Good day, and thank you for standing by. Welcome to the Q3 2022 Kingsoft Corporation earnings conference call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone, and you will then hear an automated message advising your hand is raised. If possible, please do ask your question in both English and Chinese Mandarin. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Francie Lu. Please go ahead.
Thank you, operator. Ladies and gentlemen, good evening and good morning. I would like to welcome everyone to our 2022 third quarter earnings call. I'm Francie Lu, 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 realized in the future for various reasons. These forward-looking statements are based on our own information and information from other sources, which we believe to be reliable. Please refer to the other public disclosure for detailed discussion on risk factors which may affect our business and operations. Having said that, please allow me to introduce our management team who join us today. Mr. Tao Zou, our Executive Director and CEO, and Ms. Yi Li, our acting CFO. Now I'm turning the call to Mr. Tao Zou. Okay. I'll translate for Mr. Tao Zou.
The group adheres to technological empowerment with a focus on developing core products and technologies. During the third quarter, our core businesses demonstrated strong resilience, leveraging its accumulated experience and strength in product and technology development. Kingsoft Office will continue to pursue the strategy of multi-screen, cloud, content, AI, and collaboration, and improve its product and services solutions, aiming to increase user stickiness for cloud and collaboration office scenarios. Regarding our online game business, we have adhered to the strategy of premium games and focus on the long-term development of core games. During the third quarter, total revenue reached RMB 1,837 million, up 22% year-on-year. Driven by the continued growth of individual and institutional subscription businesses, revenues from office software and services business reached RMB 1,005 million, up 25% year-on-year. Now I will turn the call to Ms. Yi Li.
Thank you, Francie Lu. Yi Li here. Good morning, everyone. In the third quarter, with the continuous expansion of the individual user base, Kingsoft Office Group strives to increase user engagement and stickiness, as well as the promotion of long-term paying subscribers by promoting cloud services and enriching product functions. With respect to the institutional subscription business, Kingsoft Office Group has dedicated to catering to the demand of government and enterprises, such as user efficiency, data management, information security, and industry application scenarios, which led to a growing penetration of enterprise level products. Kingsoft Digital Office Platform. As for the institutional licensing business, our products continued to gain acceptance by increasing demand for domestic office software from government and enterprises, partially offset the high base for the same period last year and a slower organization progress this year. Recently, we released the WPS Official Document Version for the government users.
On the basis of WPS Office Professional, it offers industry-leading document models, document templates, document promotion, and other auxiliary functions to help government users to improve the writing efficiency. Regarding the online games business, we continue to refine the core IP, further enrich the gaming content, enhance gaming quality through technological innovation, and provide players with better gaming experience. In respect to the flagship JX Online 3 PC game, we celebrated its 13th anniversary in August and launched the anniversary expansion pack in October. The third season of JX Online 3, Heroes Shen Jianxin, an animation series based on JX Online 3, was released on Bilibili in July. The rating on the animation series on Bilibili reached a record high, which demonstrated that the influence of IP has been further enhanced.
As for JX World 3 mobile game, we launched the open beta across all platforms and a new expansion pack in Chinese mainland in August. The launch has further improved user engagement and reached a broader user base, which laid a solid foundation for our long-term development. I will now discuss the Q3 operational and financial results using renminbi as currency. Revenue increased by 22% year-over-year and just slightly quarter-over-quarter to RMB 1,837 million. The revenue rate was 55% for office software and services, and 47% for the online games and others. Revenue from office software and services business increased by 27% year-over-year, and 9% quarter-over-quarter to RMB 1,005 million. The year-over-year increase was mainly due to the continued growth of individual and institutional subscription business of Kingsoft Office Group.
The strong growth of individual subscription business was mainly driven by the increase in the number of accumulated paying subscribers and the proportion of long-term paying subscribers. The growth of institutional subscription business was largely driven by increased penetration of Kingsoft's digital office platform in government and enterprises. The cost increase quarter-over-quarter was mainly due to the increased institutional licensing business, as well as the sustainable growth of institutional subscription business of Kingsoft Office Group. Revenue from online games and others business increased 18% year-over-year and decreased 8% quarter-over-quarter to RMB 832 million. The year-over-year increase was mainly due to revenue contribution from mobile titles released in the fourth quarter of 2021, such as JX World 3 and JX Online 1: Return, partially offset by decreased revenue from the existing games.
The quarter-over-quarter decrease mainly reflected the declined revenue from certain existing games. Cost of revenue increased to 38% year-over-year and 1% quarter-over-quarter to CNY 371 million. The year-over-year increase mainly reflected greater channel costs, servers and bandwidth costs, as well as purchase costs of products and services along with the business growth from Kingsoft Office Group. Gross profit increased 18% year-over-year and slightly quarter-over-quarter to CNY 1,466 million. Gross profit margin decreased by two percentage points year-over-year and slightly quarter-over-quarter to 80%. Research and development costs increased 3% year-over-year and slightly quarter-over-quarter to CNY 642 million.
The year-over-year increase was mainly attributable to increased the head count, as well as personnel-related expenses of Kingsoft Office in order to enhance products and provide high quality cloud and collaboration experience, partially offset by decreased outsourcing expense on certain online games projects. Selling and distribution expenses increased 47% year-over-year and 26% quarter-over-quarter to CNY 356 million. The increases were mainly due to the expanded scale of promotion for JX World 3 mobile game during its open beta in August 2022. Administrative expenses increased 15% year-over-year and 2% quarter-over-quarter to CNY 156 million. The increases were mainly due to increased the personnel-related expenses. Share-based compensation cost decreased 14% year-over-year and increased 1% quarter-over-quarter to CNY 64 million.
Operating profit before share-based compensation costs increased 10% year-over-year and decreased 8% quarter-on-quarter to RMB 395 million. Net other losses for the third quarter of 2022 were RMB 6,487 million, compared with gains of RMB 734 million and RMB 6 million for the third quarter of 2021 and the second quarter of 2022 respectively. The losses in the third quarter of 2022 primarily resulted from the provision for impairment on the investment in Kingsoft Cloud. As of 30 September 2022, the company held certain ordinary shares in Kingsoft, which are unlisted on the NASDAQ in the form of ADS. The company has observed that the recoverable amount of investment in Kingsoft Cloud has been significantly impacted by the stock price and the recent financial performance of Kingsoft Cloud.
The company performed an impairment assessment and made an impairment loss of RMB 6,486 million before tax in the difference of carrying amount in excess of the recoverable amount of investment in Kingsoft Cloud. Again, in the third quarter of 2021 were mainly due to the recognition from a gain from game disposal of Kingsoft Cloud as a result of the dilution impact of issuing new shares for Kingsoft Cloud. Share of losses of associate of RMB 414 million were recorded for the third quarter of 2022, compared with losses of RMB 286 million and RMB 480 million for the third quarter of 2021 and the second quarter of 2022, respectively.
Income tax credit for the third quarter of 2022 was CNY 288 million, compared with income tax expense of CNY 97 million and CNY 29 million for the third quarter of 2021 and the same quarter of 2022, respectively. The income tax credit for the third quarter of 2022 are mainly attributable to the deferred tax effect of impairment provision recognized for Kingsoft Cloud. As a result of the reasons discussed above, most attributable to owners of the parent of the CNY 6,055 million for the third quarter of 2022, compared with a profit of CNY 565 million for the third quarter of 2021, and the loss of CNY 139 million for the second quarter of 2022, respectively.
Profit attributable to the owners of the parent exclude these parts was RMB 6,007 million for the third quarter of 2022, compared with a profit of RMB 611 million for the third quarter of 2021, and the loss of RMB 90 million for the second quarter of 2022, respectively. The group has a strong cash position towards the end of the reporting period. At 30 September 2022, the group had cash resources of RMB 20 billion, representing 54% of the group's total assets. Looking ahead, we will maintain our investment in research and development, strengthen cloud and commercial office services, and expanding new game genres. We will strive to build core competitiveness and improve efficiency, aiming for the long-term sustainable development of the group. Thank you all for your attention. Now I turn the call over to Francie.
Thanks, Ms. Yi Li. Hi, operator. We're now ready for the Q&A session. Thank you.
Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephone and wait for your name to be announced. If possible, please do ask your question in both English and Chinese Mandarin. Star one one for any questions. Thank you. We'll take the first question. Please stand by. First question is from the line of Xiaodan Zhang from CICC. Please go ahead.
Good evening. I have two questions here. The first one is for the gaming. During the second quarter results release call, the management mentioned several new game release might be strategically postponed due to the macro environment. Is there any change? How should we expect the full year gaming business revenue growth rate? Secondly, I want to ask about the WPS because during this quarter, we have achieved very good results on the personal subscription business line. Could management share the outlook for next year on both personal and business side?
谢谢李萍。关于您刚才提到的全年的游戏收入的增长，我来说明一下。就是去年四季度的时候，我们上线了天梯和武林闲侠，所以基数的话是比较高的。那今年全年来讲的话，我们以前说的话是如果说有版号的话，大概是20%左右。然后我们目前来看的话，跟20%的话稍微会差一点点。主要的原因是因为魔域2的话，本来是说我们在Q4上的，然后根据现在的整体的经济形势，还有疫情的情况以及消费者的信心，我们会把这款游戏的话推到大概是明年第一季前期。所以这个主要的差口的话是在这点，但缺口不太大。关于游戏的新品的话，我请邹宇来介绍一下。
游戏的情况我再补充一下。其实游戏呢，对于整个这个金山的游戏板块，一个就是无非就是老游戏的持续稳定性，还有新游戏什么时候。反正今年一年看下来，就是总体来讲呢，像去年上的游戏在今年的贡献度还比较大，尤其是剑网3，大大超过我们预期，超过了八九，就这个新资料片上，依然数据表现良好。但是呢，在新的游戏上呢，我觉得基本上前两个Q，我预测的还是对的，我自己也觉得就是，二十大前后版号可能够呛，大概率会到明年的两会之后。我觉得今天我依然是保持这个判断。因为我们的尘白禁区呢，反正截止到十月份，截止到现在，我们还是没有拿到版号。虽然我们基本上过了终审，在排队等待，但是呢，这个大概率，可能还会要等到明年三月份才能拿到版号，包括我们的利剑。然后魔域呢，刚才李域，魔域2刚才李域也谈到了，其实我们是觉得，现在总体这种大环境下，我们还是觉得，放到，其实我们现在也是，也看了这么久，我们是觉得还是放到明年去。咱们今年意义已经不大了。放在春节前。从目前其实这个决策，我觉得至少从目前的判断来讲，这个决策是对的。可能，最近这一周，整个这个资本市场也在好转，关于那个疫情的，国家也就在最近，也提了新的二十条，包括我今天我还看，我都关注到了一些这个，张文宏先生的谈对于这个疫情这个毒性的这个认知上，但也会，也表达出未来会越来越弱。我的判断其实总体来讲，未来的对疫情的那个防控的，这个应该说就是会越来越精准，然后会更科学。但总体来讲它就是，就会逐渐逐渐的，应该说科学的放开。所以这个跟我们的判断也比较一致。所以呢，我们认为把它放到了明年的月份去呢，现在来看这个判断还是对的。主要是，这些今年也主要是这些的变化，也就是说那个尘白禁区肯定要到明年初以后，然后魔域2呢，就是春节前元旦后。我们最近已经是在做那个最后一轮的这个复利测试了。这是游戏的大体的一个今年的一个情况。然后另外，后面这个问题关于办公，今年在前三个Q呢，关于个人订阅和机构订阅都还不错。这个确实是我们也基本达到了我们年初的当年目标，我觉得力保两个订阅。那信创呢，说实话，就是我们自己能掌控的部分不错。其实我们，我们自己也是觉得这两个订阅呢，还是，这个我们相对能掌控的部分，从结果看还不错。展望未来呢，其实在办公的会上章庆元也谈过，那个，包括未来会员体制的一些调整，我就不展开了。我只是那天问我未来这个对个人订阅和机构订阅未来的发展的趋势来看，我自己认为，个人订阅依然会保持一个比较平稳的增长趋势，然后机构订阅我个人认为其有可能明后年甚至未来会发展得更快更好。这个我在前几个Q都讲过，就信创跟这个机构订阅的关系，包括，金山那个办公那边数字化办公平台以及几者之间的关联。所以我认为这个信创会，会有1.0，还会有2.0。信创不仅仅是实现，第一阶段可能实现自主可控的替代，但是未来会朝着好用、易用更高效的方向去发展。所以呢，从这个维度来看呢，我个人依然对这个机构订阅的开发充满信心。你要不要再翻译一下。
Okay. I'll translate for Ms. Li and Mr. Zou. For the game revenue growth expectation. We launched a couple of successful mobile games in the fourth quarter of 2022. Originally we expect the growth rate for this year is around 20%. But now due to the overall economy condition and also our consumer spending behavior, we decide to postpone our event to our game to next year around the festival time. Now our overall 2022 game revenue growth will be slightly lower than 20%. For both the old, new games, actually, we, for the old games, that actually mostly performed very well, they actually outperformed our expectations.
The new expansion packs are launching all since September performed very well. The old games actually, their performance are quite stable. The new games, regarding even including mentioned that it will be postponed to next year, around in festival time. Another game is Chenbai Jinqu .
This game is already in the final stage of getting the licenses, but now we still haven't got the license in November. We think that this year we may be able to get the license in Q1 next year, and we may be able to launch the game around next March. Because we think that the overall economic condition is recovering, including the COVID condition, by postponing some of our new games to be launched next year, we think that is a good decision at this time, and also in line with the expectation regarding the COVID and also the license release frequencies. The second question regarding the Kingsoft Office performance, we did very well in both the subscription business, including individual and the institutional subscription business. These two subscription business we think that they are going to perform very well going forward. Our in-app business is not really 100% under our control, so we want to put more emphasis on the subscription businesses. For the next year outlook, we think that the individual subscription business will continue to grow steadily. The institutional subscription business for next year and also the year after, we think that the growth rate may even be faster than this year. Xinchuang project, we think that there will be the 1.0 and also the 2.0 stage, it will reach an even higher efficiency stage.
So Mr. Zou has very strong confidence in the institutional subscription business growth. Hi, operator, we're ready for the next question.
Thank you. We'll now take the next question. Please stand by. This is from the line of Mrs. YLL from GS. Please go ahead. Your line is open.
管理层晚上好，投资者晚上好。我有几个问题想请教一下，一个是关于游戏这一块的，因为游戏我们海外之前表现其实也是蛮好的，然后包括现在有的这个游戏在海外也有上线的计划，然后这个上线目前的进展怎么样，然后怎么去看这个海外的表现，这是一个问题。然后第二个问题是关于这个，因为我看我们这个季度的销售费用增长的也比较高。然后这个主要是怎么去解读，然后怎么去看后续的它的一个增速。主要是这两个问题，我快速翻译一下。
The first question is about the plan about our game launching time overseas, and how do you expect its performance. The second question is about our S&D this quarter grow about 47%, how do you expect its growth in the following year and in 2023. 好, thank you.
好的，我来回答一下啊，第二个问题你先来回答。从你所说啊，确实我们在去年开始，到今年我们的剑网1：归来，包括剑侠世界3，在那个南亚太地区以及其他的一些东南亚国家，上线之后的表现确实都基本上都超过我们的EP啊，这确实是不错。然后你问到这个其他的一些海外游戏上线的计划，以及未来对它的表现的预期啊，这个我之前几个Q也谈到过，我们原计划是，先谈那个刚才谈到这个尘白禁区啊，这个游戏呢，我们本身就是准备全球同步发行的。对，只不过呢，国内受版号这个发放的影响啊，因为没有拿到，所以呢，导致这个时间表呢，一直在delay。我们目前的计划，我上面谈到了，当然可能是要看版号的发的具体情况啊，如果它能顺利发的话，我们还是会坚持这个全球同步的这么一个原则啊。当然我们也有一些这个，考虑到国内版号不确定性的因素吧，我们也有一些这个，应对这种不确定性的一种其他的方案，就是如果到明年五月份，如果国内版号还是这种不确定性很高的情况下，那我们就会选择在海外先发。对，这是我们，这是对于尘白禁区。其他的呢，其实我们今年，我也介绍过很多次啊，就是除了武侠之外呢，我们有其他的什么机甲呀，什么宠物类啊等等，包括笔戒等等这些不同的这个品类啊都有在布局。今年呢也陆陆续续地，分别在海外的一些地区呢来做一些测试，啊，其主要在国内在测。对，这些产品呢，在明年吧，应该会陆续，当然这个也还是受到各方面的影响吧，就是应该会陆陆续续这个，进行到不同阶段的测试甚至上线，对。这个进一步更细的那个时间表呢，因为我们内部也在做明年的全年的整个的规划，我觉得到明年三月份的这个年报发布那个时候吧，我再跟大家具体沟通这个具体的这个时间。然后至于表现呢，说实在的就是这个，对于游戏啊，从几年前开始，N年前开始吧，我们内部在关于游戏的这个预算的时候都是，如果它没有上线的话，我们基本上就是没有任何依据的情况下呢，我们也不会去做出一个很明确的一个收入指引吧。当然我们基本上会根据游戏上线后的一个月的表现再回去，根据这个具体的数据吧，制定一个比较，应该叫做靠谱的吧，或者说比较准确的一个数据预测。所以呢，我现在没有办法跟你说我们海外上线这些产品，对于它的表现如何如何，这个不是说故意不说，是我们内部就是这么做预判的，就是没有上线的游戏，你说多少也没用，说高了说低的，反正过去的实践经验告诉我们，这个只有数据出来了才是靠谱的，可能你说多了说少都没有太多意义。好吧，也希望你能理解。好，请翻译一下这个问题。
好的, I'll translate for Tao Zou. We launched a couple of games last year, including 剑网1：归来 and JX World 3. They perform very well in Hong Kong, Macau, Taiwan and also other Southeast Asia districts, regions. They actually outperformed our expectation. We have more games to be launched overseas going forward. For example, 成长世纪, we are planning for a global launch next year. The launch for this game in China has been delayed due to the license approval, but we are still aiming for a global launch next year if we can get the license on time.
In, if we still are unable to get the license by next May, we may be launch 成长世纪 in the overseas regions first, before we launch in China. We also have a few other games that have already started testing in overseas markets. They may have further testing plans and even launch plans for next year as well. I will have a more detailed launching schedule when we are doing our annual result by next March, and now we're keeping the internal budget and also the pipeline and planning for the game business. Starting from many years ago, we have already decided that we are not going to give out any specific guidance for games until their launch. At this time, we are not able to give out a specific guidance for the launch of the overseas games next year. I will have a more accurate guidance for these games when we have a more specific schedule on their launch time. Thank you.
关于刚才提到的销售费用，我来解释一下。其实销售费用的话，主要是我们在八月份的时候，新的游戏剑侠世界3在全平台公测并加大了推广。从效果来看，我们内部看，不管是LTV还是ROI，都是达到了预期的。那因为我们这款游戏也是一个长线运营的平台，那从用户数来看的话，大概到十一月底，大概37天左右的话，用户的留存率是保持比较稳定的。从这个用户圈层来看的话，我们新增的用户里面，对其他平台IP的用户数做了一个占比，它是提升的。这个费用的话，也是一次性的，主要是用于首推。未来这个销售费用的趋势的话，还是跟以前一样，保持比较稳定的一个态势。来，请你翻译一下，谢谢。
Okay, I'll translate for Ms. Yi Li. For the selling and distribution expenses increased, it's mainly because of our platform promotions that we did in August for JX World 3 mobile games. We are planning for a long term development for the game, and based on the result of the promotion for the past three months, the user retention rate is very good. Going forward, we are going to maintain a stable selling and distribution promotion cost for this game. The increase in August was a one-time increase in their selling and distribution cost. Thank you.
Operator, we're ready for the next question.
Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephone. Star one one for any further questions. There are no further questions at the moment, so I'll hand back to the speakers.
周总、李丽，我们现在暂时没有其他问题了。
好，谢谢。
结束了。
那我们今天就结束了啊。
好的，好的. Okay, thank you operator. We'll now conclude the presentation today. If you have more questions, please feel free to contact the IR team afterwards. Thank you.
Thank you. This does conclude the conference for today. Thank you for participating and you may now disconnect.