Kuaishou Technology B

And this meeting is being recorded. And now I'll turn the call over to Mr. Matthew Zhao, VP of Capital Market and IR at Quashel. Thank you, Arbiter. Good evening and good morning, everyone. Welcome to Budget Technology Q1 2096 Financial Results Conference Call. Joining us today are Mr. Cheng Yixiao, Co-Founder, Chairman and CEO, and Mr. Xinbin Xiaobo. Before we start, please note that today's discussion may contain forward-looking statements which involve a number of risks and uncertainties. Actual results and outcomes may differ from those discussed. The company does not undertake any obligations to update any forward-looking information, except as required by law. All important information about this call and forward-looking statement is referred to the company's public information. All first quarter 2026 results announced and ended March 31, 2020, as issued earlier today. So in today's core management, we'll also discuss certain non-FRS financial results. These are provided for additional information and should not replace the FRS-based financial results for a definition of non-FRS financial measures or reconciliation of the FRS to non-FRS financial results and related risk factors. Please refer to our Q1 20.6 results announcement. For today's core management, we'll use Chinese as the main language. A third-party interpreter will provide simultaneous interpretation in prepared remarks session and a consecutive interpretation during the Q&A session. Please note that English interpretation is for convenience purpose only. In case for any discrepancy, management statements in their original statement will prevail. Lastly, unless otherwise stated, all transit units mentioned are in RMB. Now, I hand the call over to Yixiao. Welcome to Qashul's Q1 2026 earnings conference call. In Q1 2026, we made a complex and evolving market economy environment to continue to advance our AI strategy execution, clean AI, and its global leadership in multi-module video generation. And AI technologies continue to enhance the vitality of our economy ecosystem. It expands monetization and improves organizational sufficiency. In Q1 2026, the average DA use on Qashul averaged over $413 million total. Revenue increased by 3.4 YOY to 33.7 billion. Revenue from our core commercial business, including online marketing services and other services, primarily e-commerce, increased by 10.7 YOY. Adjusting net profits reached 3.4 billion RMB with an adjusting net margin of 10%. CleanAI demonstrated strong momentum, driving our second growth curve, sustained its global leadership in model capabilities and product experience, while achieving rapid monetization growth. In Q1, CleanAI generated revenue of over 650 million RMB, representing worldwide growth of more than 300%. Next, I will walk through the details of our major business segments in Q1 2026. First, our AI strategy and the progress of our large video generation model, CleanAI. In Q1, CleanAI continues to advance its vision of empowering everyone to craft capitating stories with AI. Through ongoing model iteration, intelligent product upgrades, and deep penetration across professional scenarios, CleanAI further reinforces global leadership in AI video generation. At a modern technology level, in February 2026, we launched the CleanAI 3.0 model series. Due to an all-in-one product framework, the CleanAI 3.0 model series was full of model inputs and outputs, spanning text, images, audio, and video, integrating video understanding generation and adding in one streamlined AI workflow. While supporting video generation of up to 15 seconds, the Cling AI 3.0 model series delivers highly flexible storyboard control and a more precise semantic alignment, incorporating simultaneous audio-video generation capabilities with strong subject consistency to further extend the boundaries of AI storytelling. At a product level, Cling Lab agents more upgrade the creative experience from standalone to an intelligent agent-driven system. with features including multi-turn conversational editing and a multi-perspective intelligent shot expansion. In addition, CleanAI launched the Team Plan, supporting real-time collaborative creation for up to 15 members and enabling creators to efficiently manage content creation workflows among teams. Recently, we launched Baseball Live Effect, which once again ignited a global AI creation frenzy and swept across social media platforms worldwide. This viral hit propelled Queen AI to the top of the overall App Store charts in 42 countries and regions, including Germany and Brazil. We have continued to focus on the core needs of professional creators across the field in television, advertising, e-commerce, and gaming sectors, supporting common production with end-to-end industrial-grade capabilities, and driving meaningful cost reduction and efficiency improvement. Clingy Eye was used in the creation of selective virtual scenes and visual effects, resulting in a Chinese historical drama that swerves into file shares in the Hollywood series House of David. Clingy Eye has supported the generation of hundreds of high-quality shots, including grand scenes and complex battle sequences, demonstrating its exceptional strength in commercial film and television production. With broader adoption across professional creative scenarios, Clingy Eye's commercialization has accelerated. In Q1 of 2026, Cling AI generated a revenue of over $650 million, representing growth of more than 300% year-over-year. In March, Cling AI's analyzed return run rate reached approximately $500 million. We made continued solid progress in advancing the research and development of our general-purpose models and in deploying AI-driven inhabitants across our commercial and organization ecosystem. At the general-purpose model level, we released the CAD Coder Pro V2, an eugenic coding model with strong capabilities from MUI aesthetics, command-line reasoning, and agent execution. It is compatible with the mainstream AI coding tools such as Cloud Code. It has been trained and optimized for open call and is capable of navigating complex real-world application workflows. In terms of AI empowerment for our commercial ecosystem, we continue to deepen the application of regenerative recommendation launch models and intelligent bidding models in online marketing services scenarios, driving roughly 4% growth in domestic online marketing services revenue in Q1. To optimize our generative recommendation large models, we incorporate multi-model aligned advertising in settings. By combining value-aware, supervised learning with ranking-guided reinforced learning, we improve the quality of the material recommendation candidate set. We also enhanced inference efficiency through model optimization at inference stage for improving model performance. For e-commerce business scenarios, the new generative search framework, OneSearch v2, was fully rolled out across e-commerce search scenarios in Q1. Through tech innovation, we have introduced a self-destination generative search framework based on latent space reasoning and enhanced the model's inference capabilities and search experience without incurring additional inference costs and or service latency, withdrawing incremental GMV growth after approximately 50% of our e-commerce search business. At an organizational ecosystem empowerment level, Bioshock's proprietary coding tool, CodeSeeker, has driven AI-generated code penetration to over 50%. it's also evolved into a company-wide general presentation to my flickr explaining its use scenarios from engineering coding to broader employee facing scenarios it now empowers functions across r d product operations data etc enhance overall organizational efficiency second user growth and content ecosystem Q1, an average data use on partial app reach of 413 million, an annual reach of 772 million. Average daily timestamp per user remained relatively stable. By providing differentiated premium content, generating our traffic mechanisms, and expanding social interaction scenarios around Chinese New Year, we offer users a higher quality and a more heartwarming online community with distinctive partial characteristics. In refining our distribution mechanism, we balance user experience with monetization efficiency, resulting in increased exposure for premium content. In terms of user growth quality, we further refine operations across all channels. By integrating user acquisition spanning with monetization scenarios and continuing to innovate our user retention strategies, we successfully improve user growth ROI. During the 2026 Chinese New Year holiday, we created an immersive online spring festival experience to drive faculty user growth through innovative interactive features and extensive premium content matrix, achieving a new historic peak in DAUs. In terms of our content ecosystem, we launched a series of special characteristic content IPs, including special spring festival galas for the Year of the Horse, the Ulaanbaatar Grand Stage, the Northeast Comedy Show. Leveraging Queen AI, we released a generated Chinese New Year animation front-page service. The show got a song. These initiatives foster vibrant, festive atmosphere for users while amplifying the popularity and influence of cultural native content. User social interactions increased significantly during the Chinese New Year campaign. The number of user pairs using our social interaction products was a group of 25% compared with the pre-Spring Festival period. And the number of users that sent private messages increased by 15%. These initiatives fostered a vibrant, festive atmosphere for users while amplifying the popularity and influence of quite short-native content. Data showed that our 20.6% tenancy-year programs generate over 15 billion live streaming views and more than 250 billion for video views and over 6.5 billion cumulative likes upon user growth and reinforcing using MyShare for broadcasting press. Third, online marketing services. Q1, revenue from online marketing services reached 19.6 billion, up to 9.3% of our YOY, with revenue from domestic online marketing services growing by more than 10% year-over-year. In Q1, the content, consumption, lifestyle services, and AI application sectors were the primary drivers of our non-economic marketing services revenue. In the content, consumption sector, AI reduced production costs and lowered creative thresholds for coming-style short plays, driving rapid growth in content supply and related marketing demand. As of the end of March 2026, the peak of daily marketing spend on special comic-style short plays exceeded 20 million RMB. Within the lifestyle service sector, where clients primarily operate on a lead-based model, we advanced more refined industry operations across 20 verticals, including healthcare industry and equity-compromised service allocation and automation. By tailoring our solutions to conversion characteristics of different industries, we help merchants improve customer acquisition efficiency and improve incremental advertising spend across these sectors. At the same time, we helped the merchants reach potential customers more efficiently and improve user conversion rates through product upgrades. In addition, during the Finance New Year period, demand for marketing placement in the application vertical was strong. We effectively captured revenue budgets and optimized the deep conversion outcomes contributing to AI application clients' increased marketing spend and commitment to our platform. In Q1, we accelerated penetration of AI across diverse online marketing services scenarios, covering the full pre-placement, in-placement, and post-placement lifecycle. This improved clients' placement experience and drove growth in total spending from online marketing services. In pre-placement, the generation of AI-based marketing materials enabled merchants to produce materials at a lower cost and more efficiently. As of March, AIGC short video marketing material spending contributed 10% of total for video online marketing spending on our platform. At the in-placement stage, our universal also X placement solutions became the dominant placement tool adopted by most online marketing clients. During the quarter, we added a new AI agent feature to UAX placement solutions. Learning from the best practice in placement optimization, creative generation, and editing across verticals, our UX placement solutions automatically assisted our advertising teams with tasks such as ad unit creation and feed management, improving overall placement efficiency, and post-placement stage AI. Driven analytics automatically review the performance data and provide atomic feedback to clients, reducing manual operational workload. Meanwhile, additional employee solutions offer 24-7 automated responses, enabling clients to handle consuming parts in real-time, especially during period sessions over night hours when human support is limited. For e-commerce marketing services, we further advance and deepen our omni-domain traffic synergy strategy through improved coordination between our organic and commercial traffic pools, Enhancing e-commerce traffic exposure and business growth for brand merchants. In Q1, we onboarded an increasing number of brand merchants and small and medium-sized merchants. The number of active merchants using marketing placements increased by 33% YOY and brand advertising spending increased by 42% YOY, supporting GMB growth for brand merchants' self-operated business across the Omni domain and areas. Meanwhile, AI capabilities have been fully integrated across our end-to-end e-commerce marketing placement workflows. With coordinated efforts of user interest in, for instance, AI agents, creative and production AI agents, and appealing production AI agents, both marketing placement precision and efficiency improved. On the product side, with continuous upgrades, our Omni software marketing solutions accounted for a greater share of our total spending from e-commerce marketing services and became the primary placement offering for our e-commerce marketing services. Our Net Transaction ROI product helps merchants optimize their Net Transaction GME, enabling more stable settlement outcomes. In Q1, client penetration rate reached 45% across industries and meaningfully reduced product return rates. Meanwhile, our full-store hosting model allows merchants to overcome single product placement constraints through one quick store-wide placement, spraying up manpower. Who's e-commerce? We will advance our e-commerce strategy through three key upgrades, prioritizing clean user growth, supply acquisition, and deeper integration of e-commerce and commercialization traffic. This will enable merchants to better capture the end-to-end synergies across omnidomain scenarios, amplifying growth momentum. In Q1, by centering our advancing strategy, our e-commerce business achieves a sustainable healthy growth. We remain committed to strengthening omni-domain traffic synergies and refining operations across the full buyer lifecycle to drive long-term growth in our e-commerce buyer base. In Q1, on the supply side, we prioritized onboarding brand merchants and new merchants while further improving the quality of our supply in the first quarter. For brand merchants, we continue to advance our Voyage initiative, which launched in the fourth quarter last year. targeting top-tier brands across diverse verticals to support them on multiple fronts, including traffic operations and brand building. And at first, the quarter driven by incremental growth from new brand merchants and brand merchants' contribution to overall e-commerce, CMV, and commercialization continued to increase. maintaining strong year-to-year growth. Meanwhile, existing merchants continue to scale and stabilize their operations, while strengthening the health of residents of the e-commerce supply ecosystem. In new merchant acquisition, we work closely with our service providers across one of our targeted priority industrial zones nationwide. In Q1, the number of new merchants onboarding in these industrial zones increased about 41.8% worldwide. In addition, in collaboration with industry teams and SME merchant teams, we actively empower the new merchants to thrive across our full lifecycle from onboarding and early growth to scaling through a mix of merchant-incentive programs, operational tools, and business safeguards and marketing initiatives. In Q1, the number of SME merchant groups is leading to a healthier merchant structure and a more diversified supply. In Q1, we thought we'd improve our KOL ecosystem structure. This enhanced the supply of high-quality e-commerce content, and we'll continue to strengthen support for mid-tier KOLs. In January, we launched a treasured streamer spotlight initiative leveraging platform resources to identify and support outstanding KOLs across verticals and help them scale. In addition, we further refined our incentive policies, which significantly improved KOL streaming frequency. In Q1, the number of average daily active streamers hosting live sessions with over 10,000 followers grew 10.1% year-on-year. To empower KOLs, we began working with distribution and industry initiatives and providing top-tier merchants and KOL as we diversify monetization growth and market opportunities by expanding the reach of high-quality products with distinctive cultural e-commerce characteristics for a broader user base. Through the subsidy initiative, especially the KOL Blockbuster initiative, along with continued optimization of our distribution product allocation capabilities, we improved the efficiency of KOL product matching. In addition, we hosted offline matchmaking events between merchants and KOLs and introduced tiered services for KOLs at different levels, enabling high-precision distribution matching. In Q1, the number of merchant KOL matches in the distribution pool increased by 47 year-over-year, while the number of active KOLs participating in distribution grew by 23.5% worldwide. Our omni-domain e-commerce operations ecosystem continues to show strong growth momentum as we strengthen coordination between content-based and shelf-based scenarios through intelligent subsidies and refined operations across the full user lifecycle. We achieve end-to-end efficiency improvement from product recommendation to repeat purchase, building on stable and sustainable growth of foundation for merchants. Content-based scenarios continue to serve as the important driver of user demand. As user consumption habits increasingly expanding through browsing, search, and shopping mall exploration, our dominant domain consumption mindset among users have gradually taken shape. In Q1, e-commerce intent driven search TV grew 11% here over the year, while new and returning buyers in the shopping mall increased by approximately 36% in March. indicating users strong activity in shopping in time. In addition, we ensure supply will increase in purchase frequency among pen-shell-based e-commerce users. Furnishing end-to-end AI capabilities, we deliver tangible operating efficiency gains for merchants and upgrade user experience. Leveraging large model capabilities, we comprehensively upgrade the shopping decision-making process to end-to-end empowerment, spanning user-latent demand activation, search engagement, guided shopping and live streaming rooms, and finally, subsidy distribution. Due to large-model technologies, we launched an upgraded search experience by introducing an AI agent-based one-stop intelligent shopping assistant. With this upgraded search, we evolved from user-initiative product lookup to an AI-led product recommendation, significantly improving search conversion efficiency. In addition, leveraging AI to empower sales operations, we optimized the process of guided shopping in live streaming rooms. Illustrating scenarios of real-time product and highlight summarizations on an AI-powered outdoor real-time hosting feature generated over 10 million in incremental GMB per day per merchant. Next, regarding our live streaming business, in Q1, live streaming revenue reached 8.5 billion RMB. We remain committed to the health of live streaming ecosystem as our core priority, focusing on supply-quality improvements, content enrichment, and AI innovation to build a sustainable live streaming ecosystem for long-term growth. We continue to support high-quality content categories such as premium group live streaming and strengthen the professional operations of our current agencies. Solidify and the foundation of live streaming supply. On a product and technology front, AI capabilities fully empower live streaming rooms, AI tools including AI interaction assistance, additional avatar solutions, and AI private messaging improve the streamer's service efficiency and enhance the viewer's engagement experience. Quina's video generation experience significantly empowered live streaming data creation, accelerating a gift rollout, and enriching creative expression while boosting user willingness to pay. In Q1, the AI Universe series goes with the customizable special effects sent by users with 1.1 minutes. In content, we launched a diverse range of live-streaming interactive features during the Chinese New Year to build engaging live-stream scenarios. The Kuaishou Mastermind Quiz series featured over a large AI digital human streamers generated by CleanAI, interacting with users throughout the experience and attracting nearly 50 million users to actively participate. At the same time, we put our strength in our gaming content ecosystem. During the Chinese New Year, we launched a spring festival player carnival campaign 50 game developers and collaborating with major game ITs to roll out exclusive content and user benefits. Moreover, our esports business, a key strategic pillar of our gaming system, achieved a breakthrough. In April, Qualcomm's PS3 team won the King Pro League Spring 2016 Championship, driving the further evolution of the gaming system. Finally, about our overseas business programs. In Q1, we continuously explored high-value growth strategies for our overseas business while responding to market changes with business resilience. In terms of traffic, we continue optimizing user acquisition efficiency, and user growth makes a cultivated economy ecosystem Meanwhile, we further expanded the content verticals favored by our core users to deepen their engagement. Brazil's key market purpose is developing a maintained steady average DAUs and average daily timestamp per DAU quarter-over-quarter. For online marketing services, we consistently strengthen our advertising product availability by leveraging AI to fully empower our end-to-end marketing. workflows, improving placement efficiency and performance stability for clients. At the same time, we capitalized on our strength at content platforms to look like a commercial creative to unlock incremental advertising budgets, particularly from work that was led by cross-border e-commerce suppliers. Our e-commerce system pursued the solid year-over-year growth in GMB and order volume in the first quarter. but strength in key categories and high quality products supply improved conversion and repeat purchase rates. Meanwhile, through AI-assisted content reproduction and content reformation, we continue to optimize operational efficiency and profit generating availability. In summary, confronting many challenges and rigorous tests We remain steadfast in our core AI strategy, breaking through barriers with our deep tech and ecosystem strengths. Looking ahead, we will navigate certain needs with long-term results, continue steepening AI integration to a long-term value for all stakeholders, and allow new blocks of data. And that concludes my remarks. Thank you. I'll hand it over to Jinbin. Thank you, Yiqiao. In Q1, we continue to advance our AI strategy and main meaningful programs, leveraging our leading AI capabilities. We deepen our empowerment of customers' time and business ecosystem, delivering healthy, steady growth across both our operational metrics and financial performance. We continue to broaden the application of AI-locked models across business scenarios, further optimizing user experience and enhancing operational efficiency for our business partners. At the same time, AI is rapidly realizing its commercial value as the company's second growth curve. In Q1, the group's total revenue reached 33.7 billion RMB, with revenues from our core commercial business, which includes online marketing services and other services, primarily e-commerce, growing 10.7% year-over-year. Notably, QINGA generated revenue of over 650 million RMB, representing a year-over-year growth of more than 300%. Adjusting net profit was 3.4 billion RMB, with an adjusting net margin of 10%. Well, continuing to scale our investment in AI, we maintain the group's overall profitability and operational cash flow at a healthy level. Now let's take a closer look at our Q1 financial performance. Our total revenue grew 3.4% year-over-year to $33.7 billion in Q1. The increase was mainly driven by growth across our online marketing service, e-commerce, and clean AI businesses. Online marketing services revenue increased 9.3% to 19.6 billion RMB in Q1 from 18 billion RMB in the same period last year. This growth was primarily driven by the accelerated generation of AI across diverse online marketing services scenarios, which views marketing material regeneration costs for clients and optimized their placement experience while also improving conversion efficiency and driving higher spending by our marketing clients. Revenue from other services, including our e-commerce and Queen AI businesses, reached 5.6 billion RMB in Q1, up 15.9% from 4.8 billion in the same period last year. The increase was mainly driven by the continued expansion of our Queen AI business by continuously refining Queen AI's foundation models and developing more innovative features. We have broadened this doctrine of professional creative scenarios of salary and commercialization. In Q1, our live streaming revenue was 8.5 billion RMB. We consistently cultivated high-quality content offerings, expanded live streaming scenarios, and leveraged AI-empowered innovations to develop a rich and healthy live streaming ecosystem and diverse high-quality content. Cost of revenues increased 11.1% year-over-year to 16.5 billion RMB Q1, accounting for 48.8% of revenue. The increase was mainly due to higher revenue sharing costs and revenue growth, as well as increased bandwidth expenses, server custody costs, and depreciation of the property and equipment and the right of use assets, and amortization of intangible assets. Based on the above, our gross profit was 17.2 billion RMB in Q1 compared to 17.8 billion in the same period last year. Gross profit margin was 51.2% compared to 54.6% in the same period last year. Starting to expenses in Q1, selling and marketing expenses were 10.3 billion RMB compared to 9.9 billion in the same period last year. Selling and marketing expenses slightly increased to 30.6% of total revenue from 30.4% in one last year, primarily attributable to increased selling in promotion activities. RMB expenses increased 9.8% year-over-year to 3.6 billion RMB, accounting for 10.7% of total revenue. The increase was mainly due to higher employee benefit expenses, including share-based compensation expenses and increasing investments in AI. Administrative expenses were 770 million RMB compared to 830 million in the same period last year, primarily due to a decrease in employee benefit expenses, including related share-based compensation expenses. The group level net profit for Q1 was 2.9 billion RMB. Group level adjusted net profit was 3.4 billion RMB, with an adjusted net margin of 10%. Our balance sheet remains robust. Cash and cash equivalent time deposited to financial assets and restricted cash totaled $117.7 billion as of March 31st, 2026. Net cash generated from operating activities in Q1 was $3.1 billion RMB. Additionally, we actively delivered on our commitment to shareholder returns based on market conditions. As of today, we had room purchase approximately 854 million Hong Kong dollars or around 17.96 million shares, representing about 0.42% of our total shares outstanding for 2026. We can add, we'll continue to prioritize user needs and remain committed to investing in the app, leveraging our leading activities that will fully boost the vitality of our content ecosystem and expand monetization, reinforcing our competitive edge in every changing market, and creating long-term value for users, partners, and shareholders. This concludes our prepared remarks. Now we can open the poll for Q&A.

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我们现在进入问题环节 第一个问题有来自UBS的Kenneth Fong The first question comes from Kenneth Fong of UBS Please go ahead 请提问 谢谢管理层接受我的提问 恭喜一个非常稳健的业绩 以及肯宁非常迅猛的发展 我有一个问题是关于肯宁AI的 我们看到26年一季度的生涯化的发展 也是非常超预期 我想问一下就是主要收入增长的驱动是什么呢? 以及可林目前主要的应用场景主要是什么? 应该如何展望水平生成大模型的未来的应用的前景呢? 谢谢,我激烦一下。 Thank you, Manishen, for taking my questions and congrats on the very robust growth on Kerlin. I have a question on Kerlin AI. This commercialization progress in first quarter has exceeded expectations. What are the main drivers behind this strong revenue growth? What are the recent use case and primary application scenario for Kerlin? And how should we assess the future application process for the video generation of large language models?