2023. In terms of overseas business, based on our solid foundation in the mobile sector, we continue to cultivate our user base on desktop platforms. Looking ahead, Kingsoft Office Group will continue to focus on AI and collaboration, further polishing the products and provide high quality AI collaborative office products and services to individual and institutional users. In 2023, the online games business saw steady growth. The flagship game, GX3 Online, demonstrated resilience and strong mentality. It has been in operation for 14 years and achieved a record high in annual revenue. GX3 Online continued to iterate and release new expansion packs with upgraded graphics, providing players with more diverse and enriching gaming experience. World of Sword Origins was successfully launched in Vietnam and Chinese Mainland, attracting dedicated players with its classic game player and athletic appeal, which also contributed to the global reach of traditional Chinese countries. The global release of the anime shooter game Snowbreak Containment Zone expanded the user base of anime and overseas markets. The sci-fi-made game Metro Break made its debut at the Game Awards at the end of the year, gaining widespread attention from the international market for its art design and innovative gameplay, eagerly awaited by global players. Looking forward to 2024, the release of GX3 Ultimate will offer players brand new experience across multiple platforms. We will continue to expand into new genres refined sci-fi game Metro Break, and continuously optimized anime game Snow Break Containment Zone. As for the financial results, starting from Q4, use RMB as the currency. Renew increased 9% year-on-year and 12% quarter-on-quarter to $2,310 million. The revenue split was 56% for office software and services, and 44% for online games and others. Revenue from the office software and service business increased 80% year-on-year and 70% quarter-on-quarter to $1,286 million. These increases were mainly due to the growth of both domestic individual office subscription business and institutional subscription business of Kingsoft Office Group. The growth of domestic individual office subscription business was mainly attributable to the increases in both the paying ratio and average revenue per paying user, resulting from enriched membership benefits and upgraded membership system. The growth of institutional subscription business mainly benefited from the increase in cost reduction, efficiency improvement, and digital transformation needs of government and enterprises. as well as optimization of products and services to improve the intelligent office experience and accelerate auto-commercial. Revenue from online games and other business kept flat year-on-year and increased 7% quarter-on-quarter to $1,024 million. The quarter-on-quarter increase was primarily driven by the revenue contribution from World of Thought Origins, released in Chinese mainland in September, partially offset by decreased revenue from certain existing gaps. Cost of revenue increased 11% year-on-year and 8% quarter-on-quarter to $414 million. The increases were mainly due to higher server and bandwidth costs, along with the business expansion of the consort office group. Gross profit increased 9% year-on-year and 30% quarter-on-quarter to $1,896 million. First profit margin kept flat year-on-year and increased by 1 percentage point quarter-on-quarter to 82%. Research and development costs increased 4% year-on-year and 2% quarter-on-quarter to $685 million. The increases were mainly due to increased head counter and personal related expenses of Keysoft Office Group, reflecting our continuous efforts to improve products and services. Selling and distribution expenses increased 30% year-on-year and decreased 40% quote-on-quote to $377 million. The fluctuations mainly resulted from changes in promotion spending of online game business in corresponding quarters. Administrative expenses increased 5% year-on-year and decreased 9% quarter-on-quarter to $171 million. The quarter-on-quarter decrease was mainly due to decreased personal related expenses. Share-based compensation costs increased 28% year-on-year and 6% quarter-on-quarter to $77 million. Operating profit before share-based compensation costs increased 70% year-on-year and 76% quarter-on-quarter to $792 million. Major other gains for the first quarter of 2023 were $80 million, compared with losses of $42 million for the first quarter of 2022. and gains of $18 million for the third quarter of 2023, respectively. Share of losses of such as were $286 million for the fourth quarter of 2023, compared with losses of $256 million and $307 million for the fourth quarter of 2022 and the third quarter of 2023, respectively. Income tax expense decreased 13% year-on-year and increased 187% quarter-on-quarter to $126 million. As a result of the reasons discussed above, profit attributable to owners of the parent was $205 million for the fourth quarter of 2023, compared with the profit of $48 million and $28 million for the fourth quarter of 2022 and the third quarter of 2023, respectively. Profit attributable to owners with a parent excluding share-based compensation costs was $257 million for the fourth quarter of 2023, compared with profit of $83 million and $69 million for the fourth quarter of 2022 and the third quarter of 2023, respectively. The later profit margin, excluding share-based compensation costs, was 11%, 4%, and 3% for this quarter, the fourth quarter of 2022, and the third quarter of 2023, respectively. Now I'm on year 2023. Revenue increased 12% year-over-year to $8,534 million. Office software and services made up 53% increased 70% year-over-year to $4,557 million. Online gains and others made up 47% and increased 6% year-over-year to $3,977 million. Forth profit margin increased by one percentage point year-on-year to 82%. Operating profit before share-based compensation costs increased 19% year-on-year to $2,541 million. Profit to owners of the parent was $483 million for the year of 2023, compared with a loss of $649 million for the last year. The group had a strong cash position towards the end of 2023, as at 31 December 2023, the group had cash resources of $24 billion. Net cash generated from operating activities was $3,489 million and $2,574 million for the year ended 31 December 2023 and 31 December 2022, respectively. Capital expenditure was $474 million and $509 million for the years ended 31 December 2023 and 31 December 2022. December 2022, respectively. In 2023, our core business has steadily advanced. In 2024, Keysoft Office Group will firmly seize the opportunities of digital economic development and continuously explore the business opportunities of digital office services. We will continue to carry out product innovation and user experience optimization around multi screen, cloud, content, collaboration, AI, to continuously improve service quality and provide individual and institutional users with more efficient and intelligent office solutions. At the same time, we will deepen our presence in the field of Wuxia games and make progress in the new yards of sci-com games, bring players all-new gaming experience. Looking ahead, we will continue to leverage technology, embrace AI, and seize new opportunities to pursue high-quality and sustainable development. Thank you all. With that, let's go to the Q&A session. Hi, operator. We're ready for the Q&A session.

Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We will take our first question. And your first question comes from the line of Xiaodun Zhang from CICC. Please go ahead. Your line is open.

Good evening, Chairman Zhou, Chairman Li, Chairman Yinan. Thank you for accepting my question. I have two questions I would like to ask. The first is about our game business. I saw that last year, our flagship online game has always been very successful. I would like to ask the management to share with us how the data of our flagship online game has been going since the beginning of this year. Based on the current pipeline of a new game, how does the management look forward to a growth goal for the game business throughout the year? And then my second question is that the company currently has a lot of cash in its account. I would like to ask the management to share a plan for cash use this year, especially in terms of shareholder returns. I will quickly translate my question. So thanks, management, for taking my questions. And my first question is on the gaming business. So JX3 Online delivered a strong record in 2003. So what is your expectation for its performance this year and could you please share with us your latest full year guidance for the gaming segment? And secondly, could you please give some color on your plans of cash usage and shareholder returns for 2024? Thank you.

Okay, I'll answer the first one first. The second one, I'll answer a part of it. In general, the game is still stable in Q1. Uh, but we all know that the entire project team, uh, experience, uh, is currently preparing for the launch of this building network 3, so the whole Q1, we don't have the whole game, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, China China China China China China China China China I'm going to take the first question and also I'm going to answer a part of the second question.

Thank you so much of the question. I think in the first quarter of this year, we are having a really stable outlook. Since majorly contributed by the DX3, And since we have prioritized and throwing all of our effort in the DX3 Origins, and all of our team are welcoming the birth or the release of the DX3 Origins. And if we are going to take a look of this year's priority, obviously our priority release is going to be focusing on the release in the fourth quarter of this year, where we are going to see the release of the matcha games and also games, including the Creation of Gold and also the Shadow of Moons. And if we are taking here, we might not be having a quite clear conclusion, since the major focus of this year is going to be concentrated on the performance of the fourth quarter and the performance of the game. We can only quite clear conclusion of the performance of the game after one month of the release.

The second question, I will answer part of it first, and then add the rest. As you said, indeed, the overall face of the Jinshan Software Group is still quite plentiful. How do we think about it? First of all, in the face of the entire development of AI, I have talked about it several times at the meeting. In fact, the Jinshan Software Group not excluding the right time and the right business to make some investments. Yes, I should have said this many times. We have also been exploring, especially in the area of AI and 2B. We have also been exploring. So, this is likely to have a more clear conclusion in the first half of this year.

All right, so the rest of the benefits are added to answer the question. Hello, Xiaobai. As you can see, in our 23 years, the income of the entire company has maintained a steady growth. Our income growth is more than 10%. At the same time, the growth of operating profit is 19%. The operating profit rate has increased by 26% on 24% last year. But as you can see, our operating revenue has actually increased by 36%. The second point is how to improve our shareholder feedback, which is a problem that the board and management have been concerned about for a long time. So from a specific feedback point of view, you can see that in terms of bonus, we still maintain a steady cash bonus every year. In terms of rebates, in fact, since 2023, the company has increased the amount of rebates. Last year, we had about 3 billion in rebates in the market. Of which 2.5 billion is canceled. The other 50 million is the labor of the employees. In fact, in January and February of the previous two months in 2024, the return rate will be greater, which is basically 3.4 billion. In terms of the return rate, we have always been considering how to increase the return of our shares based on the market situation and the financial situation of the company. Thank you so much. Let me take the second question about the cash on our account.

Currently, our cash is affluent. in terms of the whole operations in the Kingsoft office group. But we have kept a proportion of our cash in our account. Since we are facing a rapid development of the artificial intelligence, we are not going to exclude the possible opportunities where probably in the first half of this year, we might be investing in a potential AI-related business, especially in the field of AI-empowered 2B sites. After the first half of this year, we might have a clearer conclusion in that part. Now let me introduce you the performance or the cash figures or index that we have in the year 2023. The year 2023 has witnessed a very stable while solid growth in terms of our revenues, which is growing by 10%. while we have already registered 19% in terms of our profit. And the profit increase ratio has been growing from 24% to 26% year by year. And our cash flow has increased by 36%. And in terms of the dividend, as well as the buyback, which is our commitment to our shareholders, let me talk about the dividend first. we have paid a very stable and solid dividend to our shareholders, and we have always provided a very stable cash dividend to the shareholders. In the field of the buybacks, this year we have planned for 300 million buybacks, where 260 million goes to the shareholders and 5 million goes to the employees. as an incentive to the employees. And in terms of the dividend and buybacks this year, we are going to grant the number according to the performance of the market, as well as the cashes in our account. And currently, what I have at my hand is the first branch of the dividend. We are planning to have RMB 1 billion dividend. But the concrete figure is going to be decided by the actual situation in the market. And we are going to disclose the number at that time. Thank you so much for your question.

Thank you. We will take our next question. The next question comes from the line of Linlin Yang from GF Securities. Please go ahead. Your line is open.

Thank you, Mr. Guan. I have a question for Mr. Zhou. Hello, Mr. Yi. I have three questions. The first question is about... I saw that our OP margin has increased by more than 30% in the fourth quarter. How do we look forward to the next 24 years of Open Margin? The second question is about WPS AI. Looking at the current testing situation, can you talk about the current user experience and the deepening of our product functions? And I saw that there was an increase in the number of paid users by the end of the year. What factors drive this? Is it based on the adjustment of our members before? Or is there a change caused by AI? And the continuity of this growth, The third question is about cloud industry. In terms of cloud, have you seen any positive changes in the latest progress in the cloud industry? Including the demand in the industry, which has also been digested in the past year. Is there any positive change in the development of AI? My first question is about the OP margin. We saw the OP margin recovered to more than 30% in Q4. How is the performance should we expect for 2024? The second question is about WPS AI. How is the testing performance? And I saw the growth rate of pain users has increased in the last quarter. What are the main drivers and how should we expect its growth in 2024. The third question is about cloud. What positive change are there in the cloud business recently? And has there been an improvement in industry demand? How should we expect the bottom line in the next year? Thank you.

Hello, Linlin. Let me answer the first question, which is about profitability. You can see from the rejection trend, the second quarter and the fourth quarter have almost exceeded 30%. Then our third quarter should be the lowest point of the whole year. What I actually want to say is that from 2023 onwards, whether it's game business or office business, the profitability has increased. Let's look at 2024. Then the development of AI should still be in the early stages. Whether it's for office work, for games, we have a certain investment in AI. From this perspective, it will have a certain impact on our profits. From a short-term perspective, from a long-term perspective, it is definitely a good status. It will not have too much impact, but our overall operating profit in 2024 will still maintain a relatively healthy and reasonable level. It will not be a level with a 31% difference.

Let me take the first question from you about the operational margin. You could see from the previous record in the Q2 and Q4 of the year 2023, we have registered the operational margin more than 30%, while the Q3 of the year 2023 have witnessed the lowest point across the year. And because in the year, that is to say by the year 2023, the two business sectors of our group, the gaming sector and the office sector, has kept a very good momentum. Well, in the year 2024, we are seeing that we are forecasting the artificial intelligence related field is still at a budding stage where we are going to focus on the investment opportunities both in our office software sector and also in our gaming sector. And this is going to have an impact in terms of the operational margins. where we are going to see in the short term, the operational margin is going to be shrinked, while in the long term, the operational margin is going to be benefited from the current investment. In the year 2024, the operational margin is going to be developed, and a very healthy and reasonable matter, it might not be as high as over 30%.

Let me answer the second question. Last November, We started the test in the middle of October. From the test results, we have achieved our expectations. Of course, as the test broke out, we continued to improve the user's product experience. Anyway, so far, the reaction of the team is basically up to the expectations. What specific product function adjustments have been improved? This is just one sentence or two sentences. It may be that there is no way to explain it to you so clearly. I think tomorrow they will also have a recording in their office. You can go to listen to that person and give him a detailed introduction. All right, I can tell you in general, the test and the improvement of our product have all met our expectations. So in the near future, we will also officially start the cost reduction test. All right, this is about the progress of AI. Second, you also pay attention to the overall number of members. It is still a relatively steady growth. What are the factors that you just asked about? Will it be due to the stimulation of AI itself? My personal point of view is that because of AI itself, we have not yet launched this AI member. So, of course, will it be because some people are aware of this because of the AI function? 我们老后用了我们的产品之后呢 又觉得不错才就付费呢 我觉得是有这可能性的啊 但是呢我们也没办法这个具体 具体来这个这个这个定量的来分析了 啊我就只是有可能所以呢 目前会员数的增长我我个人的观点还是 呃这个本身二ps品这个品牌 这个越来越多的这个办公人群知道老使用了产品之后 Let me take you second question, which is about the WPS AI.

What I can tell you about the WPF AI is that we finished the testing, internal testing of the WPF AI in November 2023 last year, and we have discovered the problems and issues, and we have improved in terms of the different . Our engineers and our working on improving the user experience in the field of the WPF AI, but in terms of the functions, that all the improvement and the final release variant. I'm not going to introduce it with such a very simple matter and I cannot introduce it with one sentence or two sentences on this phone call. I believe tomorrow our colleagues in the office sector, they are also going to have a real show where you can attend and you can also have more understanding towards this field. So what I can tell you about the WPS AI is that we have concluded The testing and we have continuously improving the user experience. The testing and the improvement of the user experience has matched up our expectations and our targets that we set up before. And this is what I want to see about the WPS AI in terms of reasons for the increase of the subscribed users. We are also seeing an increase of the subscribed users in the previous while, but what is the reason behind it? It might be because AI has created some of the highlights on the software related sectors, but we have not released the AI membership. We are not going to, there might be some other reasons that the artificial intelligence might have shifted the focus of the public to us, and that's the reason why they want to pay for our software. But these might not be the mainstream reasons for the increase of the users. Currently, I think the increase of the users might be mainly because the brand appeal of the WPS office. Some of the users, they are office workers who enjoyed our product, and they like it, and they recommend it to their friends and colleagues. That's reason why for our 9.7% year-on-year growth in our PC users.

The third one is the change in cloud business. I think this is a very good question. From my point of view, the first one is definitely the AI. It continued last year's trend, especially the SORA model. This is the whole industry after the Spring Festival. It should be said that this direction and this direction have strengthened confidence. So this is a big change that I feel. The second change is that in fact, in 2024, it should be this data road map. The road map should be the original year. In the third year, the Ministry of Finance issued the draft draft. In the fourth year, the road map was published. I also feel that we need to count on this, especially in this state-owned enterprise, the state-owned enterprise system. I think this should be the future. It will be a very... How do I put it? I want the tree to become the road sign, the tree to become the asset, the tree to become the money. It should be a very popular direction. And this is our concept called the cloud-tree unity. The tree leaves the cloud, or the cloud is the body of the tree. So this will also affect the entire industry, especially domestic. This is mainly domestic. My judgment is also that 有有整对整个行业带来比较大的一个变化 然后第三个呢其实就是 呃运营商这个围绕 cdn 的这块啊 呃叫省间结算啊这个 通俗一点讲啊其实就是 运营商本身这个这个这个还是在涨价 这个可能对整个云行业的竞争也会产生一定的影响我了解到的就是 呃友商这边总体来讲从 From last year's model of price reduction to this year's basic adjustment Anyway, I've been hearing about it recently. I can only hear that there seems to be a possibility of rising prices. Yes, that's me. From my point of view, one is the attitude of this extension of AI. The second is to figure out how this whole process flows and becomes valuable in terms of data assets. Let me answer the third question, which is a question about the cost business sectors.

I believe the artificial intelligence is going to keep its momentum in the year 2024, especially after the Spring Festival. We are seeing the release of the model which is also delighted the whole industry and provided us more confidence. I have a very optimistic outlook towards this field. The second part of my answer is about the changes in the year 2024. We have seen the Ministry of Finance recently publish important governmental documents relating to the procurement of the data and also computer-related sectors. gave us very important business opportunities where we can provide our data-related and cloud-related services to the state-owned enterprises. And I also believe moving into the future, data is going to be the future cash. And this has provided us very important business opportunities. Once again, our company has adopted to the principle where we find the unities between the cloud and the data. And I also take a very optimistic answer towards the domestic market. The third part of my answer is about the operational saving ends. And this is what will be called, I believe that At the end of last year, this part of the factors has, I would say, some of the competitors decreased their price, while this year, according to what I have understand from our competitors and from the inside of the industries, that we are all planning to increase our prices because there is more value added to the operational business, and it's also affecting our cloud business. This is my personal take of the development momentum of our industry.

So in general, I think these changes, especially AI, including this data asset, I think it's a huge benefit for the entire cloud industry. I talked about it last year. Basically, it's like opening an infinite ceiling of clouds. And then for the cloud itself, because there will be a cloud in the future, So generally speaking, to wrap it up, I would say that the artificial intelligence and also the data assets is going to evolve quite well for the cloud-related sectors.

I have once again illustrated that in the different scenarios that the development of artificial intelligence and these data-related business models is also going to be very beneficial for our operational business. What I have already repeated is that it has opened up the limits for the development of the cloud sector. And tomorrow, we are going to have the earning calls of the Kingsoft Cloud, where you can get more information from their operations I'm not going to elaborate here. Thank you.

Thank you.

Operator, now we are going to proceed to the next question. Thank you.

Thank you. Once again, if you wish to ask a question, please press star 1 and 1 on your telephone. We will take our next question. Your next question comes from the line of Daily Li from Bank of America. Please go ahead. Your line is open.

Hello, Chairman Zhou, Chairman Li. Thank you for accepting my question. I also have two questions. The first question is about our active device network. Last year, there was an improvement of 1.5 points compared to the previous quarter. In fact, the previous three quarters were in a flat state. If we calculate the absolute value of this improvement, there is a difference of 8 million. Does this have anything to do with our AI launch? Is it possible to say that most of it is related to the function of our AI launch? The second question is about our AI. . . . . . Thank you, Benjamin, for taking my question. I have two questions. Number one is about the monthly active devices. We see the number is getting better during the 4Q last year, and I know if the key driver is from the AI product launch in 4Q. My second question is about the AI development strategy. Benjamin, in our last burning call mission, we prioritized the the number of the monthly devices and the paying user and the output. So how's our strategy right now? Do we make any adjustment after we have done some testing about product and the consumer feedback?

Thank you. Okay. You, you, you, you, you, you, you, you, you, you, you, you, you, China China This multi-faceted comprehensive reason, first of all, there is the past overall experience of the office as the number of users is getting better and better, and the reputation after use is getting better and better. In addition to the normal transmission, the value of this AI last year is definitely there. This is my point of view. The second one, you asked about the whole strategy of our office. I think you remember very clearly. I don't think there is any change. This should be what we call eternal. So we must first uh, uh, uh, uh, uh, uh, uh, uh, uh, It's just that I talked about it last year. I said that I said that the focus of my work last year was to improve the value. Yes, before there was no AI, in fact, we have seen the upgrade of the member system, etc. But I also answered last year. After AI came, our first work must be back to how to better integrate the big model with our products and provide a better experience for our users. This is back to the fact that we still have to make the product better. That's right. All right. So this year we will continue. In fact, of course, we started public testing last year. This year, we will continue to enter the fee stage. Yes, so this year is under the premise of product experience guarantee. We will also gradually commercialize this one. All right, so this is the strategy.

Let me answer your question about the increase of the numbers of large active devices. I'm not going to answer the question of whether our growth is related to the artificial intelligence. My frank answer is that I don't know whether it's because of the artificial intelligence or for the other reasons we are seeing the rapid growth. But I definitely believe the office, we are benefiting from this field. language models with the empowered in the ER field definitely going to bring us more access experiences in the field. But the increase of the numbers might be due to very comprehensive reasons, including we are providing better office software experiences for the users. And spread by month to month, the user number increased But AI definitely empowers the field of office-related software, and this is also one of the important reasons for the growth. And for the strategies that we have adopted in the office software, obviously all of our strategies, first and foremost, is designed to satisfy our end users, providing the satisfying product to our end users. is the most path we are going to take in order to increase the user numbers. And we have always focusing on increasing the numbers of the subscribed users, increasing the op values. This strategy continues. I have mentioned about this strategy in last year's call, and this year we are also going to increase the op values. Artificial intelligence definitely brings us to the new field where we are going to empower our product with large language models. This year, we are going to continue our strategy and focusing on satisfying the user first. By improving the user experience, we are going to harvest more subscribed users. That is my answer to your question.

Hi, thank you for joining us today. This will conclude our presentation for the 2023 fourth quarter and annual results earnings call. Thank you.

This concludes today's conference call. Thanks for participating. You may now disconnect.