Kingsoft Corp Ltd Adr

Thank you for standing by. Welcome to Q1 2025 King South Corporation's and NIC's conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 11 on your telephone. You'll then hear an automatic message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to turn the call over to Ms. Yilan Li, our director of Kingsoft. Thank you. Please go ahead.

Thank you, operator. Ladies and gentlemen, good evening and good morning. I would like to welcome everyone to our 2025 first quarter earnings call. I'm Yilan Li, 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 its 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 only 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 first quarter of this software in 2025. In the first quarter of 2025, we achieved a good start. The overall performance was stable. Group total revenue reached RMB 23.38 billion, which is a 9% increase. Today's office continues to use users as the core, optimize product experience, and at the same time strengthen the core competitiveness of WPS 365 in the field of corporate cooperation, deepen the application of AI technology in the field of office, and promote globalization. Game business

Hello everyone and thank you all for joining Kingsoft's 2025 first quarter earnings call. We delivered a solid start to 2025 with steady performance. The group revenue reached RMB 2.34 billion of 9% year-over-year. Kingsoft's office group continues to focus on users, refining product experiences, strengthening WPS 365's leadership in enterprise collaboration, deepening AI integration in office productivity, and expanding our global footprint. Online game business continues its primary game strategy, with flagship IPs and new game genres developing synergistically.

I would like to introduce the performance of the first quarter of 2025. The total income of Jinshan Office this quarter reached RMB 13.0 billion, which is a 6% increase. By actively responding to the changes in the market environment, timely adjustment and operation strategy, focus on increasing the number of active AI users, successfully promoting the continuous growth of the number of users and paid users, WPS's personal business achieved a revenue of 8.57 billion yuan in the first quarter, which is 10.86%. In the domestic market, WPS's personal business maintained a stable development trend. In the overseas market, it achieved a high-speed growth in revenue through localization operation and differentiating functions. As of March 31, 2025, The global number of monthly active devices in WPS Office has reached 6.47 billion, with a growth of 7.92%. The monthly active device number of WPS Office PC version is 3.01 billion, with a growth of 11.3%. The monthly active device number of WPS Office mobile version is 3.46 billion,

Now, I will walk you through the business highlights of the first quarter, 2025. This quarter, King's Office's total revenue reached RMB 1.301 billion, marking a 6% year-on-year increase. By proactively addressing market shifts, refining operational strategies, and prioritizing the expansion of AI-active users, We successfully sustained growth in both our user base and paid subscription members. The WPS individual business generated revenue of RMB $857 million in first quarter, up 11% year on year. Domestically, the WPS individual business maintained steady growth, while overseas markets achieved rapid revenue growth through localized operations and differentiated feature offerings. As of March 13, 2025, WPS office's global monthly active devices reached 647 million, an 8% year-on-year increase. including 301 million monthly active devices for the PC version up 11% year-over-year, and 346 million for the mobile version up 5% year-over-year.

WCS365, through WANDA, cooperates with AI three major capabilities, continues to assist organizations and customers in realizing digital office, and speeds up the coverage of private enterprises and local state-owned enterprises. 1.51 billion yuan in revenue in the first quarter, and 62.59% increase. In March, we will upgrade and launch a channel strategy for corporate business, and build a collaborative partner system that integrates sales and supply and supply, and increase the corporate and AI office market. In April, we will release the Golden Mountain Office 5 model enhancement version in Wuhan, which will introduce deep reasoning ability,

WPS 365 leverages its three core capabilities, document management, collaboration, and AI to continuously empower institutional clients in achieving digital and intelligent office solutions. The platform has accelerated its adoption among private enterprises and local stay-at-home enterprises. generating revenue of RMB 151 million in the first quarter, a 63% year-on-year increase. In March, we launched an upgraded channel strategy for enterprise customers, established an integrated partner ecosystem for self-service renewal to strengthen our presence in the enterprise AI office market. In April, we released an enhanced version of the KingSoft Government Office Model in Wuhan, introducing advanced reasoning capabilities to further drive the adoption of AI-powered government solutions across all levels of government departments.

The game business, under the general knowledge principle of the JINPING strategy, focuses on the classic JINPING series, and continues to build a new track. Expanding the new product category, this quarter, the total income of online games and other business is RMB 10.37 billion, which is 14% of the total growth. Through the replacement and play method of the version, the Internet 3 continues to consolidate the hardware user basic disk. In April, the Internet 3 released a new news article, The return to the core of the version once again aroused players' enthusiasm. The core product of the 2D track is in full swing. With the difference in content positioning and long-term operation strategy, users are active and stable in terms of reputation, which has verified our continuous operation capability in the detailed track. The sci-fi mecha game Limit, the testing stage attracts global players and the industry. Under the guiding principle of priming game strategy, our gaming business remains focused on deepening the lexing of the classical GX series.

with expanding into new journals. This quarter, total revenue reached RMB 1.037 billion, a 14% year-on-year increase. In the first quarter, GS3 Online solidified its core Wuxia player based through version updates and refreshed gameplay. In April, GS3 Online launched its new expansion park, Taiji, archived returning to the core gameplay experience and the recognizing player enthusiasm. For the anime shooter game Snowbreak, some may note a core product in this category remains a stable user engagement and positive reception thanks to its differentiated content and long-term operational strategy. The sci-fi Metro game, Metro Break, Carnado's widespread attention from global players and the industry during its testing phase peaked at fifth on Steam's global wishlist and is scheduled for release this summer. Additionally, Fate of Sword Zero, a classic sequel to the Sword series, will carry forward the IP flexing and is planned for launch at the end of May.

Taiwan Weilai. Jinshan Office will continue to focus on AI cooperation and internationalization, maintain R&D investment, and turn new technology into real office products for users. Game business will continue to deepen the ecosystem operation of flagship IPs, and focus on new channels such as 2D science fiction. Strengthen content innovation ability, provide players with a more immersive and differentiated high-quality game experience, Next, let's welcome CFO Li Yi to introduce EG Group's financial performance. Thank you.

Looking ahead, Keysoft Office Group will remain focused on AI collaboration and global expansion, sustaining R&D investment to transform innovative technologies into practical office productivity tools for users. In gaming, we will deep ecosystem development for flagship IPs. will prioritize the emerging genres such as anime style and sci-fi genre. Strength in context innovation have abilities to deliver more immersive and differentiated high-quality gaming experience for players. Next, I would like to invite Ms. Li Yi to introduce the financial performance for the first quarter. Thank you.

Thank you, Yilan. Good evening and good morning, everyone. I will now discuss the Q1 financial results using RMB as currency. Revenue increased 9% year-on-year and decreased 60% quarter-on-quarter to $2,338 million. The revenue split was 56% for office software and services and 44% for online games and others. Revenue from the office software and services business increased 6% year-on-year and decreased 30% quarter-on-quarter to 1,301 million. The year-on-year increase was mainly attributable to the growth of WPS individual and WPS 365 businesses, partially offset by the decline of WPS software business of Microsoft Office Group. The steady growth of WPS individual business was mainly driven by the expansion of user base and paying subscribers, supported by operational strategies to boost the AI-active users and enrich the membership benefits. The robust increase of WPS 365 business primarily reflected our continuous efforts of assisting institutional clients in digital and intelligent office. along with the accelerated coverage of private enterprises and local state-owned enterprises. The decrease of WPS software business mainly reflected the adjustment of new procurement process in localization in 2025. The quote-on-quote decrease was mainly due to the decreased WPS software business. Viewing from the online games and others business, increased 40% year-on-year, and increased 20% quarter-on-quarter, to $1,037 million. The year-on-year increase was mainly attributable to the revenue contribution for Animal Games No Break, Containment Zone, and Jet 3 Online. As a launch of Jet 3 Ultimate in June 2024, it has the player experience and boosted user growth and engagement. The quarter-on-quarter decrease was mainly due to the release of few commercial content updates for JX3 online in the first quarter of 2025. Quarter review increased 6% year-on-year and decreased 7% quarter-on-quarter to $419 million. The year-on-year increase was mainly due to the growth in server and bandwidth costs and the rising China costs associated with UGET. The quarter-on-quarter decrease was primarily due to the decline in service costs of institutional clients and lower channel costs of Microsoft Office groups. Growth proofing increased 10% year-on-year and decreased 80% quarter-on-quarter to $1,990 million. Growth proofing margin increased by 1 percentage point year-on-year and decreased by 2 percentage point quarter-on-quarter to 82%. Research and development costs increased 16% year-on-year and 30% quarter-on-quarter to $828 million. The year-on-year increase was primarily driven by the increased headcount and rising AI-related expenses to support the development of AI and collaboration capabilities of Kingsoft Office 2, as well as enhanced investments in new game genres, in new game physics, The court-on-court increase was largely due to higher personal related expenses, including accrued performance-based bonus. Selling and distribution expenses increased 30% year-on-year and kept flying court-on-court up to $340 million. The year-on-year increase was managed by the greater promotional and advertising efforts in supporting testing and pre-launch activities of our new games. The quarter-on-quarter stability reflected increased marketing activities of new games, offset by reduced promotional spending of office software and service business. Administrative expenses kept flying year-on-year and increased 5% quarter-on-quarter to $160 million. Short-term compensation costs decreased 30% year-on-year and 9% quarter-on-quarter to $54 million. Operating profit before sharp rent compensation cost decreased 3% year-on-year and 44% quarter-on-quarter to $655 million. Later other losses were $22 million for this quarter, compared with losses of $4 million and $74 million for the first and the fourth quarter of 2024, respectively. Share of losses of associates of $153 million were recorded for this quarter, compared with losses for $169 million and $148 million for the first and the fourth quarter of 2024 respectively. Income tax expenses increased 40% year on year and decreased 77% quarter on quarter to $48 million. As a result of reasons discussed above, profit attributable to owners of the parent was $284 million, compared with the profit of $285 million and $460 million for the first and fourth quarter of 2024 respectively. Profit attributable to owners of the parent, including share-based compensation costs, was $360 million compared with the profit of $321 million and $496 million for the first and fourth quarter of 2024, respectively. The net profit margin included the effect of SharePoint's compensation costs was 14%, 50%, and 80% for this quarter, the first quarter, and the fourth quarter of 2024, respectively. The group had a strong cash position towards the end of the reporting period. As of 31st of March, 2025, the group had cash resources of $26 billion. Late cash used in operating activities was $102 million for this quarter, and late cash generated from operating activities was $321 million, and $1,826 million for the first quarter and the fourth quarter of 2024 respectively. Capital expenses was $121 million, $150 million, and $153 million for these quarters, the first quarter and the fourth quarter of 2024 respectively. That's all for the introduction of our financial results. Thank you all. Now we are waiting for the Q&A section.

Thank you. As a reminder, to ask questions, please press star 1-1 and wait for a name to be announced. Our first question comes from the line of Xiao Dan Zhang from CICC.

Please go ahead. Hi, Chairman Zhou. Good evening, Chairman Yilan. Thank you for accepting my question. I have two questions. The first is about our game business. We can see that XishanG has just won a 30-year anniversary trophy. Standing at this new starting point, the vision for the next 30-year game business, including strategic planning, is how to look forward to it. From a short-term perspective, the market is looking forward to this limited-time online plan. Will it be updated? The second question is about our office business. As Mr. Zhou mentioned, internationalization is one of the key strategic points of office business this year. So thanks, management, for taking my questions. First of all, as CSUN Games has just celebrated its 30th anniversary, so could management share your views on the strategic plans for gaming business going onwards, and also any updates on the launching schedules for MechaBrick? And secondly, can management update on the overseas business of WPS office business? Thank you.

Okay, I'll answer the first one first. CNG's next 30 years is a very good topic. We also did an interview on our own. I talked about some of my thoughts on this 30th anniversary. I'd like to share a few things. The core of what I'm talking about is how to spread the word. In the past 30 years, CNG has witnessed the development of the gaming industry, especially in the last 10 years, it has made some breakthroughs. How can we make it continue in the future? This is the core theme. So, what I'm talking about is One is passion. The second is hard work. Yes. And then we talked about the specific strategy. It's also three points. The first one is to stick to the principle of gold. We want to make gold. We don't want to make a bunch of rough works. The second one. In addition to the martial arts industry. We must actively open up other categories. I think it was the year before, I went to the ASEAN exhibition. This year, we will continue to use the decoder for the mech. Yes, so it can't just be an armament. We must have a variety of products. The third is internationalization. In the past 30 years, I wish in 29 years, our products are mainly with Chinese culture. The main focus is on martial arts. This category is in China and some overseas Chinese regions and some Southeast Asian countries. In general, it is still mainly in China. So in the future, I think some markets around the world are very wide. We must be more active and be more proactive in exploring and opening up. Yes. Basically, to sum up, these are the few points. Based on passion, we have to struggle, we have to make great products, we have to make a variety of products, and we have to make it international. Basically, this is for the development of the next stage. We have mentioned some guiding opinions and principles. Okay? The second one is about the defibrillator. We should have a preliminary test in March. We are also making some changes to the opinions of the test players. We are now basically on the line in July. And then in early June, we will also organize some formal It should be called official announcement. What is the specific time for the party to be open to the general public, which countries and regions, and the content. Okay? So the specific time is mainly for that time. But now it's basically confirmed that it will be online in July. Okay? This is the first question. Okay. Please translate it.

Okay, so firstly, I would like to do the answer regarding the first question. So actually, for the season one, this game has been passed for 30 years. It's a very good topic. Internally, we have discussed several times where. So for this 30-year anniversary, I would like to share about my own opinion. The key thing is that how we can transfer this successful experience to the future, especially for the Xishang ones in the past 30 years. We withdraw the development of the whole game. We have some breakthroughs, but how we could make this continue in the future, this is going to be the core things. I think that the first thing is that the passion. We love it very much, and we have to work hard on it. From the strategy, there are three points. The first thing is that We need to follow the principle to make good quality game. And secondly is that we need to do the martial arts better. Except for to do the martial arts better, we also have to develop the other categories. The year before last year, we have released another game. And this year, we're going to continue to have this restriction limitation. So we think that the categories of the game should not limit it for the martial arts. We need to have multiple different types of games. And thirdly is that we need to make it internationally. In the past, for this Shishan 1, especially in the 20-year anniversary, we have mentioned that our product really only focuses on the Chinese culture for the martial arts parts. In China, the target players are mostly in China, and also the Chinese in overseas, and also the southeastern countries. So generally speaking, the main players are in China domestic market. In the future, we need a target for the whole global market. We need to more actively to develop this market. So this is different things. We need to have a passion, we need to work hard, and we need to have good quality products. and then multiple categories internationalization so basically this is the future the next stage the development principle and ideas we think and secondly is that regarding the restriction breaker so we our initial plan is that after the test of march we internally did some like tests and we collected some opinions from the players We did some modification. So basically, we're going to release it in July. But at the beginning of June, we're going to organize an official announcement. And during that official announcement, we're going to mention the exact time, what time, and which country we're going to release, and what type of content we're going to release. So basically, based on that official announcement. But currently, we can see that basically, we're going to launch in July.

Okay. The second question is about office. Indeed, for the entire office, the core strategy set this year, or will be continued for the next few years, is actually AI and collaboration, plus overseas. Among overseas, the first time was very clear. After 2018, There are various influences in the middle, and the entire overseas strategy is somewhat interrupted. But this year, the overseas strategy has been very clearly re-published. As for the current progress, I will divide the product and operation into two dimensions. The product dimension, our focus is on doing a multilateral version for the area where we are going to enter the military in the future. We should say that we are perfecting the multilateral version as well as the compatibility, etc. From the current situation, it's almost mid-June, and we'll be able to complete the basic multi-person version of this preparation. This is on the product. From a operational point of view, there are quite a few design aspects. In the first half of the year, we mainly completed the analysis of the choice of areas, the analysis of the competitors, and the strategy of participation. as well as the team structure. We are basically able to complete it by June. And then specifically, I think we will wait until June. When the time is more mature, we will communicate further with the people in charge. This is some of the content of Zhezhe office. Of course, there is one more thing we also see. Not only is the office in the past. These years, the self-improvement of overseas itself is very strong. And in this wave, there are many middle-sized enterprises out of the sea. We think it is also a very good opportunity. Therefore, we will fully consider our entire operation strategy, which is called the team-based out-of-sea strategy, which is to follow the influence of Chinese companies in the area. The stronger it is, we may also be an important basis for our entire out-of-sea decision-making. Simply put, it is to go out of the sea with Chinese companies.

So the second question is regarding the officing. So it's a choosing is that for the whole officing this year, the COVID strategy and also their future, how many years we're going to continue. Basically, we're going to last on their AI, their collaboration, plus the overseas. Especially overseas, this is the first time to clearly mention after 2018. Because as we noticed that in 2018, they were blocked, as was paused. But this year, we reminded this word, which is the overseas strategy. So regarding that, I would like to explain in the two perspectives. One is the product perspective, the other is operations perspective. For the product, we need to make a multiple languages version. target for the region we're going to working on in the future. We're going to complete the multiple language version including that we're going to have the comprehensive like bilingual, multiple lingual versions in terms of the products and also to have make it like easily to connect with the other things. And currently we can see is that basically we can complete that in the middle or the end of June. we can complete their multiple languages version this is from the product perspective for the operations perspective so that is quite a lot of content because in the first the second year basically we have selected the regions and we analyzed our competitors and we have the strategy with the differences strategy and also the combined to have a good organization for the whole team we think that in june we can complete all of that but for the details we believe that in june when the time is good for us we could have a further communication with our investors so this is target for this office in overseas content another thing we would like to add is that not only for the office in actually in the past their overseas is actually have a very strong ability for the safe growing and a lot of this Chinese companies they would like to go overseas we think that this is going to be a very good opportunity because we're going to fully consider that we're going to combine together with the other Chinese companies because we believe that if some of the region we have a very good influence over that probably we could have a combined together with the other Chinese companies and then this is going to be a very important consideration we would like to target for and make it into our strategy.

Hello, Operator. We are ready for the next question.

Thank you. One moment for the next question. Our next question comes from Wenting Yu from CLSA. Please go ahead.

President Zhou, President Li, President Lin, good evening. I'm Wen Ting, an analyst at CellSA. Thank you for giving me the opportunity to ask a question. I have a few questions I would like to ask. First of all, it's about the wiretap. Can you give us a brief explanation about the wiretap? After the last project, which side did you optimize and change? How do we see the performance expectations after the launch? And the second question is about the Internet 3. Can you share with us the trend of our active player tree and the trend of Apple in the near future? The first question is regarding the meta break. Since the last testing, could you please elaborate a bit more on what major optimization and changes have been implemented in this title, and how do you expect the performance post-launch? And the second question is, could you please share the recent trends in the active user base and output of the GX3 title? Considering the upcoming high base effect in the second half of the year, how do you foresee GX3's revenue growth and the potential impact on our gross margin and operating margin? Thank you.

Uh, let me answer this question. Uh, after the first stage is online, uh, I don't want to go online. The public test is us. In fact, we call this extreme test. It's not a public test. This is our extreme test. It's not a public test. Uh. Basically, we are doing modifications around a few types. I also consider it as a type. Uh, the first type is a bug type. Basically, this is easy to understand. After the first stage, uh, found this, this, there, there, there are some that are not consistent with the design. We just, or on the program, uh, and so on. Our bug type, the second type, is actually the design type of design. The design is mainly around a few. One is balance. The second is playable. The third is playable. Uh, according to the actual results of the player's test, we will make a certain corresponding, and even make some adjustments to the underlying design. Yes. The third type is actually what the players experience. For example, for example, the 12 mechs. The players feel that they may need to get them for free. Yes, in this case, from the very beginning, as soon as they go online, the players experience It will be richer, not as open as this test. Yes, so basically, of course, it also includes this. In the 616 model, that kind of change may affect the balance and so on. It will also affect the fairness of this game and so on. So we will also make some adjustments. So basically, these are the categories. Yes, of course, it will still be because Finally, after it is officially online, it will also involve some activities. We also hope that after it is officially online, we will do some enrichments and increases. This is basically the work and content that we are doing after the last limit test. As for the expectations after the online, We have a bottom line, a base line, a middle line and a high line. Yes, but anyway, when it comes to gaming, I always keep one. I would rather give a surprise than give a surprise. That's a principle. That is to say, after the first month data comes out after July, we dare to give a better So we'd like to answer your question regarding this restriction breaker.

And we actually did the test. It's not a public test. This we can say is like limit, like extremely limit test. So based on that, we have, we are currently doing some modifications in different parts. First that is the buck. So after we did the test, we realized that something is not to match the race, our initial design, either programming perspective or whatever. So we're going to do this modifications accordingly. Secondly is from their design perspective, like for example, there as the balance and also the playability and the durability so we're going to based on their test results from there to do some adjustments based on like underlying design and so like for certainly is that based on their players experience like for example uh some player told us that for this the 12 mega it's um it could be and able for them to collect it freely so that they could be able to play it once they started to play instead of wait for several times then they could be able to get it in that case they can give a better experience for the players and also for their sick plastic motor we also need to do some modification because we get the information that it's going to influence their their needs so we're going to do the adjustment And after launching, and we're going to follow their activities, we hope that we're going to have more activities to make the content more richer. Which means that after the previous task, this is part of the job we are doing, and also the content we would like to modify. Regarding the expectation, actually, in our internal group, we have the basic line, we have middle line, we have higher line, but For the game, I always would like to give people a surprise instead of bad news. So I still would like to wait until July when the game is officially released. We're going to give a more accurate, more reasonable, a better result and also the performances conclusion for the whole year.

The second question is related to Internet 3. From the data of Q1, the number of users in the whole month, including up value and share rate, these are basically a better continuation. Although we saw in the financial report that compared to Q4 last year, there was a slight decline. In fact, this is basically what Internet 3 has been running for more than ten years. It's a very normal phenomenon because Q4 is basically our biggest release of these two days a year, which is also one of the highest levels of our entire revenue. Yes, so, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, Although the Internet of Things was launched in 2009, it's actually been 16 years this year. Let's start from the 10th year. At least I remember. Every year, the analysts will ask, this game has been around for so long. How do you have the confidence to do better and better? Anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, anyway, uh, uh, There is no way to make a 100% promise to the market that we will definitely be able to do something this year. I was just at the beginning of last year. When we communicated with the market, the guidance we gave the game was not high. Yes, but in fact, this whole year down, I think this is still a very satisfactory target. In fact, the reason is the same. In the game market, it has its uncertainty. this new version, this new content, the degree of attraction to players, this is an internal factor. The external factor still depends on the entire market change. Will there be some new categories that will create challenges for us? Or the players themselves, will there be an increase in fatigue for this category? In fact, or simply put, there are still many uncertainties inside and outside. So actually regarding the GX3,

Since Q1, their whole monthly active players and also their up value basically is quite good, but compared with Q4 of last year, so their year-to-year is a slightly decrease. That is very common because for Q4, that is the biggest, most busiest season, and we're going to get the highest income during the whole year. So from the data perspective, Generally speaking, it's quite stable. And secondly, it's for the second half year. Actually, I have at least answered five years. In fact, I still can remember since 2009 when it's officially launched. During that time, up to now, it's already been passed for 16 years. And since the 10th year, Almost every year, either the analyst or the investor is going to ask this question because they think that for such a long time. Why do you still have the confidence that you can make it better and make it higher, better results and better performances? And even the last year, we also asked about the same question, 2024 compared with 2023, because we know that 2024 is already the highest value historically. I would like to say that the challenges still exist in the past 16 years. So whether the players would like to recognize it, whether the players still care about this type of game, it's going to have some technical ways to do that. Up to now, we can see that we still have the confidence to do it, and we're going to stably and operate properly for GX3. Of course, we cannot 100% give the whole market any certain promise. Because it's the same thing as that last year, at the beginning of the year, when we had communicated with markets, our kinds of the guidance was not that high. We didn't have a very high expectation for last year. But when it's complete of last year, it's quite good performances. So the reason is the same. Because for the game, it has a lot of uncertainty, no matter for the uncertainty coming from our servers. For example, we're going to have a new version, we're going to have the new content, how much it's going to attract the players, and we're going to have a lot of their internal elements. And also externally, we also have a lot of challenges there, whether there is some new type of game launching to the world, whether they're going to have some challenges, whether the players themselves, they are tired of this type of martial arts games. So generally speaking, internally and externally, there are a lot of uncertainty. But anyway, we have the confidence to operate JX3 good and well.

I'll translate it into English. Xiaomi has recently break through in AI self-developed large models. Is there an opportunity for Kingsoft to collaborate with Xiaomi in the AI field? And what potential forms could this cooperation take? Thank you.

This is a very good question. It's also a strategic question. I think it was at the beginning of last year. I think it was outside. I often say this. I talked about it for two or three years. including office, cloud, and other aspects. It's all about AI. We call it all-in. In June of 2024, after Xiaomi's release, Xiaomi decided to use AI as the core. or Xiaomi has also determined its AI strategy. Basically, from Q3 last year, I told everyone that I had basically completed the layout of the entire Leixi AI, and I expressed that the entire Leixi enterprise will use Xiaomi as the core of the large model, and that Jinshan Yun will mainly take over the AI's AI-based capability, and then the office, the game, uh, uh, uh, uh, uh, I understand what you just talked about. You asked about Jinshan software. I mean, it should be Jinshan Software Group. I just talked about Jinshan Cloud, Jinshan Office, and even CIG Games. Jinshan Software Group, actually, on March 31, officially established an AI product center. What I'm going to do, when I was recording in March, I actually talked to some investors. Uh, uh, so, uh, so, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, uh, It has a very strong IT or AI ability. It can complete this upgrade by itself, which is an intelligent upgrade. But there must be a lot of companies that know that AI is very valuable and needs AI to replenish energy, but they do not have this kind of IT ability, intelligent ability. So the group will use AI to replenish energy for companies in the future. I should go to work. What is my strategy at the moment? I said, I said, I said, I said, I said, I said, I said, I said, we will extract the shared parts, modules, and even products, and then use them to pay for other enterprises. So if we add this part to it, you can understand that the entire AI policy model is built by Xiaomi itself. The bottom-level AIS is built by them, and the top-level SaaS applications Xiaomi is doing Xiaomi's Jinshan office game, doing Jinshan office game. Groups and software groups will be self-disciplined. On the top of Xiaomi, I want to make a key breakthrough on the top of the company. First of all, I will restore myself to realize the upgrade and then restore other companies. This is basically a low-level AI ecosystem strategy, okay? Of course, the specific progress, after all, we have just established it. I just talked about it. First, upgrade your intelligence. Then go to other companies. If there is further progress in the future, I will share it with you at the right time.

Okay, so this is going to be a very good question. It's kind of a strategic level question. Last year, in the beginning of last year, I have talked to the outside. I always frequently mention that it reached to the 2023, the whole software, so including the office, including the cloud, we're going to target for AI. That is why we call them all in. So In 2024, in June of 2024, Xiaomi actually officially announced that they're going to base AI as the core development strategy. So basically, since Q3 of last year, I mentioned to the external world is that basically we have completed the lay-series AI layout for the big module, for the lay-series enterprises, We're going to base Xiaomi as the core and cover of the officing, the gaming, and collaboration. In the future, we're going to base on the core, Xiaomi's big model, to open their up-level application. So basically, the whole late-series enterprise is going to have this type of layout for their AI strategy. That is why for this type, just now I have mentioned that. I understand for the Kingsoft, it's a whole group. The Kingsoft group, including the cloud, including office, including game, the whole group, we have officially set up the AI product center on the 31st of March. So during the roadshow in March, I discussed with several of our investors The AI in the future is going to be the core power for their enterprises in the future. So my understanding is that basically all of their digital systems have to be rewritten by AI. However, some of the enterprises, their company themselves has a very strong ability for the IT ability and AI ability. So themselves could upgrade themselves. but still we have a lot of enterprises they don't know how to get the value from ai they cannot get the empowering from ai because they don't have the ability for the ai so they have no idea how to they could have like like empower themselves so in that case we think that we need to have um like we believe that in the future we're going to target for those type of customers And we need to firstly empower ourselves. We need to understand how to empower for the other enterprises. But the way we need to do it is that we're going to do our work. Before we empower the other people, we have to empower ourselves. For the whole Kingsoft group, we need to do as quickly as possible to have the upgrading of ourselves, doing the whole process. We're going to understand and control of, we know exactly how we could get the empower through AI. And after we complete that part, we're going to get the common things from this process, like different module, different product, how we could have the empower for the other enterprises. Then we can add this into our service to finish the whole complete AI process. So the module is going to be the Xiaomi, and this is the basic logic. And the App Levels application, we're going to have this Kingsoft whole group. It's like the officing, the game, everything else. And we're going to focus on their empowered enterprises using AI. So this is going to be the breakthrough in the future. And as I mentioned previously, we need to upgrade ourselves. Then we could be able to empower the other enterprises. So this is the whole ecosystem, the whole AI ecosystem. system strategy for the late series for the details we have mentioned previously is that we need to intelligent make ourselves intelligent enough then we could be able to empower the other enterprises this is actually when we have a better like next step progress when we have a more collection then i would like to share with us more

Thank you for the questions. With that, I would like to have the call back to the management for closing.

Hello. Thank you for joining us today, and this will conclude our presentation for the 2025 first quarter earnings call. Thank you.

That concludes today's conference call. Thank you for your participation. You may now disconnect.