Earnings Call: Q4 2015

Mar 22, 2016

Ladies and gentlemen, thank you for standing by, and welcome to the 2015 Q4 Kingsoft Corporation results announcement conference call. At this time, all participants are in listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you wish to ask a question, you will need to press star one on the telephone. I must advise that this conference is being recorded today, Tuesday, 22nd of March 2016. I would like to hand over the conference to our first speaker today, Ms. Francie Lu. Thank you. Please go ahead. Thank you, Joe. Ladies and gentlemen, good evening and good morning. I would like to welcome everyone to our 2015 fourth quarter and annual earnings call. I am 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 own 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 join us today. Dr. HongJiang Zhang, our Executive Director and CEO, and Mr. Francis Ng, our Executive Director and CFO. Now I am turning the call to Dr. HongJiang Zhang. Thank you, Francie. Hello, everyone. Good evening and good morning. Let me start to make a few overall comments on the performance of Kingsoft in 2015. I would like to start by saying that 2015 marked a year of great achievement for the company in implementing mobilization, going global, and all-in cloud strategy. Our mobile MAU reached to a new high of 736 million in December 2015, and the mobile and overseas revenue now accounted for 67% and 51% of Cheetah Mobile's total revenue in 2015 respectively. The significant progress Kingsoft Cloud made in 2015 also far exceeded our expectation. We believe all those achievements have well-positioned us in further exploring the mobile internet and cloud services business in the year ahead. Last year was another year of consistent and strong growth. We achieved more than 69% growth in annual revenue, and our total revenue reached to a new record of CNY 5.7 billion. As we focused on heavy investment in mobile application development, global market expansion, and cloud service breakthrough, we have experienced a short-term pressure on profit in 2015. Excluding the impact of share-based compensation cost, the operation profit for 2015 increased 27% YOY to CNY 898 million, while the operating profit margin decreased by five percentage points YOY to 16%. This in fact reflected the transformation of our business from over-dependency on online game business with high operation margins with Cheetah Mobile and Kingsoft Cloud businesses with rapid growth and great market potential. Cheetah Mobile continued to achieve its strategic goal in 2015 in term of overseas user expansion and better monetization for office growing global mobile user bases. In December, Cheetah Mobile had over 635 million mobile users globally, with 79% of them located outside of China. Cheetah remained the third largest global publisher in Google Play's non-game category with four of its mobile apps, namely Clean Master, CM Security, Photo Grid, and CM Locker, ranked among the top 40 most downloaded non-game apps on Google Play in December last year. Robust mobile and overseas performance drove Cheetah Mobile to top-line growth in the year. Cheetah Mobile revenue grew by 113% year-over-year to CNY 3.56 billion. On the mobile monetization side, mobile revenue already accounted for 72% of its total revenue in the fourth quarter, up from 37% in the fourth quarter of 2014. Looking forward, Cheetah Mobile remains firmly committed to strengthening its mobile and global business and building Cheetah Mobile into one of the leading mobile platforms globally. Cheetah Mobile will continue to leverage its mission-critical apps as the main entry point to acquire users, build a content platform to enhance user engagement, and strengthen its strong data analytic capabilities to fortify its strategic advantage. Cheetah Mobile will also stay focused on building a profitable and sustainable growth over the long term, as well as implementing a more balanced approach when looking at its key priorities, which is user acquisition, user engagement, revenue growth, and profitability. In year 2015, Kingsoft Cloud exhibited outstanding achievement in its focus business, gaming cloud, video cloud, and government and corporate cloud. Kingsoft Cloud established the first national game industry eco-base in Hainan Province in the end of 2015. It held a game ecosystem annual conference in December, attracting more than 400 game industry participants. This actually showcased Kingsoft Cloud's leading position in the gaming cloud market. The video cloud service business was officially launched in November 2015 with outstanding technology advantages, and was able to provide a highly stable and cost-effective service to its clients, including Bilibili, Kuaishou, and Jinri Toutiao, the leading mobile video players in China. During the year, Kingsoft Cloud entered into strategic partnership with Peking University Healthcare and Qingdi, and won a contract from a furious competition to provide cloud service to Beijing Municipal Government. Kingsoft Cloud sees a tremendous opportunity and explosive growth potential in the cloud service industry, and will continue to solidify its leading position in its focused market segment and further explore new market opportunities in 2016. On the gaming side, we have delivered 9% annual growth in revenue in 2015. Our flagship title, JX Online 3, marched into its sixth year of outstanding performance with the compound annual growth rate over 55% in the past four years, far outpace the growth rate of MMO market in China. Two major mobile games were launched in 2015. That is the 3D version of "Journey to the West," "Conquering the Demons," and "Brave Cross." Both were ranked as one of the top ten popular games in Xiaomi and iOS game platform. With its achieved sustainability and continued innovation, JX Online 3 is expected to continue generating significant revenue and profitability in the coming years. We have also prepared a strong pipeline in the mobile game, which will be launched in 2016. Our WPS Office business also contributed an excellent performance in the past year. Total revenue from WPS Office, net of advertising revenue from cooperation with Cheetah Mobile, posted a strong annual growth rate at 35%. The traditional PC business maintained a steady growth with improved monetization capability on traffic from WPS Office Personal Edition. To solidify its leading position as an office solution provider in China and capture the fast-growing enterprise market, Kingsoft WPS firmly executed its WPS+Cloud strategy to provide universal integrated cloud office services. The global MAU of WPS finally reached 482 million, among which mobile MAU were nearly 77 million, with an 18% increase year-over-year. In December, WPS iOS was awarded the Best of 2015 by Apple App Store, and WPS Android was awarded by Google Play as the best app of 2015. We will continue our efforts in the traditional government and enterprise market, and expect steady growth in providing WPS+Cloud office solutions. We will further explore monetization on the traffic from WPS Personal Edition, and also start to explore monetization opportunities in the traffic from WPS mobile application. Monetization on both PC and mobile traffic will be a focus in 2016 and should be a highlight of the year. The strategic investments and effort we made over the past years have clearly paid off and set a cornerstone for us to capture many opportunities in mobile Internet, global market, and the cloud service. In 2016, we will continue to make proactive investment in those core businesses and the key strategic focuses to further strengthen our foundation, support sustainable growth, and drive long-term shareholder value. At the same time, we will start to harvest a moderate improvement on our operating profit margin as a result of tightly adhering to our investment strategies in the past years. We are confident that we will maintain our strong growth momentum to achieve new heights in 2016. Ladies and gentlemen, now I would like to turn the call to Francis, our CFO. Francis? Thank you, Dr. Zhang. Hello, everyone. I am now going to discuss the Q4 and 2015 operating and financial results. I am starting from Q4 using CNY as currency. Revenue increased 18% quarter-on-quarter and 66% year-on-year to CNY 1.7 billion. The revenue split was 23% for our online game, 62% for Cheetah Mobile, and 15% for office software and other, which including our cloud business. Revenue from our online game business increased 25% quarter-on-quarter and 20% year-on-year to CNY 415 million. The quarter-over-quarter increase was mainly attributable to the increased popularity of JX Online 3 and a series of successful in-house in-games promotion, driven by our continuous optimization and innovation of the game. The year-over-year increase was primarily driven by the sustainable and significant revenue growth of JX Online 3, reflecting our expanded user base and continuous improvement in game experiences. Daily average PCU decreased 4% quarter-over-quarter and 18% year-over-year to 0.5 million. The year-over-year decrease was mainly due to the natural decline in the ADPCU, average daily peak concurrent user of games in Vietnam. Monthly average paying account decreased 12% quarter-over-quarter and increased 7% year-over-year to 2.9 million. The quarter-over-quarter decrease was primarily attributable to the decreases of JX Online 3, with no expansion pack released in the fourth quarter. The year-over-year increase was due to the expanded user base of JX Online 3. Monthly ARPU increased 38% quarter-over-quarter and 13% year-over-year to CNY 44. Revenue from Cheetah Mobile increased 13% quarter-over-quarter and 89% year-over-year to 1.1 billion. The quarter-over-quarter and year-over-year increases were primarily due to the revenue growth from mobile advertising business, especially in the overseas market, driven by the growing global mobile user base and substantial improvement in the mobile monetization. Mobile MAU from Cheetah Mobile increased 12% quarter-over-quarter and 61% year-over-year to 635 million in December 2015. Approximately 79% of mobile MAU were from overseas markets, mainly from the U.S., Asia, excluding China, and Europe, compared to approximately 69% in December 2014. Our mobile user installation increased 21% quarter-over-quarter and 115% year-over-year to 2.3 billion as of December 30, 2015. The robust mobile user growth mainly reflected our mission-critical application continued to gain traffic shares and were expanding rapidly in the global market through our effort in market exploration, market expansion, and continuous improvement of our user experience. Revenue from our office software and other business increased 29% quarter-over-quarter and 83% year-over-year to 263 million. Quarter-over-quarter increase was primarily due to the following reasons. First, the strong ramp-up from sales of WPS Office in peak season. Second, the rapid growth driven by seasonal strength in the WPS online advertising. Third, the rapid growth of cloud storage and computing service by extending the business into new market sector. The year-over-year increase mainly reflected the exceptional progress of Kingsoft Cloud in tapping the market, the improvement on monetization capability of WPS free user traffic, and lastly, the steady increase of the sales of WPS Office enterprise software. Cost of revenue increased 14% quarter-over-quarter and 85% year-over-year to 420 million. The QOQ and YOY increases were primarily due to the higher traffic acquisition costs associated with Cheetah Mobile advertising platform and higher overseas bandwidth and internet data center, that is IDC, costs in line with its revenue. Also an increase in the bandwidth and equipment depreciation expenses of Kingsoft Cloud as a result of rapid usage growth and investment in cloud computation and data platform. Gross profit increased 90% quarter-over-quarter and 61% year-over-year to 1,358 million. Gross profit margin increased by 1% quarter-over-quarter and decreased by 3% year-over-year to 76%. Our research and development costs, net of government grants, increased 1% quarter-over-quarter and 38% year-over-year to 365 million. The year-over-year increase was mainly due to the higher personal related costs, driven by the increased headcount of Cheetah Mobile and online game business, as well as an increase in the salary package. Selling and distribution expenses increased 24% quarter-over-quarter and 143% year-over-year to CNY 593 million. The QoQ and YoY increases were primarily due to promotion activities for the core mobile applications of Cheetah Mobile. Administrative expenses decreased 28% quarter-over-quarter and increased 5% year-over-year to CNY 94 million. The quarter-over-quarter decrease were mainly due to the decrease in professional service fee. The year-over-year increase was mainly due to the increase of staff-related expenses. Share-based compensation costs decreased 10% quarter-over-quarter and increased 92% year-over-year to CNY 113 million. The year-over-year increase mainly reflected the grant of Cheetah Mobile options and awarded shares to selected employees. Operating profit before share-based compensation costs increased 91% quarter-over-quarter and 49% year-over-year to CNY 363 million. The margin of operating profit before share-based compensation costs increased seven percentage points quarter-over-quarter and decreased three percentage points year-over-year to 20%. Other income increased 129% quarter-over-quarter and 619% year-over-year to CNY 83 million. The increase primarily reflected the government financial incentive we received in the fourth quarter 2015. Other losses, net recorded a loss of CNY 64 million, which mainly due to the fair value loss on a financial instrument at fair value through profit or loss, compared to a loss of CNY 50 million for the third quarter 2015, and a loss of CNY 9 million for the fourth quarter 2014. Finance income decreased 8% quarter-over-quarter and 29% year-over-year to CNY 46 million. Income tax expense increased 327% quarter-over-quarter and 628% year-over-year to CNY 113 million. The effective tax rate increased by 12 percentage points quarter-over-quarter and 47 percentage points year-over-year to 54% in the fourth quarter, which was primarily due to the one-time impact of intra-group rearrangement of certain operating business. As a result, our profit to owner of parent increased 138% quarter-over-quarter and decreased 35% year-over-year to CNY 113 million. Profit to owners of parent, excluding ESOP charges, increased 21% quarter-over-quarter and decreased 29% year-over-year to CNY 143 million. Now I turn to the full year comparison, 2015. Revenue increased 69% year-over-year to CNY 5.676 billion. Online game make up 24%, increased 9% year-over-year to CNY 1,369 million. Cheetah make up 63%, increased 113% year-over-year to CNY 3,562 million. Office software and others make up the remaining 13%, increases 76% year-over-year to CNY 746 million. Gross profit margin decreased five percentage points year-over-year to 77%. Profit to owner of parent decreased 52% year-over-year to CNY 369 million. Profit to owner of parent, excluding ESOP charges, decreased 37% year-over-year to CNY 552 million. The profit margin excluding ESOP charges was 10% for 2015, versus 26% for 2014. On our balance sheet, we reported a cash and bank deposit of CNY 8.6 billion at the year-end of 2015. Net cash generated from operating activities increased 51% year-over-year to CNY 1,435 million. Capital expenditure was CNY 806 million and CNY 849 million for the year ended December 31, 2015, and December 31, 2014, respectively. Now I finished my introduction on the financial performance. I now hand the floor back to question and answers. Hi, Joe. We are now ready for the question and answer session. Thank you. Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on the telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or the hash key. Our first question comes from the line of Thomas Chong of Citigroup. Please go ahead. Hi. Thanks management for taking my questions. I have a couple of questions. The first question is about the cooperation with Tencent. Can management give a bit more color about when we should expect the 2 new games to be launched, your expectations, and also how you would account for the revenue? Are you going to book it on a net revenue basis? My second question is about the Kingsoft Cloud computing business. Can management give us some more color about the revenue in the fourth quarter and your expectation in 2016? My final question is about the potential cannibalization for your mobile games with your PC games. How should we think about the trend for your online games in 2016? Thanks. Thank you, Thomas. Let me answer your question number one and number three, which are regarding the gaming cooperation with Tencent. I hand it back to you, Dr. Zhang, to talk about the cloud. Your first question is regarding the cooperation with Tencent. Namely, the cooperating partner for our flagship mobile game, JX3, which all of us expected will be launched very soon. We actually decided that the first game will be published by Tencent, and we are doing the final testing. We are hoping that the game will formally launch in April, end of April. The second game, which we probably will cooperate with Xiaomi, are expected to launch at the end of summer, which is probably around September time. The third game, if the first two game are on schedule, we probably will launch around the end of this year, maybe the first quarter next year. You asked about expectation. As we mentioned for over a year now, because we are leveraging on our very important IP and we are partnering with a very strong partner, namely Tencent and Xiaomi, we do have a high expectation on those three games. As the revenue recognition method, we now are partnering with Tencent. They are actually performing as a publishing platform, and we are more a game developer. So we will be adopting the typical traditional profit sharing between the publishing platform and CP. This is your question number one. Your question number three is also related to game, which is our PC game. As you could notice that our existing cash cow, the JX Online 3 PC game, are still growing very healthy after a continuous growth of more than 100% in the first two years and over 50% in the third year. Last year, we also grew at around 30%. More importantly, if you look at the other metrics except for the revenue growth and profit, you will notice that our user number, paying accounts, all increased very healthily, which are actually a deliberate effort by the game team in order to treat this game as a very long life cycle game. We actually embarked a rejuvenating program to rejuvenate some of the graphic on JX3, as we are treating it as a very long-lived PC game. So we expected that at least in the coming near future, we could expect that JX Online 3, we have a high expectation on its performance. These are the two questions regarding to our mobile game and PC game. I now hand over to Dr. Zhang to talk about our cloud. Hi, Thomas. The cloud business at Kingsoft experienced explosive growth last year. We grew about 300% in the past year, and we think we will continue to grow very fast, definitely more than double this year. The overall market itself, if you look at what is announced by other companies, I think the overall market also has experienced tremendous growth. If we look at our revenue and our leading position in the public storage cloud service and the gaming cloud and also in video cloud, we believe we are at the top 5, if not top 3. We hope to continue that leading position in 2016 and expanding our footprint in the enterprise, in particular in the healthcare sector, where we already have won the contract with Peking University People's Hospital, the largest AAA hospital in Beijing, and the system already started operating. Also, we won the Beijing Municipal Government public cloud, and the first phase is also in store and start testing. So we are pretty optimistic for 2016 in the cloud space, and particular in viewing the rapid growth in the mobile video and also the fact that enterprises are rapidly adopting public cloud. Hopefully, I answered your question. Thanks, Francis. Thank you. Your next question comes from the line of Evan Zhou of Credit Suisse. Please go ahead. Hi, good evening, Dr. Zhang, Francis, Francine. Thanks for taking my questions. Just two questions. First is regarding, could you maybe discuss a little bit more about the rationale behind our decision to go exclusive with Tencent in our first MMORPG game? We have seen some successful cases since Tencent's launch, some of the major MMORPG games, with some other partners but also, some unsuccessful stories. Do you want to share with us what is the pros and cons, or what is your thoughts regarding that decision? That will be very helpful. Second question is regarding our overall margin expectation for 2016. I think in Cheetah's press release and earnings call, I think company already giving a pretty explicit expectation on Cheetah's bottom line to improve to roughly 17% on GAAP net margin in 2016. I was wondering how could that translate into our number, in 2016, a ballpark range will be helpful for us. Thank you. Yeah. Hi, Evan. Thanks for the question. This is Hong Zhang. I will take the first one, and I will let Francis answer the second one. As we enter into the final stage of the JX series mobile games, MMO games, we started a conversation and discussion with a number of partners, Xiaomi and Tencent in particular, decide where to launch the games. After overall consideration, pros and cons, we feel that Tencent and Xiaomi are the best bet. We can place our flagship games, in particular, the JX, create the first mobile game and also the one that will get launched toward the end of the year. This is a very important decision. We spent a lot of time on it, and I am aware that no matter which one you cooperate with, you can always come out with successful stories and sad stories. But we bet our confidence in our partnership with Tencent this time to flagship games and also one with Xiaomi in the summer. Hi, how are you? Evan. You raised a very important question that I think most of the investors are very interested on the call. It is about the profit margin outlook for 2016. As you mentioned that on the last week, earning call released by Cheetah, they have already made a statement that I understand that in the past, they did not give guidance on the profitability. They usually give guidance on the top line. However, last week, I do hear that on the call, Sheng did mention about the guidance for the operating margin, which was a decision endorsed by the board a few hours earlier than the call, which Dr. Zhang and myself also sit on the board. If you ask me about the profit guidance for 2016, the overall theme, I would say that we still are on the path to capture the mobile transformation opportunity. So you would not expect that in 2016, we will bounce back to a few years ago with operating margin of over 30%. However, if we look into each of the four business, I could tell you some of the growth driver on the top line and also on the profitability, you should figure out yourself that we should on an upward trend, both on the top line and also on the operating margin line. First of all, we started with Cheetah Mobile. For the Cheetah Mobile, if you remember that the guide on the top line that they will still expect a very fast growth on their top line, probably not less than 60% on the top line. In the bottom line, they have already mentioned that they were expected that the CNY 1 billion on GAAP profit for 2016. Which mean that the operating margin, excluding the ESOP charge, will bounce back to 16%, 17%. That is an improvement or increase as compared to 2015. They account for around two-thirds of our revenue in 2015, so that will definitely translate into an upward push on the overall Kingsoft operating margin in 2016. On the second category, I wanted to talk about the outlook for game, that I already answer in the first question raised by Thomas. We expected that on the PC, our cash cow, JX Online 3, will continue to perform with a steady, healthy growth on top line and very healthy bottom line, as JX3 is already a very healthy and mature product. So you expected that they will enjoy a very steady and thick operating margin. On the other hand, we also talk about the mobile game. We have already spent two year, actually more than two year, in investing in the mobile game area. Last year, we called investment or quote unquote notes of over CNY 200 million on the mobile game because not many of them are started formal monetization. The two game that we launch in the second half or fourth quarter are only at just the beginning. So we still are in a very happy investment stage, both in 2014 and 2015. However, in 2016, we mentioned that we already started to launch our three game, which the first one, as I mentioned that that will be in April/June. The second one will be around September. With those two game, which also are partnering with not only the strong IP and good game team, are also partnering with the very best publishing platform. You could expected that definitely will also be a catalyst in driving the revenue and operating profit for our 2016 P&L. But of course, it would depends on how successful those two games are. But they will definitely, as compared to 2015, will be a positive push to increase our profit margin. The third one, WPS. WPS, I remember that in the last quarter, I already relayed the message, which was determined during our strategic meeting held in summer. We decided that starting end of 2015 or beginning of 2016, we will start the monetization on our mobile WPS software. Which means that that will also be another upward push on our revenue and profit. Whereas as compared in 2014 and 2015, all our effort are spent on the investment without any monetization on our WPS mobile side, even though we actually won a lot of award in a lot of area. This is the third part. Apparently, if you hear from me that all three, we expected an uplift in our operating margin, but not expect a lot because they are still on this path. Do not expect a very significant increase, but on the direction, I would say that they all go towards the increase side. On the last part, on our cloud business. Our cloud business is a very important long-term business for Kingsoft. It was quite different in its nature as compared to other suite business, which require relatively heavy CAPEX, because we are working on an infra, a large part of our cloud business endeavor on the infrastructure layer service, which require a lot of capital investment. After we declare the all-in strategy, I would say that they are still in its early stage. Dr. Zhang mentioned that we already are very successfully in getting the number 1 position, excluding Tencent, in the cloud game area. And we also recorded a very successful result second half 2015 in the video cloud business. The revenue are growing at a very high speed, which is about 4x in 2015 as compared to 2014. And Dr. Zhang also mentioned that in 2016, you expected that they will continue to grow more than 100%. However, a lot of investors ask me about when we are going to achieve a break-even point. I would say that we are also on track to that point. If we do not take into consideration of any potential price war, that because the increase in our operating scale, actually our fixed overheads are being covered by our thin and healthy gross margin. So actually, if you look at 2016 in our budget, we are still expected that the cloud business will record a negative number on the bottom line. But in terms of percentage, meaning the net loss percentage as a compare to the revenue are actually diminishing, meaning that, in terms of percentage, we are actually going towards closer to the break-even point. I think with all the four segment directions, you could imagine or figure out yourself that, in 2016, we could expect that our operating margin will lift up from that we recorded in 2015, but not a lot. Thank you. Thank you. Once again, if you wish to ask a question, please press star one on the telephone and wait for your name to be announced. Your next question comes from the line of Wendy Huang of Macquarie. Please go ahead. Hi, Dr. Zhang, Francis, and Francie. This is Hillman calling on behalf of Wendy Huang. I have a question about your mobile game. Regarding your partnership with Xiaomi on the second title, is that an exclusive partnership, or you still licensing to other Android platform as well? Regarding your mobile game launches, could you talk in a bit more details about the reasons for delays, and how confident are we regarding the April and June timeline? Thank you. Thank you, Hillman. Let me answer your second question, which is more direct. You asked about the delay in our mobile game, which is not a surprise, as you could imagine that we are new in the mobile game development business. We started that 2 years ago. We are actually accumulating experiences. Actually, in beginning of 2015, we decided that we have already accumulated sufficient experience, then we start to elaboration on our important IP. Also, if ask about the delay in the schedule, that is primarily due to the reason that, number one, we are new, as I mentioned upfront. Second is that the JX IP are so important that we wanted to make sure that will be going to be more secure and popular. When we go through the schedule with Tencent for the first game, they actually considered that the game could be launched immediately or even last month. However, they think that because it is such a good game, they wanted to further polish it a bit. They now set out the timetable that to be launched in April or May. I think that are quite certain because, if you haven't talked with the publisher, you decided that you're ready to go, but after you have the publisher to go hand-by-hand to review the game, they might have some other suggestions. That might further delay the launching schedule. But now, both of them are already in the final stage of discussion. So the launching time for this first mobile game, I would say that is quite certain that will launch around May 9th. Okay. I have another question about your cloud strategy. Going forward, how should we think about your product mix and vertical mix? Maybe you can share a bit about what we expect by end of this year. How should we think about the revenue by game, video, government, as well? Also, if you look at the product, how should we think about the revenue by storage and also cloud computing? Thank you. Just want to understand your focus in terms of product and also vertical going forward. Yeah, let me first answer about the cloud. The cloud computing business is rapidly growing, and the market changes every day. So internally, we don't divide them in very detailed verticals. But I would like to share with you is that we have already reached the number one position in term of cloud storage service, public cloud storage service in the enterprise space launched in 2014. We continue that lead in 2015, and the good news is that in the cloud computing business, we had a faster growth in 2015. So today, by December, the computing part of our cloud service has already exceeded storage service. In this coming year, in 2016, we expect all of them will continue expanding, and with the computing expanding even faster. So this is where we stand. In addition to computing, we are also going to expand our footprint in the database service, in the hybrid cloud with our VPC technology, and in the mobile video sector in particular. If you paid attention, you might have noticed an explosive growth in the mobile video in the last 2 months. That requires a large capacity in term of video live broadcasting capability. That is where we are strong, and we are ahead of our competitors, and we started investing in that area from early last year, and we acquired a company in the video technology area toward end of last year that gave us a lead in the area. Overall, we will see a continued fast growth in the cloud computing and cloud storage area. I am quite optimistic, and since we are going to reach the ending of this meeting, I also want to emphasize one thing, which is, though you did not ask. As our WPS business in 2015, we reached another milestone. As many of you know that we have made great strides in the public sector, meaning government and the SOEs and large enterprises, in licensing our WPS software, in particular, driven by our WPS+Cloud strategy. In those markets, we command a huge market share in term of new purchases, anywhere from 60%-90%. What I am going to tell you is that we see a tremendous growth in the advertising revenue for WPS, leveraging our large personal edition of WPS user base. We talk about close to 100 million monthly active users on PC. There, we start to experiment and operate advertising and also value-added services. In 2016, you should expect this income to exceed the licensing software income. That effectively turns our WPS into an internet company. Not to mention that we are going to start monetizing our mobile traffic as well, which is another 80 million monthly active users worldwide. I hope that will help as well. Thank you. That is very helpful. Thank you, Dr. Zhang and Francis. Thank you. Once again, if you wish to ask a question, please press star one on the telephone and wait for your name to be announced. There is no further question at this time. I would like to hand the conference back to our presenters. Please continue. Okay, this will be the end of our 2015 fourth quarter and annual earnings call. Thank you everyone for your participation. Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.