Good day, and thank you for standing by. Welcome to the Q3 2021 Kingsoft Corporation earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, you may press star zero. I would now like to hand the conference over to your first speaker today, Ms. Francie Lu. Thank you. Please go ahead.
Thank you, operator. Ladies and gentlemen, good evening and good morning. I would like to welcome everyone to our 2021 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 relied upon in the future for various reasons. These forward-looking statements are based on our information and information from other sources which we believe to be reliable. Please refer to the other publicly disclosed documents for detailed discussion on risk factors which may affect our business and operations. Having said that, please allow me to introduce our management team who joined us today. Mr. Zou Tao , our Executive Director and CEO. Mr. Francis Ng , our Executive Director and CFO. Now I'm turning the call to Mr. Zou Tao . Zou Tao .
Okay. [Non-English content]
I'll do the translation for Mr. Zou. Our overall business grew steadily during the quarter. Kingsoft Office would focus on addressing user needs to enhance its product and services, and continue to pursue a strategy of multi-screen, cloud, content, AI, and collaboration. Meanwhile, our online game business adhere to its premium gaming strategy. The group's business continued to grow in the third quarter, with revenue reaching RMB 1,510 million, up 8% year-on-year. Driven by the continued growth of licensing and subscription service businesses, our office software and service businesses maintained strong growth momentum in the third quarter, with revenue reaching RMB 804 million, up 37% year-on-year. Now we're turning the call to Francis.
Thank you, Francie. Good evening, ladies and gentlemen. In the third quarter, the strong year-on-year revenue growth of licensing business was primarily driven by the growing cloud office and licensing business in the government and enterprise market, and the increasing demand for localization. Kingsoft Office Group continued to improve the services quality of its localization business by joining the Trusted Computing Group, where it worked with different partners to set up a multidimensional cooperative program. The program focuses on document services to effectively promote the integration of cloud products with digital government and state-owned cloud projects. Meanwhile, Kingsoft Office Group actively participate in the pilot exercise of the newly launched industrial localization business and gain recognition from clients. The subscription services business continued to maintain a robust year-on-year growth during the quarter.
Kingsoft Office Group tried to optimize collaboration office scenarios and launch new solution to effectively maintain stable growth in active users and paying users, resulting in transition on paying user habits from casual to long-term lease. As of the end of September 2021, the number of monthly active devices of its key product amounts to 521 million, increased 14% year-over-year. With increasing demand for cloud and collaboration office solution, the number of users of WPS Docs in the third quarter already exceeded the peak record during the COVID-19 pandemic. In order to cater to small and medium-sized enterprise and teams' demand for collaboration and convenience office solution, Kingsoft Office Group has invested in ActionSoft, a local PaaS provider, and aimed it to develop a digital transformation solution to achieve the synergy between office scenarios and business scenarios.
During the quarter, the online game business continued to maintain a stable performance quarter-over-quarter. Revenue from flagship JX Online 3 PC game and the classic JX 2D PC games achieved steady quarter-over-quarter growth, demonstrating the sustainable longevity and vitality of the core IP. In August, we celebrated the 12th anniversary of JX Online 3 PC game, and launched the theme activity with collaboration between traditional and contemporary Chinese culture, which received wide acclaim from young generation gamers. In October, we launched [Non-English content] the anniversary expansion pack for JX Online 3 PC game, and a new section with the theme of traditional Chinese medicine, an upgraded gameplay that has been popular among gamers. In addition, JX 1 : Gui Lai, was released in China in October. During the third quarter, the domestic games industry adapted to new regulations.
We are proactively embracing the new regulatory environment, which we believe should contribute to a more sustainable development path for the industry. Going ahead, we will continue our integration of development and operation of new game genre to create a diversified content ecosystem while strengthening the performance of our core IP products. I will now discuss the Q3 operational and financial results using RMB as a currency. Revenue increased 8% year-over-year and 2% quarter-over-quarter to RMB 1,510 million. The revenue split was 47% for our online games and others, and 53% for our office software and services. You could see that the contribution from WPS has actually exceeded our gaming business. Revenue from our online games and other business decreased 13% year-over-year and increased 2% quarter-over-quarter to RMB 706 million.
The year-over-year increase was largely due to decreased revenue from existing games, partially offset by the revenue contribution from the newly launched mobile games. Revenue from office software and services business increased 37% year-over-year and 2% quarter-over-quarter to RMB 804 million. The year-over-year increase was largely due to both strong growth of licensing business and sustainable growth of personal subscription services business of Kingsoft Office Group. Cost of revenue increased 12% year-over-year and decreased 1% quarter-over-quarter to RMB 269 million. The year-over-year increase was mainly due to, firstly, the greater service and bandwidth costs in line with the expansion business of Kingsoft Office Group. Secondly, increased personnel in related expenses of operating team of online game business. Gross profit increased 7% year-over-year and 3% quarter-over-quarter to RMB 1,241 million.
Gross profit margin decreased by one percentage point year-over-year and was flat quarter-over-quarter at 82%. Research and development costs increased 28% year-over-year and 17% quarter-over-quarter to RMB 621 million. The increases were mainly attributable to the increased headcounts as well as personnel-related expenses. Selling and distribution expenses increased 10% year-over-year and decreased 22% quarter-over-quarter to RMB 243 million. The year-over-year increase was mainly due to higher personnel-related expenses as Kingsoft Office Group continued to increase its sales and marketing effort to further expand its presence in government and enterprise market, partially offset by decreased marketing and promotional spending of online game business. The quarter-over-quarter decrease was largely due to decreased marketing and promotional spending. Administrative expenses increased 14% year-over-year and was flat quarter-over-quarter to RMB 134 million.
The quarter-over-quarter increase was primarily due to increases in personnel-related expenses and depreciation expenses related to new office buildings. Share-based compensation costs increased 137% year-over-year and 81% quarter-over-quarter to RMB 74 million. The increase is primarily reflected in new grants of awarded shares to the selected employee of the group in the third quarter of 2021. Operating profit before share-based compensation costs decreased 8% year-over-year and increased 33% quarter-over-quarter to RMB 361 million. Net other gains for the third quarter of 2021 were RMB 734 million, compared with the gains of RMB 368 million in the corresponding periods of last year. The gains of RMB 48 million in the second quarter of 2021.
The gains in the third quarter 2021 and 2020 were mainly due to that we recognize a gain on deemed disposal of Kingsoft Cloud as a result of the dilution impact of the issue of new shares in this quarter. The gain in the second quarter 2021 were mainly due to fair value gain on financial instruments at fair value through profit or loss. We recorded share of losses of associate of RMB 286 million for the third quarter of 2021, compared with share of profits of RMB 12 million for the third quarter of 2020, and share of losses of RMB 211 million for the second quarter of 2021.
Income tax expense for the third quarter of 2021 was RMB 97 million, compared with the income tax expense of RMB 10 million for the third quarter of 2020, and income tax credit of RMB 26 million for the second quarter of 2021. The changes were mainly due to the increase in the accrued deferred tax expenses in the third quarter of 2021. As a result of the reason discussed above, profit attributable to owners of the parent decreased 15% year-over-year and increased 1,061% quarter-over-quarter to RMB 565 million. Profit attributable to owners of the parent, excluding e-shop, decreased 11% year-over-year and increased 752% quarter-over-quarter to RMB 611 million.
Net profit margin excluding the effect of share-based compensation costs were 40%, 49% and 5% for the three months ended 30 September 2021, 30 September 2020 and 30 June 2021 respectively. Our statement of financial position, we have cash resources of RMB 18.8 billion as 30 September 2021. Net cash generated from operating activities was RMB 490 million, RMB 670 million, and RMB 631 million for this quarter, the third quarter of 2020 and the second quarter of 2021 respectively. Capital expenditures was RMB 165 million, RMB 205 million, and RMB 46 million for this quarter, the third quarter of 2020, and the second quarter of 2021 respectively.
In the third quarter, our core business continued to expand and contributed solid results to the group. Looking forward, we will focus on exploring opportunities of the enterprise services and online game market, continue to expand R&D with investment, as well as enhancing our product and services, aiming to provide our users and partners with valuable products and services experience and drive long-term return for our shareholders. This concludes our brief prepared remarks and, Francie , we are open for questions and answers.
Okay. Thanks, Francis. Operator, we're ready for the Q&A session.
Certainly. As a reminder to ask a question, you will need to press star one on your telephone. To withdraw your question, please press the pound or hash key. Please stand by while we compile the Q&A roster. If you would like to ask a question in the management to Chinese, please translate your question into English immediately for the benefit of all participants in the call. Once again, to ask a question, it's star one to ask your question. Thank you. The first question comes from the line of Xiaodan Zhang from CICC. Please go ahead.
Hey, Francis. [Non-English content] I got two questions here. First of all, can management share some color on guidance for fourth quarter and next year? My second question is regarding the gaming business. What's the outlook for next year's pipeline and the regulatory environment? Thanks.
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[Foreign language]. I'll translate for Francis and Mr. Zou. For the first question on the revenue guidance for 2021. With the game business, we think that there will be a 10% decline year-on-year. This is, as Mr. Zou explained earlier, the game business due to the industry regulation. Some of our new games were not able to be launched this year, even though JX1 performed very well after its launch, but it's not enough to offset the other delayed games, delayed mobile games. The game business it has a big impact on our operating profit performance.
The operating profit for this year will also be a 20% decline year-on-year. For the office business, the Kingsoft Office business, we suggest investor to take reference to their own disclosure. They did not give out any exact guidance for the upcoming quarter and also for the full- year. Both the group and also Kingsoft Office, we have strong confidence in its overall performance, and we think that the revenue growth will maintain a relatively high growth rate. As the parent company, we are now going to disclose more than the disclosure given by the Kingsoft Office company.
For next year, I can also give overall general picture for the Kingsoft Office business based on this current user growth performance, and also on this product, and the performance of our partners, and that's also the localization trend. We have strong confidence in the performance for Kingsoft Office for next year. For the game business, in 2021, we were largely affected by the regulation change in the gaming industry. We have already stated that we are fully supporting the government's regulation restriction. In the short term, there may be some impact on the performance of our profitability.
In the long term, we think that it will be helpful to the overall gaming industry in the market performance. The actual financial impact on our game business is actually quite low for minors less than 18 years old. They're actually not allowed to log on to our games. The revenue contribution from minors is roughly just 1%-2% of our total revenue. For the next year, we are actually conservatively optimistic. We believe that the gaming industry is still an important monetization way for the overall internet market. It's not going to be replaced. We think that it's going to be regulated more effectively going forward.
We think that the 2022 performance will be much better than 2021. Once we get the approval license, we're going to launch the new games, including the classic version of JX online 3. In addition, I would like to emphasize that even though gaming business is a large part of our revenue contribution, but it's actual value impact on our SOTP is only a single digit. There should not be a big impact on our value, SOTP value for the overall Kingsoft performance. The second question by Mr. Zou
We first explained the pipeline for this year. We are now able to launch [Non-English content] this year due to the regulation changes. This year we already launched the JX 1: Gui Lai on October 15th, and we have two more new mobiles to go for this year. On November 18th, we're going to launch Wulin Xianxia, this one already have the license. Then we have already started promotion for the game. By the end of December, we have another self-developed self-distributed game, JX World 3. This one will be launched towards the end of the year, so it shouldn't have too much impact on the financial performance for 2021. Regarding the regulation, we have already seen the new regulation launch on September 1st, and this is actually in line with our expectation, roughly about one week after our second quarter result announcement, the new regulation was officially launched regarding minors. The overall execution for the regulation in the past quarter is quite good, quite smooth. We think that the regulation for next year will be dependent on the result of the regulation on the minors. Based on the past quarter, we think that we actually meet the expectation. There is some voice in the gaming market that the regulation will be more or less back to normal regarding the approval licenses. In my own opinion is that the regulation for minors is the very first step. We think that afterwards, it's possible that there are further regulation regarding the content of the game or regarding to the adult gamers. Overall, we are fully supporting and applying, complying with the new regulation, and we think that it will be beneficial to the overall industry in the long term. Thank you.
Thank you. The next question.
Sorry, operator. One more thing to add for the next year pipeline. It's already November. We're currently doing the budgeting for 2021 for the pipeline for the games for next year. So far, we don't have the detailed timeline yet. We're going to discuss that later. Thank you, operator. Ready for the next question.
Thank you. The next question comes from the line of Yang Linlin from GF Securities. Please go ahead.
[Non-English content] The first question is about the new game. We think [Non-English content] performs well. Could you share more about the game expectation about the revenue and the outlook? The second question is about R&D expenses. We saw R&D expenses increased a lot this year. Could you give us some guidance about next year? The headcount change next year in game and WPS sector? Thank you.
[Non-English content]
I'll translate for Francis. Regarding the question on R&D investment. R&D capability is always one of our key strength for Kingsoft. You have noticed that there's obvious increase in the R&D expenses for this year, and this is because we are investing in the Kingsoft Office business due to the localization trend and also the great expectation for the increasing enterprise demand going forward.
We are investing in the Wuhan R&D strategic center and also in the development of the new functions for Kingsoft Office. For the game business, the salary and bonuses increase in early this year to keep competitive with the market. There is an increase in the R&D expenses for this year for the gaming business. Looking forward, we think that R&D is still a key part of our investment. For the Kingsoft Office business, we're not going to keep the aggressive growth rate at 100% every year. For the game business, we are not going to have a large increase in the compensation for the employees every year. For next year, for the revenue outlook, we think that Kingsoft Office will maintain a very strong outlook for next year. For the game business, we think that due to the new games to be launched next year, the profit and revenue will also increase from this year. As the percentage of revenue, the R&D percentage will decrease compared to this year. For the answer to the question on the new games, we launched JX1 : Gui Lai this year, and this is actually a small surprise for our game business. We launched it towards the end of the year, but this game actually has a very good performance in the overseas market in Vietnam, which is better than our expectation. For next year, we are going to have more new games to be launched and also more contribution from the new game. Thank you.
Thank you.
Yeah, we're ready for the next question.
Thank you. The next question comes from the line of Kenneth Chen from HSBC. Please go ahead.
[Non-English content] So thank you for taking my questions.
My first question will be, can we have the revenue contribution coming from the PC-based gaming and also the mobile-based gaming? The second question will be the revenue contribution coming from the overseas and domestic in terms of the gaming industry. [Non-English content]
[Non-English content]
OK, I'll translate for Francis. We actually don't disclose the specific numbers of what this revenue contribution details on the game business. Roughly speaking, the PC game still takes a heavy percentage contribution for the overall game revenue. We have a classic IP, the JX Online 3. This PC game alone contributes roughly about 50% of the total revenue, and we also have other classic games like JX1, JX2. They're also good revenue contributors. The overall PC versus mobile game contribution percentage is roughly about 60%-40%. PC still takes a greater percentage in terms of the contribution. For the overseas game business performance, in the past our key revenue contributors is still from the domestic market.
We actually try out the overseas games in Southeast Asia area in small scale. This year we launched the JX1 game in Vietnam. It was quite successful. In the past year, the revenue contribution from overseas is actually a single-digit percentage point. This year, due to the good performance from JX1 in Vietnam, the overseas contribution is actually a little over 10%, which is a good growth from last year. The overseas expansion plan as Mr. Zou stated earlier, that is a direction for our game business. Due to the COVID pandemic and also other factors, we are still developing the overseas expansion plan. Thank you.