Earnings Call: Q4 2014

Mar 20, 2015

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 annual results 2014 Kingsoft earnings 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 your telephone keypad. I must advise you that this conference is being recorded today, 20th of March, 2015. I would now like to hand the conference over to your speaker today, Ms. Francie Lu. Please go ahead, ma'am. Thank you. Ladies and gentlemen, good evening and good morning. I would like to welcome everyone to our 2014 Q4 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. Zhang Hongjiang, our Executive Director and CEO, and Mr. Francis Ng, our Executive Director and CFO. Now I am turning the call to our Executive Director and CEO, Dr. Zhang Hongjiang. Thank you. Good evening and good morning, everyone. First, let me give an overview of 2014 for Kingsoft. I would like to start with the focus on our mobile front. If the year of 2013 was the start of mobile transformation for our core businesses, then 2014 was the year of outstanding achievement in mobile transformation for Kingsoft. Our total mobile MAU, monthly active user, continued a rapid growth and exceeded over 481 million in December 2014, compared with 210 million a year ago. So this is more than doubled. Over 63% of our mobile MAU were from overseas in December 2014. In the Q4 of 2014, 37% of Cheetah Mobile's revenue was from mobile service. These performances showcase that we have made excellent progress in all of our priorities from gaining traffic shares, accelerating global market expansion, to strengthening our mobile monetization capabilities. In addition to the accomplished mobile transformation, all of our three major business lines delivered outstanding results in the past year. Amongst which, Cheetah Mobile's achievement was particularly impressive. On May 8, 2014, Cheetah Mobile was successfully listed on New York Stock Exchange. As we continue to invest aggressively in mobile application development, global market penetration, and global mobile monetization, we are well-positioned to take the tremendous opportunity ahead, driven by the explosive development of global mobile market and mobile internet. The year of 2014 was also a critical turning year for our strategic business unit, Kingsoft Cloud. In 2014, we decided to focus our cloud effort on enterprise services by disposing Kuaipan Personal Version in September last year. We are excited to see substantial progress in the development of our cloud storage and cloud computing services. The daily average data uploaded onto our storage service was approximately 258 terabytes in December 2014, driven by the soaring increase in cloud storage users and the organic mobile user data. Now, more than 90 games are operated on our platform, including the MU Miracle, Chinese name, Quanmin Qiji, which is the China's blockbuster mobile game in the past year. All of those metrics show that it was the right time for us to focus and invest on the next great opportunity, enterprise cloud storage and cloud computing services. As a significant step forward for our cloud business, we unveiled the all-in cloud strategy in December 2014. This strategy entails making huge investment into cloud technology development, talent recruitment, market expansion, and cloud service infrastructure building. We are dedicated to building Kingsoft into a leading cloud service provider in China in the coming years. Now, in more detail, let me get into some of our numbers, then later on, each of our business. 2014 was another year of continued growth. We delivered a solid annual top-line growth of 54%, and our total revenue reached CNY 350.1 million. All of our business lines achieved a record high in terms of revenue and operational metrics. Excluding the effect of share-based compensation costs, the operating profit for 2014 declined 4% year-over-year to CNY 715.5 million, and operating profit margin decreased by 13 points year-over-year to 21%. These results are in line with our proactive investment strategy in mobile transformation and trading off short-term profit for longer-term greater gains in the future. I am actually pleased with the outstanding performance and the execution of our strategy, particularly the swift expansion of our global mobile user base, the substantial improvement in mobile monetization capabilities, and the accelerated growth of our cloud service. Now let's look into each of our four business lines. 2014 was a milestone year and marked a new start for Cheetah Mobile. It has delivered another year of impressive achievement in terms of revenue and operating metrics. For the year of 2014, the revenue for Cheetah Mobile recorded a growth of 141% year-over-year. The strong growth momentum was supported by the significant progress we have made in exploration of global market monetization, mobile traffic expansion, and the strengthened monetization capabilities of PC-based user traffic. In terms of revenue growth rate, the breakthrough in global monetization is particularly impressive, driven by the strong and accelerated growth of global mobile advertising market and Cheetah Mobile's unprecedented effort in expanding our market advertising businesses worldwide. For the fourth quarter, revenue from mobile service of Cheetah Mobile grew 98% quarter-over-quarter and 635% year-over-year to CNY 217.4 million, which represented approximately 37% of Cheetah Mobile's total revenue, compared with approximately only 11% a year ago. Mobile MAU of Cheetah Mobile soared at an impressive rate of over 138% year-over-year to 395 million, approximately 69% of which were from overseas markets. I am also pretty excited to see CM Security, which was launched in January 2014, has rapidly grown into the second leading mobile application of Cheetah Mobile. Our flagship mobile application, Clean Master, continues to rank number one in downloads within the tool category on Google Play in December last year, according to App Annie. CM Security took the number two position. Our online game business continued to grow at an annual rate of 14% last year, outpacing the average annual growth rate of MMO gaming market in China. Thanks to the release of a series of expansion packs in the past year, the revenue of our flagship game, JX Online 3, increased 54% year-over-year to reach CNY 705.3 million, following a consecutive two years nearly double annual rate. In November 2014, JX Online 3 achieved a new record in terms of revenue and also APA with the launch of the expansion pack. In November 2014, our first self-developed mobile game, Transfiguration Lord, was launched and well received by the gamers. The past year also marked a year of change for Kingsoft WPS Office. Total revenue from WPS Office, net of advertising revenue from Cheetah Mobile, posted a slight growth of 1% year-over-year to reach CNY 290.7 million in 2014. The monetization on traffic from our WPS Office Personal Edition exceeded our expectations, driven by the rising usage of WPS Office, our improved monetization capability, as well as the cooperation with Cheetah Mobile. The MAU of WPS Personal Edition continued to increase and exceeded 82 million in December 2014, compared to 62 million a year ago. However, we have observed a slight decline in WPS sales to government agencies following a peak in the year of 2013. During the year of 2014, WPS Office focused its effort on the mobile office application development and the global user base expansion. In July 2014, WPS Mail and the WPS Mail for Xiaomi phone were launched, adding a key function to our mobile WPS productivity suite, which enhanced the mobile experience of Android phone users. Our global mobile MAU for WPS increased by 96% year-over-year to 85.6 million in December last year, of which MAU of WPS Office were 63.5 million. 2014 was also a turning year and laid a solid foundation for Kingsoft Cloud. As cloud service became mainstream and experienced explosive growth in China, the successful provision of cloud storage service to Xiaomi, the year's fastest-growing smart device provider in the world, and the excellent provision of cloud computing service to MU Miracle, China's phenomenal blockbuster mobile game in 2014, marks a milestone of our capabilities in providing cloud storage and computing services. We are most encouraged to see the daily average upload data into our storage service soar to approximately 258 terabytes per day in December 2014, compared to 61 terabytes a year ago. I would like to turn the call to Francis, our CFO, to go into further detail of last year's report. Thank you, Dr. Jiang. Hello, ladies and gentlemen. I am now going to discuss the Q4 2014 operational and financial results. Let us start with the Q4 using the CNY as a currency. Revenue increased 26% quarter-on-quarter and 60% year-on-year to CNY 1,072 million. The revenue split was 32% for our online game, 54% for Cheetah Mobile, and 14% for office software and others. You may notice that we have done a reclassification here because Cheetah Mobile has become a separately listed company, May in 2014. Revenue from our online game business increased 14% quarter-on-quarter and 20% year-on-year to CNY 346 million. The quarter-on-quarter increase was mainly attributable to the continued growth of JX Online 3, with the release of the largest expansion pack of the year in November 2014, and new contribution from two mobile games, which were commercially launched in September and November 2014, respectively. The year-on-year increase was primarily due to the sustainable and notable growth of JX Online 3, which has grown for the past 13 consecutive quarters, driven by continuous improvement in game experience and introduction of attractive expansion pack on a quarterly basis. Daily average PCU, a measure for game popularity, increased 7% quarter-on-quarter and 5% year-on-year to 700,000. The quarter-on-quarter increase was mainly due to the sustained popularity of JX Online 3, and the year-on-year increase was primarily driven by the launch of new version of JX Online 1 in Vietnam. Monthly APA increased 14% quarter-on-quarter and 45% year-on-year to 2.7 million. The solid QoQ and YOY increases in APA primarily reflected an ongoing increase in the JX Online 3 users. The monthly ARPU decreased 5% quarter-on-quarter and 20% year-on-year to CNY 39. Probably we all remember, we have already discussed that wherever the rate of JX3, the proportion of JX3 user increase in our gaming user portfolio, the ARPU tend to decrease because they are the time-based game, which normally has a much lower ARPU than the other item billing game. Revenue from Cheetah Mobile increased 30% quarter-on-quarter and 133% year-on-year to CNY 582 million. The quarter-on-quarter increase was primarily due to the outstanding performance of online marketing service, driven by the phenomenal growth of global mobile monetization. The year-on-year increase was mainly due to the increase in revenues from online marketing services and Internet value-added services, driven by increased monetization capability of PC-based user traffic, as well as the notable ramping up in the global mobile monetization. The mobile MAU from Cheetah Mobile increased 16% quarter-on-quarter and 138% year-on-year to 395 million in December 2014. Remember that early in the IPO process, we promised that we will definitely exceed 300 million. Later that was increased up to 350, and now the actual result for 2014 is 395, which is much higher than what we expected. In December 2014, approximately 69% of mobile MAU were from overseas market, mostly from the U.S., Asia, and Europe, compared to approximately 53% in December 2013. Our mobile user installation increased 26% quarter-on-quarter and 240% year-on-year to over 1,089 million. We have already exceeded 1 billion user download as of December 2014. The robust mobile user growth mainly reflect that our mission-critical applications, particular Clean Master, continue to gain traffic share and we are expanding rapidly in the global market through our effort in market exploration, market expansion, and the continuous improvement of our user experiences. The growing number of user in turn attract additional users on our mobile advertising platform, which once again attract advertising, which result in a virtuous cycle. Revenue from our office software and other business increased 41% quarter-on-quarter and 10% year-on-year to CNY 144 million. The QoQ increase mainly reflected the strong sales of WPS Office in the peak season and a significant ramping up of revenue contribution from Kingsoft Cloud, driven by the phenomenal growth of cloud storage user from Xiaomi, as well as our fast-growing cloud computing services to mobile game provider. The year-on-year increase mainly reflected the full year strong growth of our cloud storage service provided to Xiaomi and significant progresses we have made in the cloud computing services to mobile game providers, as well as a growth in revenue from online marketing service driven by the improved monetization capability of WPS's free user traffic. Cost of revenue increased 61% quarter-on-quarter and 152% year-on-year to CNY 226 million. The QoQ and YOY increases were primarily due to the increase in channel and content costs associated with Cheetah's mobile game business, as well as higher bandwidth server hosting costs, depreciation along the increasing user traffic, and activities of Cheetah Mobile and the rapid development of our cloud services. Gross profit increased 90% QoQ and 46% year-on-year to CNY 845 million. GP margin decreased by 5% quarter-on-quarter and 8% year-on-year to 79%. Our R&D costs decreased 3% quarter-on-quarter and increased 51% year-on-year to CNY 264 million. The year-on-year increase was mainly attributable to the increased staff costs, driven by the expansion of the group mobile application development teams and increased salary and benefits. Selling and distribution expense increased 6% quarter-on-quarter and 48% year-on-year to CNY 244 million. The quarter-on-quarter and year-on-year increases primarily reflected our investment in expanding the mobile user base of Cheetah Mobile in the global market. Administrative expenses increased 20% quarter-on-quarter and 71% year-on-year to CNY 90 million. The quarter-on-quarter increase was primarily due to an increase in professional fees, and the year-on-year increase was mainly due to a higher professional fee and an increase in staff costs. Share-based compensation costs decreased 10% quarter-on-quarter and increased 254% year-on-year to CNY 59 million. The year-on-year increase was primarily driven by the new grant of Cheetah Mobile's option and awarded shares to selected employees in conjunction with its IPO in 2014. Operating profits before share-based compensation costs increased 81% quarter-on-quarter and 23% year-on-year to CNY 247 million. The margin of operating profit before share-based compensation costs increased 7% quarter-on-quarter and decreased 7% year-on-year to 23%. Our other losses in 2014 amounted to CNY 30 million. Basically, included the asset impairment. Compared to a gain of CNY 196 million in Q3 2014, the Q3 gain was primarily percent gain on the disposal of our Kuaipan Personal Version. Our finance income decreased 3% quarter-on-quarter, increased 64% to CNY 65 million. Our income tax expenses decreased 24% quarter-on-quarter and increased 41% year-on-year to CNY 60 million. Our effective tax rate held flat quarter-on-quarter and increased 2 percentage points year-on-year to 7%. As a result, our profits to owner of parents decreased 25% quarter-on-quarter and increased 5% year-on-year to CNY 174 million. Profit to owner of parents, excluding the ESOP expenses, decreased 24% quarter-on-quarter and increased 13% year-on-year to CNY 202 million. Let me turn to full year 2014. Revenue increased 54% year-on-year to CNY 3,350 million. Online game made up 37%, increased 40% year-on-year to CNY 1,253 million. Cheetah Mobile made up 50%, increased 141% year-on-year to CNY 1,674 million. Office software and others made up the remaining 30% and increased 11% year-on-year to CNY 423 million. Our GP margin decreased 4 percentage points to 82%. Profit to owner of parent increased 15% year-on-year to CNY 769 million. Profit to owner of parent, excluding the ESOP, increased 22% year-on-year to CNY 875 million, and the profit margin excluding the ESOP charges was 26% for 2014 versus 33% for 2013. Our balance sheet, we have cash and bank deposit of close to CNY 7 billion at year-end 2014. Deferred revenue, including current and non-current portion, as at 31st December 2014, was CNY 325 million compared to CNY 233 million last year. The increase was primarily due to the increased sales of prepaid card in 2014. Net cash generated from our operating activity decreased 4% year-on-year to CNY 952 million. Our CAPEX was CNY 845 million and CNY 133 million for the year ended December 2014 and 2013 respectively. Let me turn over the floor to Dr. Jiang to talk about the outlook for Kingsoft in 2015. Dr. Jiang. Thank you, Francis, and good evening, ladies and gentlemen, again. Looking forward, Cheetah Mobile will continue to invest aggressively in mobile application innovation, big data analytics research, and global market expansion as well as the global mobile monetization capabilities. Clean Master and CM Security will maintain their strong growth momentum as Cheetah Mobile's flagship mobile apps that continue to deliver innovative and better than expected mobile experience. Leveraging the fast development of mobile internet market, strategic collaboration with Samsung and Xiaomi, as well as the expansion of geographic coverage, the user base of our mobile apps will continue to expand rapidly. As the global mobile advertising market booms and evolves fast, we expect the mobile platform of Cheetah Mobile will continue to attract user activities and advertisers, and mobile advertising will become our strong growth catalyst in the coming year. Additionally, Cheetah Mobile's recent acquisition of MobPartner will further enhance our global mobile monetization capabilities and extend the footprint of our advertising business. Going forward, we remain focused on building one of the world's leading mobile advertising platform and on expanding our market penetration and market share. With its proven track record of growth and increasing popularity, we expect JX Online 3 will maintain its growth momentum in the coming year as we continue to provide ingenious and better-than-expected game experience. A number of expansion pack for JX will be launched in 2015 to further stimulate and consolidate our gaming population. We have more than 10 mobile game projects currently under development. A number of which will be commercially launched this year. We expect revenue from mobile games will become an important growth catalyst for our online game business in the coming years. We expect the enterprise sales from Kingsoft WPS Office will resume its strong growth momentum, driven by the increasing demand for office software services across devices, as well as the improved IPR protection policies in China. In addition to the enterprise sales, we will continue to explore the monetization on traffics of WPS Personal Edition, which will be a growth catalyst for our WPS business in this year. More importantly, we will focus on the new mobile office apps development and the worldwide mobile user base expansion. We will also start to explore the monetization opportunities on the traffic of our mobile WPS. In the past year, we have established competitive capabilities in providing cloud services to meet the need of rapid growing mobile internet companies, with a phenomenal success in mobile user data storage service and the mobile game platform service. This year, with the increased investment, we will accelerate our effort in extending our storage services capabilities into new market and vertical applications. We expect revenue from Kingsoft Cloud storage will continue its strong growth momentum driven by the fast-growing shipment of smart devices and the mobile user data, as well as the penetration of cloud service into new sectors and new verticals as well. Also, we will increase our investment in cloud computing services to ensure we continue extending our shares in mobile game platform market and extending into other non-game industries. We expect revenue from our cloud computing services will also gain strong growth momentum. To accommodate the explosive growth in demand of cloud services and achieve our business goals, we will invest heavily in building cloud service infrastructure. Looking forward, we will continue to execute our mobile transformation and all-in cloud strategies, given the encouraging performance of all of our business lines in the past year and our solid execution capabilities. We are confident that Kingsoft will maintain its strong growth momentum in term of top line and also mobile internet transformation, and reach new heights in 2015. Thank you. Thank you, operator. We are ready for the question and answer session. We will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. The first question comes from the line of Alex from J.P. Morgan. Please ask the question, sir. Hi, good morning and good evening, everyone. Thank you for taking the questions. The first question is about the cloud business. Can you guys share with us the latest thoughts in the development strategy of cloud in 2015? What are the key areas and what are the key investments you guys have in mind, and what could be the financial impact? Thank you. Thank you, Alex. This is Hongjiang. Let me try to answer your question. In 2014, we had great success in two fronts in term of cloud services. One is our stronghold, which is the data storage services, and the new addition was the computing platform for gaming industry or mobile games. The mobile game platform really accelerated last year and placed us in the top runners of the cloud service providers for this particular sector. I see the continued effort in these two areas for this year, but we are expanding beyond just mobile user data and just mobile game computing. We have moved beyond that. We are expanding into more verticals, including but not limited to the video space. There are more and more video capture devices, as well as other verticals like education, like finance. But in the meantime, we focus our effort also on strengthening our competitiveness in terms of cost, in terms of service quality, in terms of the response time. At this moment, we are leading the industry, but competitors are catching up very fast. So in terms of investment, as I mentioned earlier, the major investment will be on the infrastructure, because this is a CapEx-heavy sector, and also on recruiting top talent. As the cloud becomes a mainstream, we quickly realize how important the talents are and how scarce talents are. Given the fact that China's cloud industry just started, there are very few top talents in this field. So we are going to strengthen our effort in that as well. So all of those will help us to position ourselves in the leading position in the cloud computing space. And we also want to make sure we do not miss the opportunities that traditional industries are moving their IT infrastructure into cloud. So necessary investment will be put together, and that will definitely impact on our bottom line. But hopefully, the top-line growth will be even bigger. I hope I answered your question, Alex. Yeah. Yes, it does. Can I follow up with a further question on the cloud computing, but more on the competitive landscape side? As you discussed, this is a highly competitive market. A lot of the competitors are quickly catching up. Can you talk about what is your key differentiating strategy in the market, and what is your competitive advantage and disadvantage in the cloud business? Thank you. Alex, what was your first question? I know the second one is on the advantage. What was the first question? The first question is, there are a lot of cloud service suppliers in the market. How do you differentiate your product? Okay. Yeah. We actually launched our mobile game computing platform in the second half of last year, like in July and August, really pushing the service out. If you are asking about the differentiation, when we were thinking on our computing cloud, we identified that mobile game is the area to cut in first, because it is a particular sector that require very fast computing and very good network quality, and very stable service. When we design our product and roll out a service, those three are the top considerations that we put together. We are the company that provide the best performance virtual machines needed for the mobile games. We also established our own BGP network. The network performance is also good. Those advantage, those differentiations are already shown in the launch of last year's blockbuster game, the "Quanmin Qiji." On the first day of launch, it gathered CNY 26 million paid for that particular game in the first 24 hours, which the first 24 hours for a game launch is always the most scaring period, and our service had no major interruptions at all. That just shows how strong the service is. Also, in term of the storage service, we mentioned a number a couple of times, the daily average upload of data was more than 250 in December. That basically put us the first place. Capable of supporting that scale of data upload, not to mention the existing data, that itself put us in the leading position already. Basically, we have overcome the problem of scale, which also means that we also overcome the difficulty on the engineering side. Those are the factors that put us in front of our competitors. Of course, we do see our competitors put their act together. But we are quite confident we will continue to improve our product and services, and we will also identify areas where we will cut in with a strong product. That's helpful. Thank you very much. Thank you. The next question comes from the line of Ilman Chan from Macquarie. Please ask your question. Thank you for taking my question. I have a question regarding the mobile game. Just now you mentioned that there will be more than 10 mobile games under development this year. Could you talk about some of the major titles that we should be aware of, and also the timing of the launch of these major titles? I have another question. Thank you. Thank you. Thank you for the question. Let me answer the question. We have actually communicated to the market that we have more than 10 mobile games in the pipeline. I am not going to go into the detail of each of the mobile games. You might want to know that we probably have three major mobile games to be launched in 2015. One is what we already talking for some time, the market expecting for some time, the MU Miracle which probably launch in the mid of 2015. The other two is of particular importance. The Wex Game actually leveraging on its strongest IP, JX Online 3, and also the JX series, which are also be expected to be launched in the second half 2015. These three are the major mobile game titles that you can expect. Okay. Thank you. I want to ask more about the cloud business. Our cloud business has been growing very fast, and the majority of the growth is driven by Xiaomi and our support to them. Could you talk about more on about how we can explore to new verticals? When do we expect non-Xiaomi customers can contribute to a more significant portion of our cloud business? If possible, could you also talk about the financial aspect about the cloud business, like the profitability, the margins of it? Thank you. Yeah. Let me take the question. Yes, Xiaomi's growth in term of mobile user data last year definitely helped tremendously the overall growth of Kingsoft Cloud in term of the data volume, also in term of income. Another growth area, which actually grow from zero, from nothing to a significant number, is the mobile game computing platform. That is independent of Xiaomi. In the 2015, we will see a continuing growth from Xiaomi, the mobile data. We are pushing very hard in getting new customers and getting into new verticals as well, as I mentioned earlier, the number of verticals we are looking into it, and by ourselves and together with our potential partners. I think it is too early to talk about specific verticals where we will see a significant growth. I think give us a couple quarter more, we will be able to share more with you. As I mentioned earlier, through support of the growth of our cloud business, we will invest heavily in infrastructure and also in talent acquisition. We shouldn't expect a profit in this year, because the business is still in the early stage and growing. We'd rather focus our effort on the top line and on establishing partnership and getting more customers onto our service in this year. The other question, you asked about the profitability. I wanted to supplement on that is that, you probably know that the Kingsoft Cloud strategy is actually to be focused. With that, we spin off our Kuaipan Personal Version in December last year, so as to focus on the 2B business. There is a characteristic for 2B business, which is a major difference from a 2C business, is that we charge our client on day one. So it is much more easy for a 2B business to become break even. So, except the fact that it is very difficult to predict or forecast whether there is any price war or how severe the price war will be We will be expected that we could achieve breakeven within the 12 to 18 months time. Not talk about the price war. Of course, it also depends on how the strategy, how big that we wanted to grow the business. We might invest more at the front end, so as to capture a bigger market. So it is really difficult to tell about the profitability at the early stage. Okay, got it. Thank you very much. Thank you. The next question comes from line of Evan Zhou from Credit Suisse. Please ask your question, sir. Hi, good evening, Dr. Jiang and Francis. Thank you for taking my question. My question is about your PC game growth. I am wondering, some of our peers, like industry leaders like Tencent, have witnessed a slowdown of their PC game, especially in the MMORPG segment. I am wondering if you could share some of your thoughts regarding our key. In the more longer run, maybe in the next 2-3 years, how do we strategically think of our PC business as well as the mobile game part of the business ramping up speed? Thanks. Let me first answer the question, and then Francis can go to some details if we need it. If you look at the PC network game market in the last three years, you definitely see a slowing down in terms of growth rate, but it is still growing. Last year was a single digit in terms of MMORPG game. The market growth was less than 9%, and we grew about 14%. In particular, our flagship, JX3 Online, grew over 50%. In terms of slowing down, yes, they are slowing down because last year we grew almost 100%, and the year before we grew almost 100%. But we see the popularity of our JX3 Online game continue to grow, and so we expect this year there will still be a decent growth for that particular game. Having said that, definitely the mobile games represent the future growth. If you look at the last three years, the growth rate of games are much higher than the PC games. That is actually why we put almost all of our increased R&D investment into mobile games. If you ask me what will be the growth catalyst for our gaming business, I would say it will be the mobile games. Hopefully we will see a number of very successful mobile games next year that will mark the success of our mobile transformation in our game business. Yeah, understood. Thanks. My second question is regarding our margin trajectory. I remember that probably 2-3 quarters ago, we kind of foresee there is a likelihood that our OPM can see a recovery in the first half of 2015. I am wondering if you have any, kind of give us some colors of update about that visibility. Shall we still foresee the margin to stabilize somewhere in mid this year or later this year? Or there is an update of that visibility? Thanks. Let me take this question first, and Dr. Jiang can Sure. Evan, thank you for the question. Yes, we have actually communicated to the market that we expected that 2014 will be a very significant transformation year for Kingsoft. We actually have been investing heavily in the mobile internet across all of our four business. We originally expected that with the increase in headcount, in the R&D staff count, and together with the launching of the mobile game, which start to become a monetize of the investment we have made in the past year. Also the continuous increase in the revenue of Cheetah. It is generally expected that the operating margin for Kingsoft as a whole will improve in 2015. I am going to share with you that we actually have a lengthy discussion within the Cheetah board and the Kingsoft board in the previous few day. Talk about the recent development of our mobile internet strategy, in particular on the Cheetah Mobile business. We are very excited to see that Cheetah Mobile have achieved a tremendous result in terms of ramping up its MAU. As I mentioned earlier, we originally expected that they could achieve 300 million in 20- 14, but they actually delivered close to 400 million in 2014. Also, in terms of monetization of its mobile app, they actually make a tremendous achievement in the monetization of their mobile app in the overseas market. As you probably know that the revenue contributed by our mobile revenue in Q4 had already exceeded 30%, close to 40%. As such, the board actually looked deep into where we wanted to get the Cheetah Mobile into. The board actually decided that we will invest further heavily in 2015 in order to enhance the entry barrier. We are going to invest heavily by spending all the profit that we originally budgeted in our first draft budget in 2015. We will spend all that to further invest in the market to capture further increase in the mobile MAU. If you are interested, you probably can tune into the 8:00 P.M. Cheetah call. The CEO, Fu Sheng, will share with you further on a detailed strategy. The time is running fast, so I won't go into details. I would encourage you to listen to what the CEO and CFO of Cheetah said in 5 minutes time. Yeah, sure. Thank you. You could expect that we actually continue to grow very healthily or strongly on the top-line revenue across four of our business, in particular, Cheetah. They're expecting to deliver another year of over 100% growth on the top line. But on the operating margin, because of that decision, you could expect that 2015 will be another year of heavy investment in capturing the mobile opportunity, both on the Cheetah side and also on the Cloud side. Thank you, Evan. Yeah, understood. Just very quick to follow. The incremental increase of spending will be mainly on Cheetah, but not really on the other side of the business, or it's on both sides? Mainly on Cheetah. On the other side, for example, on the gaming business, we already invested in the mobile game studio starting in 2013, 2014. They are actually in the years of harvest. Understood. Thank you very much for the clarity. Okay, thank you, Evan Zhou. Due to the time limit, we are ready for one last question. Thank you. The last question comes from Mr. Alvin Jiang from Morgan Stanley. Please ask your question, sir. Hi, Dr. John, Francis, and Francine. Thank you for taking my question. I have a quick question on WPS. Do you expect any major updates on the product or adding some new features on your enterprise product? In the personal product, I think our personal version of WPS already accumulated considerable users, MAUs. How far do you expect we are from the monetization from mobile advertising, or maybe other means? Alvin, let me take this question. The WPS side of the story is that at this moment, in the last year, sorry. In the last year, we have achieved quite a good result in term of monetizing the PC users traffic. We talk about the personal edition's traffic by utilizing this traffic and providing value-added services. On top of the licensing revenue, we actually more than double the value-added service revenue there. In term of the new features to the enterprise version, we have quite quietly added on and improved on quite a number of features, because ever since ICBC signed the contract with us more than a year ago to switch into WPS as their major productivity software. We have been improving our enterprise versions in multiple fronts so that our product can be easily integrated into the workflow process, and also add on many other functions. That's on the enterprise part. On the mobile user traffic monetization side, we feel that the mobile productivity is still an area that needs a lot more investment and observation. We have been working hard in looking into the monetization part, but at this moment, our decision is we still need to look into it more before we start to monetize it heavily. Okay, thank you. Hi, ladies and gentlemen. As there are no further questions, at this time, I would now like to hand the conference over to the speakers. Go ahead. Hi, ladies and gentlemen. This is the end of our 2014 fourth quarter and annual earnings call. Thank you all for attending. Have a good night. Thank you.