Kingsoft Corp Ltd Adr

Good day and thank you for standing by. Welcome to the second quarter 2024 Kingsoft Corporation earnings conference call. At this time, all participants are in the 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, Please press star 11 again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Ms. 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 second quarter and interim Resource Earnings Call. I'm Li Yi Nan, 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 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 a 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 solid to facility 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. Zou Tao, our executive director and CEO, and Ms. Li Yi, our acting CFO. Now, I'm turning the call to Mr. Zou.

Hello, everyone. Welcome to the second quarter of Jinshan Software's second quarter and mid-term performance call. This quarter, the Group continues to achieve double growth in revenue and operating profits. Total income to RMB 24.7 billion Comparison growth 13% Repair growth 16% Operating profit to RMB 7.9 billion Comparison growth 18% Repair growth 32% Operating profit rate 32% Comparison increase 1% Repair increase 4% Summary net profit to RMB 3.9 billion yuan, the same as the increase of 588%, the same as the increase of 38%. In the second quarter of Jinshan Office, the income reached RMB 11.9 billion, the same as the increase of 6%, the game and other business income of 12.86 billion yuan, the same as the increase of 20%, the same as the significant increase of 41%.

Hello, everyone, and thank you all for joining KingSoftware 2024 second quarter at the interim results earnings call. This quarter, we continue to achieve due improvement in both our revenues and operating profit. In particular, our total revenues reached RMB 2.47 billion, a year-on-year increase of 30%, and a quarter-on-quarter increase of 60%. Operating profit reached RMB 719 million, a year-on-year increase of 18% and a quarter-on-quarter increase of 32%. The operating profit margin reached 32%, up one percentage point year-on-year and four percentage points quarter-on-quarter. Next, profit attributable to shareholders reached RMB 393 million, A significant year-on-year increase of 588% and a quarter-on-quarter increase of 38%. Among these, Kingsoft Office Group's revenues in second quarter reached RMB 1.187 billion, a 6% year-on-year increase. Unlike games and other business revenues reached RMB 1.286 billion. A 20% year-on-year increase and a significant 31% increase quarter-on-quarter.

Next, I would like to focus on the performance of the second quarter of 2024. This quarter, the third half of the year is focused on the development opportunity of new ecological power, and continues to strengthen the strategy of AI cooperation, multi-level, and cloud content. continue to develop and invest in AI and cooperation, through technology innovation, product replacement, performance improvement, etc., constantly strengthen product competitiveness, realize new productivity, and truly land in the office field. Q3 Office officially released the RPS AI 2.0 strategy. Through innovative applications in the personal version, business version, and business version,

Next, I will walk through the business highlights of the second quarter of 2024. This quarter, Teamsoft Office Group focused on the development opportunities of new quality productive forces. Continued to adhere to the strategy focused on AI, collaboration, multi-script, cloud, content, continue to invest in R&D of AI as a collaboration. Through technological innovation, product interaction, performance enhancement, and other initiatives to continuously enhance the competitiveness of product to realize the implementation of new quality product forces in the field of office. Teams of the Office Group efficiently launched the WPS AI 2.0 strategy, aiming to enhance new productivity through the innovative applications in the personal, enterprise, and government editions, helping users and clients improve their office efficiency.

In terms of personal use, the main product reads the number of active devices, maintains stable growth, to 6.02 billion, with a growth of 3.08% in the same ratio. Among them, the PC version of IPS Office with a monthly operating equipment value of 2.71 billion, with a growth of 7.11% in the same ratio. The mobile version of IPS Office with a monthly operating equipment value of 3.28 billion, with a steady recovery in the same ratio. The number of individual users In terms of individual business, the number of monthly active devices of our products maintained

steady growth and reached 602 million, representing a year-on-year increase of 3.08 percent, of which the number of monthly active devices of the PC version products amounted to the 270 million, representing a year-on-year increase of 6.11 percent. While the mobile version achieved 328 million monthly active devices with steadily rising year-on-year, the calculated pay increase reached 16.15 million, a 14.79% year-on-year increase, by continuously optimizing end-to-cloud integration experience on the product side. enhancing user's thickness to WPS cloud services, and boosting user activity on the cloud.

We are a personal user. WPS AI has newly launched AI Writer Assistant, AI Reading Assistant, AI Data Assistant, AI Design Assistant, to give users more control and trust. AI Writer Assistant can provide users with immersive and writing functions greatly improve the efficiency of text creation. AI Reading Assistant can help users to analyze, summarize, and ask questions. AI Data Assistant can help users to complete AI computing, analysis, and classification of large-module data through natural language interaction. AI Design Assistant can help users to quickly complete layout, style design, Focus on individual users.

WPS AI has newly launched the AI writing assistant, AI reading assistant, AI data assistant, and AI design assistant. Assisting users improving efficiency and quality during office tasks. AI Writing Assistant offers users an immersive call writing feature, significantly boosting writing efficiency. AI Reading Assistant helps users analyze, summarize, and perform Q&A on documents. AI Data Assistant enables users to perform large-scale data AI calculations, analyzing, and classification through nature language interaction. AI design assistants help users with fully complex layout, self-design, image processing, and other tasks, aiming to deliver a more practical differentiation of experience across these four dimensions.

and launched a new office productivity platform for face-to-face organizations and corporate clients, WPS365. WPS Office, WPS Cooperation, and WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition and WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition of integrated upgrade version, WPS AI Business Edition For enterprise clients, we have launched the WPS365 New Productive Forces in Office,

For organizations or corporate clients, it integrated the up-grounded versions of WPS Office, WPS Collaboration, and WPS AI Enterprise Edition, immensely connecting document management, collaboration, and AI capabilities. The WPS AI Enterprise Edition helps governments and enterprise customers solve problems in the AI construction process with AI Hub, AI Docs, and Propellant Pro, and realize the efficient collaboration and the security control for the entire organization.

面向党政客户推出了金山政务办公模型, 基于此发布的Datense AI政务版, 涵盖政务AI写作,政务AI问答,政务AI工具等能力,

For party and government clients, the King Software government office model was launched, based on which the WPS AI government edition was realized. This edition includes capabilities such as governmental files AI writing, governmental files AI Q&A, and governmental files AI tours. and is compatible with various environments, such as domestically developed information technology innovation, and supports private development, providing intelligent support for government affairs scenarios.

At the same time, we continue to invest in corporate clients, explore our PSAI corporate version, and implement a feasible solution in office scenarios. The corporate brain concept provided by RPS365 is to integrate data, algorithms, and algorithms, and use AI capabilities to provide companies with powerful intelligent platforms, to promote the digital transformation of companies, and to achieve individualized, customized, and refined production and service. Currently, we are working with companies like securities, banks, insurance,

Meanwhile, they'll continue to explore feasible solutions for the anti-employment patient of the WPS AI Enterprise Edition in office scenarios with leading enterprise customers. The concept of enterprise brand offered by WPS 365 integrated data, algorithms, and computing power to provide a powerful intelligent platform through AI capabilities. This supports enterprises in their digital transformation, enabling personalities, customers, and refined production and services. We have already carried out WPS AI Enterprise Edition or creation projects with well-known enterprises in the field of security, banking, insurance, and Internet services.

We continue to advance the integrated and collaborative process of Zhengqi, focusing on the core Zhengqi customer value scenarios, deepening product capabilities, and addressing companies such as finance, energy, transportation, publishing, biomedical medicine, and high-end manufacturing. WPS365 has served more than 18,000 head and body customers. New standard customers include Central Bank, China United Wealth Insurance, China Huanneng, Guangzhou Subway, China Huangjin, Shanghai Chengjian, Tongwei shares, Taier Group, Jindongfang Technology, Jindongfang Education and other well-known organizations.

We continue to promote the integration of government and enterprises and to flow the integration experience and the collaborative office processes focused on the value scenarios of leading government and enterprise customers. Deepening product capabilities. We are enhancing product capabilities and developing secure and efficient industry-specific solutions for sections such as finance, energy, translation, publishing, biomedical, and high-end manufacturing. We have more than 18,000 leading government and enterprise clients, including Citibank, China United Profit Insurance, China Huaneng Group, Guangzhou Metro, China National Gold Group, Shanghai Construction Group, Tongwei Group, Haier Group, BOE Technology Group, New Oriental Education, and other well-known organizations, and have formed a demonstration effect.

The game business continues to focus on the classic swordsmanship series under the general knowledge principle of the JINPING strategy.

In terms of online game business, under the primary game strategy, we focused on deeply developing the classical GX series. We are aggressively employing new market segments and expanding into new genres.

successfully launched in June, 2024, and achieved the entire platform data inheritance and communication of QiJian. The number of active users on the entire platform has significantly increased, and the number of active users per month has reached 11.46 million, of which 6.91 million have returned, accounting for 60.29%. The return of a large number of old users has increased the limit of IP long-term operation, The mobile game GX3 Ultimate was successfully launched in June 2024.

Achieving full platform data inheritance and interaction with the flagship game GX3 Online significantly increases the number of daily active users on all platforms. The first month of open beta, the monthly active users reached 11.46 million, of which 6.91 million were returning players, accounting for 18.29%, and the large number of smart players returned and continued to pay. Improving the baseline for the long-term operation of the IP. With the successful launch of the MOBAG-MGX3-Ultimate, the constant influx of new users has brought new vigor to the product IP.

After a long period of improvement, the results of the windfall were achieved on the second-dimensional track. In the sci-fi mecha track, the decoder continued to polish the user experience.

After a long period of effort, we had achieved fruitful results in the ACG field. In the sci-fi maker game, Magic Break has completed its first domestic public data test in August.

三季度,我们将举办建网三十五周年庆。

In the third quarter, we will hold the 15th anniversary celebration of GX3 online and continue to release new versions to further consolidate the vitality of our core IP.

We will continue to keep the users as the center, insist on technical benefits, continuously create new products and content, create unique experiences, and create long-lasting value for our users and shareholders. Next, I would like to invite CFO Ms. Li Yi to introduce the second quarter and the financial performance in the last half year.

Thank you. Look ahead. We will continue to focus on our users, adhere to technology-driven business, constantly innovator and output products and contacts, and create a high-quality experience to create a sustainable and long-term value for our users and shareholders. Next, I would like to invite Ms. Li Yi to introduce the financial performance for the second quarter and the first half of 2024. Thank you. Thank you, Soto and Elan. Good evening, everyone. I will now discuss the second quarter and the first half of 2024 financial results. I'm starting from the second quarter, used RMB as the currency. Revenue increased 30% year-on-year and 16% quarter-on-quarter to $2,474 million. The revenue split was 48% for office software and services, and 52% for online games and others. Revenue from the office software and service business increased 6% year-on-year and decreased 3% quarter-on-quarter to $1,188 million. The year-on-year increase was mainly due to the growth of domestic individual office subscription business. partially offset by decreased domestic institutional licensing business of Keysoft Office Group. The growth of domestic individual office separation business was primarily attributable to the improved user sickness and commercial risk, driven by our continuously product enhancement and the optimization of user experience in cloud services and AI future. The slight quarter-on-quarter decrease was mainly due to decreased domestic institutional licensee and subscription businesses, partially offset by the increase of individual office subscription business. From the online games and other business increased 20% year-on-year and 41% quarter-on-quarter to 1,286 million. The solid year-on-year increase was primarily driven by the contribution from several games, partially offset by declined revenue for GX3 Online, which had a relatively high base in the second quarter of 2023. The significant court-on-court increase was mainly attributable to ongoing improvement in game experience and the successful launch of GX3 Ultimate. Cost of revenue increased 90% year-on-year and 9% quarter-on-quarter to $432 million. The increases were primarily due to higher server and bandwidth costs associated with business expansion, as well as increased channel costs, along with the revenue growth of online games. Gross profit increased 11% year-on-year and 70% quarter-on-quarter to $2,000. Gross profit margin decreased by 1 percentage point year-on-year and increased by 2 percentage points quarter-on-quarter to 83%. The fractured actions were mainly due to changes in the revenue mix. Research and development costs increased 11% year-on-year and 4% quarter-on-quarter to $741 million. The increases were mainly due to higher staff costs include accrued performance-based bonus. Selling and distribution expenses increased 26% year-on-year and 45% quarter-on-quarter to $379 million. The increases mainly reflected the increased promotional efforts to support newly launched games. Administrative expenses increased 1% year-on-year and decreased 3% quarter-on-quarter to $155 million. Share-based compensation costs decreased 10% year-on-year and increased 7% quarter-on-quarter to $82 million. The quarter-on-quarter increase was mainly due to the growth of awarded shares to the selected employees of certain subsidiaries of the company in this quarter. Operating profit before share-based compensation costs increased 14% year-on-year. and a 29% quote-on-quote to $876 million. Later, other losses for the second quarter of 2024 were $12 million compared with losses of $103 million and $4 million for the second quarter of 2023 and the first quarter of 2024, respectively. Share of losses of associates of $169 million were recorded for the second quarter of 2024 compared with the share of losses of $323 million and $169 million for the second quarter of 2023 and the first quarter of 2024, respectively. Income tax expense for the second quarter of 2024 was $48 million, compared with income tax of $78 million and $42 million for the second quarter of 2023 and the first quarter of 2024, respectively. As a result of the reasons discussed above, profit attributable to owners or the parent was $393 million for the second quarter of 2024, compared with the profit of $57 million and $285 million for the second quarter of 2023. and the first quarter of 2024 respectively. Profit attributed for the owners of the parent, including share-based compensation costs, was $441 million for the second quarter of 2024, compared with the profit $123 million for the second quarter of 2023 and $329 million for the first quarter of 2024. The net profit margin, including share-based compensation costs, was 18%, 6%, and 15% for this quarter, the second quarter of 2023, and the first quarter of 2024, respectively. And now on the first half of 2024, revenue increased 11% year-on-year to $4,611 million. Office software and services made up 52% and increased 11% year-on-year to $2,430 million. Online games and others made up 48% and increased 10% year-on-year to $2,198 million. Gross profit margin decreased by 1 percentage point year-on-year to 82%. Operating profit before sharpest compensation costs increased 20% year-on-year to 1,554 million. Shared loss of associates of 338 million and 554 million were recorded for the first half of 2024 and 2023 respectively. As a result of reasons discussed above, profit attributable to owners of the parent was 678 million for the first half of 2024 compared with the profit of $250 million in the same period last year. Profit attributable to owners of the parent, excluding share-based compensation costs, was $770 million, compared with profit of $359 million in the prior year period. The net profit margin, excluding share-based compensation costs, was 70% and 9% for the first half of 2024 and 2023 respectively. Our statement of financial position, we had cash resources of $24 billion as of 30 June 2024. Latest cash from operating activities was $1,374 million and $2,308 million for the first half of 2024 and 2023 respectively. Cash used for capital expenditure was $164 million and $183 million for the first half of 2024 and 2023, respectively. That's all for the introduction of financial results. Thank you all. Now, we are ready for the Q&A section. Thank you, operator.

Thank you. We will now begin the question and answer session. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Xiaodan Zhang from CICC. Please ask your question, Xiaodan.

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 question is about our game business. I would like to ask the management to share how you see the performance after the online 3.5 is online. The second question is about our office business. We see that the growth of the office business in the second quarter has slowed down to a certain extent. I would like to ask the management to look at the business trends of the C-end and B-end of the subsequent quarter respectively. Thank you. So thanks, management, for taking my questions. And I got two questions here. My first question is regarding the gaming business. So could you please share your views on the performance of JX3 Ultimate after its launch? And my second question is on office business. So revenue growth of office business slowed down a bit during the second quarter. So what's your outlook on individual and institutional business, respectively, for the upcoming quarters? Thank you.

Hello, let me answer these two questions. The first question is, how many dimensions does the Internet of Things Internet of Things show after it is online? One is the dimension of the number of users. We observed that the number of active users has grown by more than 100%. I was just talking about We also talked about the total number of users or the first month of the release. We have more than tens of millions of users. There are more than 600 million users. So in general, this is beyond our expectations. In terms of revenue, it will be more because it is only June in the second quarter. June is a short time and the performance is not obvious. But in fact, if you look at it from July and August, Especially the latest one. We may not have exposed it. Anyway, basically one day has created. This is the highest record in history since the launch of the whole 2009. It is also very likely that this August will also create the whole unit month. It's just a day. It's a day. It's a day. This record. Then in August, it may also be the highest record of the unit month. So from the point of view of Q3 data in July and August, it should be said that there is no limit to the number of users. This is also a performance in terms of revenue. The overall performance is very good. It is also beyond our expectations. All right. This is from the number of users and the number of income. Let's translate the first question first.

Thank you. So, thank you, Xiaodan. Thank you for your question. And let me just ask the first question. And firstly, we're going to have the different, the separate dimensions to the prospects to answer your question. Firstly, is that regarding this GX3 for this ultimate and when it launched. Firstly, we're going to check the users' numbers. We observed that the growth of their daily active users could go nearly 100%. So as we mentioned previously that altogether all the users, when it launched at that day, the first day, their active users could reach to more than 10 million, so which is also exceeding of our expectations. And the second is from this perspective of the income. So we know that for the Q2. Since June up to now, the time is quite short. So the performance is not that significant. But if we're going to take a look from this July and August, especially the last time we can see is that for only one day, it could already reach their highest record since it launched in 2009. And it's also a possibility that in August, we can reach to this highest performance since in the whole single month. So get together with Q3 and together with the data in July and August. So for this JX3 ultimate, generally speaking from the income perspective, the total performance is quite good. It is exceeding our expectations. So this is from the users and also income, the two aspects to answer your question. So this is the first part of your question.

uh, uh, uh, We call it institutional authorization and institutional subscription. Institutional authorization mainly refers to this part of the new creation. In fact, basically, in the previous few seasons, we have also communicated with you. In fact, we basically believe that in this current environment, there will be no substantial changes in the new business. So this is basically what we expected, which is similar to last year. In addition, there is the rest of the institutional subscription. The institutional subscription, in fact, we ourselves have seen through the data that the increase in our real SaaS subscription is very, very fast. I don't know how much the office fee has fallen, but it is a very high increase. In fact, this financial report, from the perspective of financial collection, seems to be a little lower than before. Actually, due to the change in the model of institutional subscription, the institutional subscription that was paid last year has now turned into a real way to pay by month. If we smooth out the perspective of financial collection, we will still have a relatively high increase. I will also make some explanations here. uh, uh, uh, uh, uh, uh, uh, The market is still very, very good. Yes, the C-end is actually from that. Well, let's start with that. Well, a few data, like ours, this PC version of the user number, the increase in the number of users, is still up to 87.1% in the previous year. Well, the entire number of users reached 271 million. This is basically up to our expectations. Because this technology is already relatively large ah Our initial prediction of the year is also to hope that this year we can get a 5% increase Actually, it's also higher than expected That one The number of paid users This one also revealed that we have reached more than 38 million Basically, there is also a 15% increase in the same ratio There is also a 15% right So that's it But maybe the market will This is my own judgment. The market may think that the commercialization of AI may have given too high expectations at this stage. But in fact, according to our own internal rhythm, the commercialization of AI is also a very good expectation. Because since last year, we have divided the whole AI into a few pieces. such as AIGC, Insight, and Copilot. They released 2.0 this year, and they also launched a lot of AI-oriented products for business and face-to-face individuals. As we continue to deepen the user experience of these products, we also find that, especially in Copilot, there is still a lot of room for improvement. So, from the perspective of AI commercialization in CEDAW, In fact, there is still a certain degree of slowdown. The main purpose is still to hope that through the polishing of this product, we still hope that the entire product experience will be better and more perfect, and then gradually increase the pace of the entire commercialization. So from this strategy, under the guidance of this strategy, from the actual data, we ourselves think that the entire AI commercialization So the second way is that we're going to think about is regarding this sort of office business.

So how are we going to look at the C and B end? So from the budget perspective, the office completion rate is quite good. It's 100%. It's very good. So if we're going to look at the C and the B end, I would like to have a further explanation. And for the B end perspective, we're going to separate into the institutional authorization. So for the institutional authorization, that is for the localization. And basically, in the previous quarters, as we have previously mentioned that currently based on this situation, the whole environment, the basis for localization is that we're not going to have significant change. So it's going to be roughly the same as last year, except for that, we were also going to have the institutional subscription. So this is actually from the data we have they're actually the exact subscription, the subscription growth is quite fast. And actually from this financial report, we can see is that from this financial report, it has a slightly decrease, but this is actually, it's from this 2B's perspective, and they have some reason. The reason is that last year, we're gonna calculate their income by their annual income. But right now we have changed it into this monthly billing. That is why they're from this financial accounting perspective, it can cover, it can have a smooth out. Although their total income is quite high, but it's from this financial report, it will have a slightly decrease. So in the tomorrow and the day after tomorrow, we're going to have for their office basis, we're going to have a further explanation. Probably some of the investors have some misunderstanding regarding it. But this is actually from the 2B's perspective for the localization. Basically, it's based on our expectation to follow, to growth. And especially for this subscription, it is way existing of our expectation. So from the C end, so from different data, and from this PC's version, we can see that the user's growth tremendous growth. Last year, it reached to 7.1%. The total yield could reach to 270 million. So the basic is quite big. Initially, we thought that the first half year is going to have the growth of 5%. But right now, it is more than of expectation. And the total income could reach to 38 million, more than 38 million. the goods and for the year-on-year for the increase of 15%. And probably for this market, according to my judgment, is that the whole market for the whole general commercialization for the AI probably at this stage is going to give too high expectation. But according to our internal judgment, the AI commercialization has already reached to our very good expectation. like LGC and the INSEE co-pair, they have released the 2.0 version, which is going to fit to personnel and enterprise to have different functions and products. The target for this product during the customer's experience process, they're going to have a very big space to develop. And also for the AI's commercialization perspective, it has a slightly slowdown. The main reason is that we need to throw the the grinding for the improvement for those products. We hope that when we can make this product have a better experience for our customers and when we have a better experience for it, so then we can hurry up of the whole process for the commercialization. So from this data, the whole commercialization for the general AI, we have a very strong confidence for it.

Hi, operator.

Xiao Dan, I would like to add that the income from the subscription of the office that you are paying attention to, we can actually see that the amount of growth of the contract is far higher than the growth of the revenue. This actually means that we have more than 3.5 billion yuan in revenue in the first half of the year. We can also see that the amount of contract debt in the balance sheet can also be seen. In fact, this also means that the speed of our subscription transformation is accelerating. Yes, I would like to add this point.

Okay, so I would like to have some adding is that from this office services, actually for the subscription revenue, and we can see is that for the contract growth is much higher than the income increase. So later on, we would like to have a further explanation regarding from this contract, and also we can see from this contract completion, we can see is that the subscription transformation speech is accelerating and is have a very good growth.

Hi, operator. We are ready for the next question.

Thank you. Our next question comes from the line of Jueqi Zhu from CITIC Securities. Please go ahead, Jueqi.

Hello, Mr. Zhou. Hello, Mr. Li. Can you hear me? Yes, we can. Okay. I'm Zhu Jueqi, a computer researcher at Central Securities. I have two questions to ask you. My first question is about AI and office, because we see that there are more and more products on the market, such as Baidu 360, and so on. They have launched similar AI office products. How do we look at the economic pattern of AI and office? 我的第二个问题是关于集团的账面资金 因为实际上看到集团账面资金非常充裕 去年的话其实在业绩会上也表达过 会关注AI相关的投资布局 这一块想请教一下有没有什么更新 接下来我简单翻译一下 My first question is about AI office applications How do you view the competitive landscape? My second question is about AI investment. How do you view the investment in AI when the group has sufficient cash on the balance sheet?

Thank you. Let me answer the first and second questions. The first question is that AI applications are indeed flexible. How do you view this kind of competition? In fact, people talk about this topic every season. Let me talk about my point of view. In fact, in addition to Microsoft Office, to be precise, we don't think other products are our competitors. Why do you say that? In fact, you have to look at the history of the development of Microsoft Office or WS Office and see what kind of product it is. My own point of view is that we are actually an article content creation. And now, of course, it also includes co-creation and sharing of such a platform. The point of communication is actually about the creation process of the article and the sharing of such a platform. So you have to take this into account. It's easier for you to see clearly. Because this AI actually includes you. Actually, I remember there was a product called Ali's Quark. You will find that it seems that they now have some, especially AIGC, some capabilities to automatically generate documents, or something like that. So it will naturally This corresponds to Kimi, right? I also answered Kimi in the last Q. When you look at Kimi, you can also interpret it with another file. So it seems that you can always see different products on the market. It seems to be competing with our office on some functional points. In fact, it looks like this from the original point of view, but you have to go back to the topic I just mentioned. In fact, it is based on the document. Of course, it's a platform for creating, cooperating, creating, circulating, and reading. You will find that only Microsoft's positioning is exactly the same as ours. But in fact, we have been competing with Microsoft for more than 30 years. It's a product that has come back. So you look at it from this perspective. Of course, This will not be with this AI itself more and more powerful ah This this text content creation this this Oh, yeah, I forgot what I said just now There is also an edit, an edit, and of course there is also a format of historical documents This kind of compatibility in all aspects, etc. This is also included Only we are doing it with Microsoft The rest of this is just simple based on AI AI machine content generation This is true To be honest, we also exposed a lot of models last year, right? We also mentioned three big pieces. Last year, when we mentioned 1.0, we mentioned three big pieces. The first piece is AIGC. If you look at it from this perspective, it's true that it doesn't really care about the format of the article itself, the version, and so on. It's just creating a text. To be honest, It's true that you don't really need to use office software. In fact, this kind of demand is what I used to think. Even if there is a search engine, it's enough to collect a copy and use it. If you don't care so much about the format, it's okay. So this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one Of course, he must also have a certain proportion of this content creation. So these are essentially customers who are not in conflict with us. Yes, because I just said that we have more of this after the content is generated. There is also this version that is called format text processing, especially the complicated format text processing. So, so, so based on this positioning, you will find that it is easy to figure out the gap between us. Okay, of course, there are still a lot of search on the market. Ah, after searching, he also has a certain one This one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one, this one,

So actually for this AI application, actually that is correct. Indeed, that is emerging different products. And regarding the competition situation, regarding this topic, actually each quarter is going to have people to ask me this question. So I would like to share my perspective on this topic. So actually, basically speaking, except for this Microsoft, the other products, we don't think that they are our competitors. Why is that? It's because for the Kingsoft, if you can take a look of our office development history, you can take a look what exactly the product is. So actually, you can see that we are actually the creation for the content, for the documentation. And right now, we also is going to have some collaborative creation, sharing in this platform. So if we can make it as simplified as that, we're gonna based on this documentation, creation, and treatment, this is gonna be a shared platform to have all these functions. So based on this, you can clearly understand that this AI is also being included, including like Ali is gonna have crack. You can realize that they are very similar, like some of them, especially they're gonna have this AITC, based on AIGC, they can automatically to have some abilities to create documents. And to include the TIMI, they also have this ability. We can understand that actually the market has a lot of products together with our office products. Looks like we are competing with each other, but actually they are based on this documentation's creation, coordination, transform, read platform. So you can realize that actually only the Microsoft, their identification is exactly the same as ours. Actually, in the past 30 years, only Microsoft is our competitor. So whether it's gonna, together with the AI's exact, their function and abilities become stronger and stronger, it's gonna have the content creation, added historical documentations, formats, the formatter, the horizontal files, et cetera, is only actually together with Microsoft that's doing this. The other platforms, the other companies that are based on the AITCs, content creation, content productivity. So last year, we started to make a lot of modules. And lastly, we have mentioned that we're going to have three parts. The first part is the AITC. We don't care about the content format or version. then we can only need to produce one paragraph of the content. Actually, it doesn't necessarily to require office software. Privacy, if you can have the searching engine, that would be enough, because if we don't care about the format, and you have some certain products, they are based on this AI knowledge searching and cursing an answer, then they gotta have some certain ability to do this content creation. And actually for those type of products, they are not our competitors. What we are doing mostly is for this content. When they have created the content, we need to have format just to realize it, to have some format, especially a very complex format documentation treatment. This is actually the differences which we can understand as a gap between us with the other companies and with the other products. they're going to have this AI search. And after this, they have the ability to do the treatment for this documentation, but mostly they are doing the searching. They compete with each other for search for certain products. So it doesn't have a significant competition relationship with us. So from a collaborative perspective, is like a thing and facial they are and also the cancer documentation so that they are the online documentation's perspective yes this is also another way to explain that so this is the my understanding from our macro solutions macro expeditions regarding your question

Hello, there are two levels of investment in AI. Since last year, we have been cooperating with Shunwei. Basically, the initial company and the large-scale company have some investments. There are two levels of investment. One is financial investment, and the other is business cooperation. In terms of the group, AI has just started this track. Our group has been looking at opportunities in terms of applications. As you mentioned, we are still balancing the entire fund. The first one is the shareholder return. In the first half of the year, the entire return on the fund was about 400 million Hong Kong dollars. Basically, our return on the fund was cancelled. So the share price of the entire fund is around 1.5 billion. On the other hand, we are looking for new opportunities. We have been looking at it. If it is a suitable opportunity, we are also communicating with the market. Thank you.

And regarding your second question for this investment of AI, and we can explain it from two aspects. Last year, as we mentioned that, we're trying to find some cooperation with other companies, especially the startup companies. And from the financial perspective, and also from this business perspective, we have two different perspectives. We're looking for the cooperation. And from our group perspective, because AI is just started, And our group is looking at the suitable opportunities. And we are trying to make a balance with the two ends. The first three is the shareholders' return. And for the first half year, the return is going to be the HK$400 million in the first half year. And the purchase is cancelled. And the equity ratio is 1.5. And we are also looking for suitable opportunities for this further communication with the good opportunities for us to do any certain investment. Thank you.

Thank you for joining us today and this will conclude our presentation for our 2024 second quarter and the interim results of earnings call. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.