Kingsoft Corp Ltd Adr

Good day and thank you for standing by. Welcome to Kingstaff Corporation's third quarter 2024 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 answer questions during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 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. Yilan Li, IR Director of Kingsoft. Please go ahead, Ms. Li.

Thank you, Operator. Ladies and gentlemen, good evening and good morning. I would like to welcome everyone to our 2024 Third Quarter Earnings Call. I'm Yilan 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 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 the side, the translation is solid 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. 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. Welcome to the 3rd quarter of this year's software conference. This quarter, thanks to the outstanding performance of XishanJu, the total income and profitability of the group have increased significantly. The total income reached RMB 29.15 billion, which is 42% of the total growth rate, and 18% of the total return rate. Business profits have made new breakthroughs and created a new height in history. to RMB11.4 billion, not only increased by 204%, but also increased by 44%. Among them, JinShan Office earned 12.07 billion, increased by 10%, and decreased by 2%. Game and other businesses earned 17.08 billion, increased by 78%, Hello everyone and thank you all for joining Kingsoft's third quarter 2024 earnings call.

We are pleased to report strong growth in both revenue and profitability this quarter. led by an exceptional performance from CESA. Total revenue reached RMB 2.915 billion, representing year-on-year and quarter-on-quarter increases of 42% and 18% respectively. Operating profit hit a record high of RMB 1.14 billion, a remarkable 204% increase year-on-year and a 44% increase quarter-on-quarter. Kingsoft Office Group contributed RMB 1.207 billion in revenue, up 10% year-on-year and 2% quarter-on-quarter, while our gaming and other business generated RMB 1.708 billion, a 17.8% year-on-year increase and a 13.3% quarter-on-quarter increase. These results demonstrate our core business' momentum and position as for sustained growth.

Next, I would like to introduce you to the industry situation of the third quarter of 2024. Jinshan slow work continues to excel in technical business, years of persistent investment in technical research and development, continue to create first-class customer experience, and form the backbone of our core products, making us a leading industry in domestic basic office software.

Now I will walk you through the business highlights of the third quarter of 2024. Kingsoft's office group maintains leadership in domestic office software through long-term R&D investment aligned with our technology-driven strategy.

In terms of domestic personal subscription business, this quarter's real income was 7.62 billion yuan, a 17.2% increase. Our research and development in the field of AI and cooperation are all in progress. First of all, income growth mainly comes from our continuous optimization of functions and strengthening of AI rights, which attracts more users and pays them back. On October 10, 2024, WPS AI is officially launched as a smart writing tool based on AI agent-driven intelligent writing, which is different from the traditional large model. AI Agents have independent thinking and the ability to use tools to gradually complete and achieve goals, and the advantages of improving work efficiency and reducing operating costs are also very obvious. WPS AI 2.0 provides users with a more convenient and efficient creative experience, further improving user consistency and increasing the return on investment. Secondly, The WPS Hongmeng version of the project is expected to further improve the penetration rate of the product. On October 8, 2024, the WPS Hongmeng original version of the project was officially opened, and the editing and processing of many file formats was realized, and the user's operating habits were integrated. This multi-device interaction method and multi-faceted product configuration to provide users with a more intelligent office experience. By using Hongmeng's full-scale co-operative capability, we can further achieve more efficient cross-border cooperation based on different hardware products' advantages. As of the end of September, the number of active products in the office increased by 6.18 billion, which increased by 4.9%. Among them, the number of active PC parts increased by 2.77 billion, which increased by 7%.

Our domestic individual office subscription business generated RMB 716 million in revenue this quarter, a 17.2% year-on-year increase. This growth was primarily driven by AI features highlighted by the October 10 launch of WPS AI call writing. WPS AI 2.0 delivers a more efficient creation experience, boosting user engagement and conversion rates. Additionally, the public beta of WPS Harmony OS Next is expanded to further enhance product penetration. Launched in October 2024, this version enables symbolized document and data sharing across devices, and the platform, supporting multi-user collaboration, boosting, editing, and version capabilities. At the end of September, our product reached 618 million monthly active users, up 4.9% year-on-year growth, including 277 million PC users, up 7%

and 338 million mobile users, up 3.4%.

Our domestic institutional subscription business generated RMB 248 million in revenue this quarter, primarily driven by enhanced WPS 365 offerings. which are seeing strong adoption among large private and state-owner enterprises in our public cloud business. We are expanding this revenue stream while optimizing our revenue model, building a solid foundation for sustainable growth in our domestic institutional subscription business.

In terms of domestic institutional subscription business, this quarter's income of 14.3 billion yuan has increased by 9% Domestic institutional licensing revenue reached RMB 143 million this quarter, up 9% year-on-year, by aligning with policy changes and customer needs.

We successfully expanded our presence in lower tier government markets, focused on localization solutions. This market expansion has driven order growth in our domestic institutional licensing business.

In terms of overseas business, overseas market users continue to grow, mainly in mobile platforms. There is also a huge room for improvement in PC platforms. With overseas AI,

Our overseas business continues to see youth growth, primarily in mobile, with substantial growth potential in PC. Leveraging our overseas AI capabilities, we recently achieved a second position on the Product Hunt leaderboard, demonstrating growing international recognition.

The game industry, under the general principle of a premium strategy, continues to focus on the deepening and deepening of the classic Sword and Shield series, and continues to vigorously set up new racing tracks to expand new games. We are committed to the continuous growth of the positive gaming content and the continuous expansion of the value of the game. Sword and Shield 3 has no boundaries. The heir to the legacy has realized our multi-spectrum communication strategy. Since the line-up, the performance has been excellent. The number of first-month monthly users has reached 11.46 million. Of which, 6.91 million have returned to the player. The percentage has reached 60.3%. This quarter is also the 15th anniversary of the building network mountain celebration. The 15-year anniversary in spring and autumn, but it still maintains the vigorous vitality. Following our primary strategy, the online game business continues to strengthen the classic GX online series.

We are making significant investments in new genres and market opportunities. JX3 Ultimate has delivered strong performance since launch, reaching 11.46 million monthly active users in its first open beta month, with returning players accounting for 16.3%. In this quarter, coinciding with the 15th anniversary celebration of JX3 Online, The number of returning players has exceeded expectations, and the game achieved record-breaking revenue across all platforms in August.

With the cultural connotations accumulated over the past 15 years, and the advanced digital technology that has been passed down through the culture and spirit of technology, we have once again made a new exploration on the social responsibility of promoting cultural influence. The Western Regions Grand World Project, a celebration between GX3 and Y,

The Dunhuang Museum and the Dunhuang Intangible Culture Heritage Protection Center aims to digitally restore the historical safe room. This initiative has gained recognition from Xinhua News Agency, a Chinese official news outline.

科幻机甲游戏解析机 8月13日结束了首次的封闭测试。 参测玩家的热情超出了预期。 Our sci-fi micro game, MicroBreak, successfully completed its first beta test in August.

Drawing strong player response and global attention, the game garnered nearly 3 million global preregistrations and peaked at

Seventeenth on the Steam Global Wishlist, attracting more than 1 million new users.

The 15-year success of GX3 Online demonstrates our commitment to our Prime Game strategy, where the strong market response to MicroBreak reflects our successful expansion into new gaming genres.

In the long-term future, Jinshan Office will continue to invest in AI and cooperation, to meet the needs of various offices in different scenarios, to bring more intelligent and efficient office experience to the users. The gaming industry will strive to continuously innovate and improve its quality, to bring outstanding gaming experience and rich gaming content to global players. We have always adhered to the idea that the first user is a technical business that persists in innovation, thus continuing to create value for our customers, shareholders, and employees. Next, let's welcome CFO Li Yi

Looking ahead, Kingsoft Office Group will maintain its long-term investment in AI and collaboration, delivering intelligent solutions across deliver office scenarios. Our game business will focus on innovation and quality improvement to provide expansion of experience to players globally. We remain committed to our core principle of putting users first, promoting technology-driven business, and fostering innovation to create value for our customers, shareholders, and employers. Next, I would like to invite Ms. Li Yi to introduce the financial performance for the third quarter. Thank you.

Thank you, Suzu and Elan. Good evening and good morning, everyone. I will now discuss the third quarter financial results using RMB as currency. Revenue increased 42% year on year and 80% quarter on quarter to $2,950 million. The revenue split was 41% for office software and services and 59% for online games and others. Revenue from the office software and services business increased 10% year-on-year and 2% quarter-on-quarter to $1,207 million. The year-on-year increase was mainly due to the increased domestic individual office subscription business of Kingsoft Office Group, which was primarily attributable to increased user sickness and commercial risk, supported by the introduction of WPS AI version 2. with four new assistants in this quarter that provided more efficient, creative experience. Real Newfoundland online games and other business increased 78% year-over-year and 33% quarter-on-quarter to $1,780 million. The remarkable year-on-year and quarter-on-quarter increases were largely attributable to first The outstanding performance of GX3 Online and the successful launch of GX3 Ultimate further boosting the game popularity. And second, the active operation and enhanced experience of other games. Cost of revenue increased 20% year-on-year and 7% quarter-on-quarter to $460 million. The increases were primarily due to great China costs, along with the revenue growth of the online games, as well as higher personal related expenses of online games business. Gross profit increased 46% year-on-year and 20% quarter-on-quarter to $2,454 million. Gross profit margin increased by 3 percentage points year-on-year and 1 percentage point quarter-on-quarter to 84%, which were mainly due to the changes in revenue mix. R&D costs increased 28% year-on-year and 60% quarter-on-quarter to $861 million. The increases were mainly due to increased headcount to support the development of AI and collaboration products, as well as higher accrued performance-based bonus. Selling and distribution expenses decreased 70% year-on-year and 4% quarter-on-quarter to $365 million. The year-on-year decrease was largely due to high base in the third quarter of 2023 with the promotional and advertised activities for the launch of new games. Administrative expenses decreased 11% year-on-year and increased 7% quarter-on-quarter to $166 million. Share-based compensation costs decreased 20% year-on-year and 29% quarter-on-quarter to $58 million. Operating profit before share-based compensation costs increased 168% year-on-year and 37% quarter-on-quarter to $1,202 million. The other losses were $63 million for this quarter, compared with gains of $18 million and losses of $12 million for the third quarter of 2023 and the second quarter of 2024, respectively. Share of losses of associates of $428 million were recorded for this quarter, compared with losses of $307 million and $169 million for the third quarter of 2023 and the second quarter of 2024, respectively. Income tax expenses were $31 million for this quarter, compared with income tax expense of $44 million and $48 million for the third quarter of 2023 and the second quarter of 2024, respectively. As a result of the reasons discussed above, profit attributed to owners of the parent was $403 million. $13 million for this quarter, compared with the profit of $28 million and $393 million for the third quarter of 2023 and the second quarter of 2024, respectively. Profit attributable to owners with parent excluding share-based compensation costs was $453 million for this quarter, compared with the profit of $69 million and $441 million for the third quarter of 2023 the second quarter of 2024, respectively. The net profit margin, including share-based compensation costs, was 16%, 3%, and 80% for this quarter, the third quarter of 2023, and the second quarter of 2024, respectively. The group had a strong cash position towards the end of the reporting period, as at 30 September 2024, The group had cash resources of $25 billion. Later cash generated from operating activities was $1,387 million for this quarter. Later cash used in operating activities was $552 million for the third quarter of 2023. And later cash generated from operating activities was $1,045 million for the third quarter of 2024. Capital expenditure was $109 million, $160 million, and $50 million for this quarter, the third quarter of 2023, and the second quarter of 2024, respectively. That's all for the introduction of our financial results. Thank you all. Now, operator, we are ready for the Q&A section. Thank you.

Thank you. We will now begin the question and answer session. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. We will now take our first question from the line of Xiaodan Zhang from CICC. Please ask your question, Xiaodan.

Hey, Mr. Zhou, Ms. Li, Mr. Yilan, good evening. Thank you for accepting my question. I have three questions I would like to ask. The first question is about our game business. Since this year, the performance of game business has exceeded the period. I would like to ask the management to share how they see the continuation of the subsequent growth. The second question is about our office business. We see that some short-term disruptions in the first half of the year are being gradually digested. How does the management look at the B-end and C-end businesses for next year? The third question is also a question that the market is very concerned about, which is the shareholder return. So thanks management for taking my questions. And first of all, regarding the gaming business, What is your view on its growth resilience in the upcoming quarter? And secondly, could you please share your outlook on individual and institutional business within the office software sector? And lastly, any insights regarding shareholder return would be highly appreciated.

Thank you. How is it? I took a look at it. Basically, next year, we still have three to five games in stock. Three of them have already received the license plate number. Two of them are applying for the license plate number. Two of them are our agent products, which are the Fengshen Zai Ling and Zijian Shanhai made by Jianxing Studio. The rest of the three are self-proclaimed. This is the preparation situation. Second, based on the current test situation of the limiter in August, we think that the performance of next year is still worth looking forward to. Of course, the specifics of this, this, how to fight, and so on, I still answer all the way. The game is not online. We have no way to so regarding my answer is that actually for the course of the potential of the game in the future

Basically, next year, we still have three to five different types of games in stock. And of that, three of the games, we have already bought their certifications. And another two is still under their application process. Among that, two of their games, we are doing their distribution to do the operation for the product, which is made by a function of the company and to have a game. And another three of the games, we have a series of research And also based on the performances in August of the Mitchell break, the situation, we think that next year the performances should be expected. All the details regarding how it's going to look like and also the growth rate, that is the same as our previous answer that the game doesn't have any indication yet. We cannot give a very clear answer for it. And also we can only base it on the data of the launch and to give some like guidance for these are the current performances.

Okay. The second question is about office. The exhibition of B-end and C-end. I will answer in a few ways. The C-end, everyone has been paying attention to it since we started promoting it in the past two years. I have to know that the linear, uh, the, the, the, the, the, the, the, the, the, the, the, the, I've talked about this strategy many times before. I said that we must first improve the user experience, expand the number of users, and then do the third step, which is to continue to improve the up value. I think this strategy has been in the past for many years. has not changed, and has achieved very good results, including the launch of this AI. So we will continue to work on this. For the B section, we also saw a significant success this year. The subscription of our institutions and the transition from the place to the subscription mode has also taken a very strong step, especially in the face of these domestic This is a private enterprise. It has made great progress this year. We believe that the future of institutional subscription will still have a very wide range of space. Of course, this also proves that we are in the 305 model, which is modularized and organized. This method can still meet the needs of many companies, and it can be compared to the whole package. So I think there is still a lot of room for improvement in this area. So actually for the office side, for the B and the C and the forecast,

we would like to answer in several perspectives. Firstly, from the C-end, people are always paying attention in the recent two years. We are always trying to promote the AI to have AI value added. Previously, we had this introduction that all the products we have launched, we're going to base on this area to continue to have better performances, improve the customer experience, and also increase the customer feeling for it. This is the whole C-end. This is causing that we're going to base our AI to have some coordination and have some development according to that. For the CM, this is our CM strategy. And firstly, we need to increase the customer experience to have more customer members. And secondly, we need to have, like, strengthen the payment rate of the customers. And third step is that we need to update their UPValue and recently we never changed this strategy yet and we got very good performances including the AI promotion. For the B-end, we actually did acquire performances for their institutions subsidiary and also for subscriptions. And initially we have put it from this site transcription into their monthly institutions' subscriptions. We think that this is quite good for big startups. Especially, we are thinking about the part companies. Here, we have a very good improvement for their institutions' subscriptions. So, we believe that this part still have a very bright future. And this also proves that for the 365 modules, we're going to have different pieces. And to combine these pieces, we have matched with different enterprises' amounts compared with the whole general package. We believe that this has a very good space to improve. And regarding the information innovation, we think that this actually has a step-by-step to be recovered, and we believe that in the future, it's going to have a very rapid growth.

The third question is about the shareholder feedback. We will still China. uh, uh, uh, uh, uh, so regarding the um regarding this question we the same thing is that we're going to do it as there

But regarding this question, we're going to answer in two perspectives. The first is for this repurchase. Based on 2024, we constantly require some repurchase. And the total amount for approximately 500 million Hong Kong dollars and the total share value is 1.55. And compared with the other companies who did the repurchase, basically speaking, our... share radio of the repurchasement required meeting we will continue to do that and also we're gonna um based on this the product director's period the amount period we're going to continue to do this action and regarding the divisions so every year our proposal has to wait until the next year for the q1 of next year and their board of directors is going to face on that sure division situation And also, there are comprehensive elements of the company's development to give a proposal for the division. Currently, we cannot answer this question yet, whether we're going to, like, expand this division or not. We can't answer the question at this moment.

Thank you. Our next question comes from the line of Zhu from Civic Securities. Please ask your question, Zhu Qiqi.

Okay, thank you for giving me the opportunity to ask questions. I am Zhu Jieqi, a member of the Central Bank. First of all, congratulations to the company for achieving a very strong performance in this quarter. I have three questions to ask. The first question is about our office software business. In fact, Q3's average is relatively called Q2 is improved. I want to ask if you can feel the business warm-up brought by the improvement of the public environment. My first question is about office software business. Has the office software business feared the business recovery brought about by the improvement of the microenvironment? Does WPSAI's product and commercialization progress meet our expectations? My second question is about internationalization. What are the prospects for office software and gaming businesses to expand overseas? My third question is about our profits. which are the reasons for this performance in terms of profits? Thank you, Mr. Guan.

Let me answer the first two questions and answer the third one. The first one is about the change in the red light environment. Do you feel the warmness of the office? Because everyone knows that many of our customers are government, including the state-owned enterprises. Uh, uh, is beneficial to us. Yes. And then, the other thing is that the government's role is to let the government return to normal daily governance. No matter what, from the perspective of the corporate side, it should also have a clear reflection. Because the problem of follow-up has been solved. So we think that for us to promote the B-end infrastructure subscription sector should also be greatly improved. We also have a more optimistic attitude towards this. The next question is about AI. Is the progress of product commercialization in line with the expectations? It should be said that it is currently in line with our expectations after the revision. In the previous Q&A, I talked about my point of view. . . . . . . . . What we are adjusting now is that from 0 to 1, it still has to be 0.1, 0.2, 0.3. There has to be such a process. So you can see that we have actually made a lot of adjustments this year. We have launched a lot of virtual AI functions, including AI writing assistant, AI reading assistant, data assistant, design assistant, semi-script, script, and so on. In fact, we don't expect that This one or it will help the user to solve it all automatically and automatically complete it, but to help users improve efficiency in different scenarios. This is what I express. Don't expect it to be 0-1 all at once, but to complete 0-0.1, 0.2, 0.3. Such a process. Yes, this is more in line with the development rules of the service itself today. So from this point of view, we think that this year is a very good, complete, completed, and adjusted strategy for AI development. Okay, let's translate it.

So firstly, to place the understanding of this microenvironment, and regarding the question of whether we can fear it has a rebound, So actually, we have a lot of customers that are government or they are state-owned enterprises. From the government perspective, especially recently, the latest standing committee of the National People's Congress mentioned that it's going to have a budget of 600 million RMB to do the investment. So based on these areas, generally speaking, from the government perspective, they have money in hand. So they're going to get back to their regular daily business governance and operation. That is why I think that this is definitely a benefit for us. In addition, to let the government get back to the regular daily governance from their enterprise perspective is going to have a tremendous increase. So for us to do the promotion of BN, especially for the institution subscription area, is going to have a very big improvement. For the AI perspective, regarding the AI, That is whether we have reached the progress of a product like commercialization. I had mentioned previously that that is based on it's really realized of our expectations after we reversed of our strategy. Last year when the AI has promoted out, especially for Microsoft, first we can reach the concept of the whole palette. So the market expected to realize from zero to one at once, but actually based on our practice, in the past one year's practice, especially we like to have a cooperation like innovation database with our customer. We think that if we're not going to go directly from zero to one, we're going to go like zero point one, zero point two.

But we have our customer to increase their customer experience in different scenarios.

That is why we can mention that this is going to complete the 0.1 or 0.2 process. This is actually more basically satisfied of the objective physical development process. And based on this, based on this dimension, we think that this year we have a very good development strategy for AI.

The second question is for Hai. Let me talk about the game first. From the data point of view, our own overseas game income ratio is continuing to increase. And then from the area point of view, in fact, we are the earliest. Everyone knows that we started in 2004. We launched five games in Vietnam, including Southeast Asia. And then, in fact, since our second game last year, it has already begun. It is a kind of global, global layout. Yes, and with the release of this limiter next year, this is also . . . . . . . . . This has all maintained a very good growth of the same ratio and the same ratio Although we don't have any specific data about overseas at the moment But in fact, we have seen a very big potential Especially I noticed that the whole PC user This is actually our past is mainly pushing the mobile section But because of the user After using our mobile section, we took the initiative to download our PC section Our PC Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan I talked about it at a meeting. Last year, the original plan was to focus on overseas, but AI came out. After AI came out, we transferred the strategic center to AI itself. Yes, but after two years of development, we think AI has settled in the office space. It has gradually settled down and matured. So from next year on, we do have a plan.

so actually regarding the the overseas strategy we would like to talk about the game first from the data perspective we actually for the overseas game has tremendously increase of this income percentage from the regions area which is that we started to get into get overseas since 2004 in the vietnam and also the southeast asia we kind of promoted the martial arts games and the last year for um for the last year of their emmy game they have we have started the global layout and next year for their martial break This is actually a product fitting to the global market. And we believe that it's going to have breakthrough improvement. And for the office, for the layoff of overseas, basically in the past, we didn't have any promotion yet, especially since the COVID-19 period. And we didn't focus on it yet. But from the data perspective, no matter for the income, for the mobile end or the PC end, that our customers always have a very good increase, no matter for their monthly compared or yearly compared. And although we didn't release the data yet, but the potential is quite big, especially for the entire PC end. Previously, we only promote the mobile end, but the customer is going to download the PC end once they recognize the games. And so we can see that the monthly active users will reach to more than 10 million users. And so the increased number of the year-on-year and the month-on-month will reach to more than 10%. Actually, we can see that the overseas customers recognize our products very well. So we think that in the future, for the overseas markets, for the entire service, it's going to have a very strong growth. Last year, initially, we would like to focus on the layout of the overseas market, but AI comes out, and that is why we transferred our key point into AI. And also through the two-year development, we think that the AI is going to have a localized for the office area, and it's going to have a step-by-step become more and more mature. Next year, we're going to develop the overseas market, and we hope that it's going to have a good performance.

I would like to share two aspects of the third question. First of all, from the income side, we can see that the income of our game system is higher than our own internal and external expectations. The same growth is more than 70%. This is mainly from our Internet3. As a game of our 15th anniversary, the Internet3 was launched in June, and after the end of the year, the end of the year, the end of the year, the end of the year, Then the number of players, the number of days and months, there is still a growth of several times. In this regard, it is equivalent to when we were in August, when we were in the middle of the year, there were also relatively good activities from the income section. Then in the profit section, I actually want to share a little bit, which is our Xishan area. So what we mentioned just now, our Qijian section, it is the PC section, its own profit will be a little higher. Uh, the second point is that it should be said that Xishan Ju's self-published mobile game has been in the world since we started in 2022. Many of us should say that most of the users come from our official channels. This also means that the cost of dividing us into external channels will be less, so we have been communicating with the market, that is, Xishan Ju, its business model, as a self-published, especially in terms of mobile games, So actually from this profit perspective, we would like to expand into two perspectives.

Firstly, from this income end. This season for the games is no matter for the internal expectation or the external expectation, it has extra expired of expectation. And their year-on-year scores could reach their 7%. And for their JX3 online, this is reached to when we have this annual ceremony for 15 years. And also in June, their daily active users has tremendously increased. And also in August, For the annual sales revenue, we realized that for the income perspective, it's quite good. I want to talk about the profit perspective. For the CX-3 compared with the JX-3 online, for the PC end, the interest rate is quite high. For the CX-3, the mobile game, since 2022, compared with the JX-3 online, most of the customers are coming from our official channel. And that means that we didn't share that much resources through the channels. We always have to communicate on the market that, so the decision to use this business model is that it's going to have a safe research and a safe publish. So for the mobile game, we think that we're going to explain these two questions by these two perspectives. One is for the income end, and another one is from the profit end.

Thank you. Our next question comes from the line of Lin Yang from GF Security. Please ask your question, Lin Lin.

Good evening, President Zou, President Yi. I would like to ask two questions. One is about the game business, this year's Q4 and next year's support. The second question is about The loss of our company, because I saw that Jin Shan Yun, in fact, its profit margin is also improved. And then the whole thing, if you remove the one-time reduction, the loss is also decreasing. So I just want to ask, if you remove this one-time reduction, then for us, the loss of our company, that is, the loss of our company, how much does it correspond to? And then in the future, it's probably going to be I have two questions. The first question is about the game business. Could you give us some guidance in Q4 and next year? My second question is about the losses of the affiliate companies. After excluding one-time portion, what would be the losses of the affiliate companies? Will there be any further impairment losses in the future? Thank you.

林林总,那我就先回复一下您关于那个市场指引的。 In terms of gaming, we expect that there will be a 31% growth in the whole year. As for next year, we don't have the exact numbers yet. Because we haven't started yet, we haven't finished yet. But just now, Chairman Zhou also introduced that next year, there will probably be five games that will be released. Two of them will be managed by us, and the other three will be managed by us. These include the more anticipated offline game, And then there's Qiyuan 0, World 4, and then there's Fengshen 0 and Three Seas. There are about five games. Because in terms of numbers, it should still be a big year. You mentioned the one-time impact of Golden Mountain Cloud. The impact on the group is about three billion. About its follow-up, Golden Mountain Cloud's performance will start from 8 o'clock. It's just that the specific data might be a little bit more convenient for their meeting.

Yes, Mr. Lin. Okay, let me follow up on a small question. You just mentioned the 3G of the whole year. Because you can see that the number of 3G is very high. And then consider that 4G itself, although it is a new piece of information, it is considered a traditional forgetfulness. Then we are... How do you look at the data value of Q4?

Because we are a 15th anniversary of a long-term gaming game, we will also make some record-breaking adjustments in terms of gaming rhythm. We won't say that Q3 is already very high, so we will still adjust it in terms of rhythm.

I understand. Thank you. Very clear.

So our answer is that based on this market guidance for the games, we expect that the annual growth is going to reach to 30%. And currently we don't have an actual number come out yet because we didn't complete it yet. But next year we're going to have five games launched. Two of the games were distributed via their agent, and three of the games were saved, researched, and developed. And so we can see that the market is quite expected for these five games, especially for their natural break. And also we have the word of this World 4, and the players of this World 0, this type of games, that is for these five games, is quite good and quite attractive for this market. From the number, for the quantity perspective, this is going to be a big year for us. So for the Kingdom Cloud, Let's talk about the King's Law of the Clouds, the once influence. We can see that the once influence is roughly more than 300 million RMB. So this is actually the once influence. Before this continues, we think that the performance is going to start from the eight points. For the specific data, we can follow up later. And just now I have a follow-up question about Q4 for the JX3 online. What about the expectation for the Q4 data? And our answer is that because we are doing this operation for long-term, as we mentioned previously, that we are celebrating Office 15's annual ceremony. So we will do some quarterly adjustments. We cannot say that Q3 is going to be very high.

Thank you. We have now come to the end of the question and answer session. Thank you all very much for your questions. I'll now turn the conference back to Ms. Ynan Li for closing comments.

Hi. Thank you for joining us today, and this will conclude our presentation for the 2024 Third Quarter Earnings Call. Thank you.

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