Earnings Call: Q1 2020

May 26, 2020

Earnings release

Hello, ladies and gentlemen. Welcome to first quarter 2020 Kingsoft Corporation earnings conference call. At this time, all participants are in a listen-only mode. After the management's brief remarks, there will be a Q&A session. Today's conference call is being recorded. I would now like to turn the conference over to your first speaker today, Ms. Francie Lu. Thank you. Please go ahead, ma'am. Thank you. Ladies and gentlemen, good evening and good morning. I would like to welcome everyone to our 2020 first 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 own information and information from other sources, which we believe to be reliable. Please refer to the other public 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 our Executive Director and CEO, Mr. Zou Tao. Zhou-dong. Zhou-dong. Excuse me. The line of Mr. Zou Tao has disconnected. Okay. He will dial in again. I think he's having a technical issue right now. All right. Yes. He'll dial in again. The line of Zou Tao has now joined. Please go ahead, sir. Hi, Zou Zong. Zou Zong. Sorry about that. There was a brief connection issue earlier. The first quarter results have laid a very good foundation for 2020. The company's various businesses have developed steadily and performed exceptionally well in addressing the challenges of the COVID-19 outbreak. At the same time, the pandemic has accelerated the digital transformation and online collaboration of all industries, thus laying a solid foundation for our future development. Especially, we saw significant growth in the operational performance of cloud office products and services, as WPS has been more widely adopted for remote working. Our flagship JX Online 3 PC game also achieved a stable performance, whose revenue continued to grow year-over-year. on May 8, 2020, Kingsoft Cloud was successfully listed on the NASDAQ. Our cloud services and business continued to maintain its robust growth in the first quarter. As the largest shareholder of Kingsoft Cloud, we have full confidence in its future performance. Riding on the wave of the post-pandemic digital transformation, we are marching towards a bright future and are determined to become a winner of this unprecedented new digital era. In the first quarter, our total revenue was RMB 1,171 million, up 32% year-on-year, kicking off 2020 on a positive note in spite of the COVID-19 outbreak. Our office software services and others and online game businesses grew 36% and 30% year-on-year, respectively in the first quarter. Now we are turning the call to our CFO. Thank you, Francie. Hello, everyone. For the first quarter of 2020, the business of Kingsoft Office Software and its subsidiary, collectively known as Kingsoft Office, developed steadily. Global monthly active user of WPS family, which have record highs with strong growth of cloud office product and services, particularly WPS Docs. WPS Docs is an online document product, has become one of the largest online collaboration tool in China. Kingsoft Office has further consolidated its leading position in the office market in China, with a dominant user base in WPS Office and WPS Docs. During the quarter, Kingsoft Office provided more than 4 million free business collaborative cloud office accounts to various government organization, enterprise, schools and medical institution to support the remote working and work resumption in fight against COVID-19. More than 100 government organization and industry association have adopted WPS Pass. WPS Business one-stop cloud office service platform as a preferred remote office product. With continued innovation and leading position in the field of office software. Beijing Kingsoft Office Software Inc. was named as the innovation pioneer enterprise in the information technology application. It was also admitted to the information technology park in Jingkai District. In National Cybersecurity Industrial Park, WPS Office 2019 Security Edition received the Prestigious Butian Award from the Independent Innovation Report of the Internet Information in 2019. An outstanding products and technology award of information technology application in China, in recognition of its product excellence. The above breakthrough provides solid foundation for our licensed business to seize opportunity in the areas of cloud service, innovative information technology and infrastructure investment. Going forward, Kingsoft Office will further leverage its technology capability to maintain dominant position and stellar reputation in document and information processing, while enhancing user experience and offering easy to use, yet highly effective products and services. In the first quarter, the online game business maintained a robust year-on-year revenue and user growth, reflecting our R&D track record in developing compelling online game and IPs. Revenue and average daily active user of our flagship JX Online 3 PC game recorded a year-on-year growth of 33% and 20% respectively. While revenue from other PC game of the JX series increased by 44% year-on-year. For the mobile game business, our key mobile game, JX Online 1 and Adamant Online, continued to perform steadily during the quarter. During COVID-19 outbreak, we have launched several charity initiatives, such as setting up an in-game fundraising and offering free game login in response to China's call to support epidemic prevention and control. We aim to deliver positive message in this unprecedented time and further enhance the positive influence of our IPs. On May 22, 2020, we launched the new expansion pack for JX Online 3 PC game, aiming to provide gamer with a new game experience. Going forward, we will continue to focus on quality content creation, and further enhance the integration of R&D and operation, thus laying a solid foundation for our online long-term development. I will now discuss the Q1 operational and financial result using CNY as currency. Before I start, I would like to explain that the comparative figure are restated to reflect the reclassification between continuing operation and a discontinued operation. The operating result of Kingsoft Cloud has been presented as a discontinued operation. Revenue increased 32% year-over-year and decreased 21% quarter-over-quarter to CNY 1,171 million. The revenue split was 67% for our online games and 33% for office software and others. Revenue from our online game business increased 30% year-over-year and decreased 15% quarter-over-quarter to CNY 781 million. The year-over-year increase was mainly due to the healthy growth of our flagship JX Online 3, driven by enhanced user engagement and monetization ability, as well as enriched mobile game portfolio. The quarter-over-quarter decrease was largely due to the declined revenue from JX Online 3 as a large-scale expansion pack being successfully launched in the fourth quarter of 2019. Revenue from the office software and services and others increased 36% year-over-year and decreased 31% quarter-over-quarter to CNY 391 million. The year-over-year increase was mainly attributable to the revenue growth from WPS Office subscription services, driven by rapid expansion of user base with enhanced features and services. The quarter-over-quarter decrease was largely due to the declined revenue from WPS Office licensing and WPS Office online marketing services resulting from a weak seasonality, which was partially offset by the solid and sustainable growth from WPS Office subscription services. Cost of revenue increased 15% year-over-year and decreased 14% quarter-over-quarter to CNY 201 million. The year-over-year increase and quarter-over-quarter decrease mainly reflected the changes in content and channel costs associated with revenue from license mobile games in each corresponding quarter. Gross profit increased 36% year-over-year and decreased 22% quarter-over-quarter to CNY 970 million. The group's gross profit margin increased by 3 percentage point year-over-year and decreased by 1 percentage point quarter-over-quarter to 83%. The increase in the group's gross profit margin year-over-year was mainly due to the increased revenue contribution from self-developed games, which have relatively higher gross profit margin. Our net research and development costs decreased 4% year-over-year and 13% quarter-over-quarter to CNY 355 million. The year-over-year decrease was largely due to the reduced outsourcing activity for our R&D projects as a consequence of the pandemic. The quarter-over-quarter decrease was mainly attributable to the temporary exemption or reduction of social and medical insurance premiums in this quarter. Selling and distribution expense increased 37% year-over-year and decreased 36% quarter-over-quarter to CNY 147 million. The year-over-year increase was mainly due to high expenses incurred as WPS business continued to increase its sales and marketing effort to expand enterprise market. The quarter-over-quarter decrease was mainly due to fewer promotion activities. Administrative expenses increased 17% year-over-year and decreased 28% quarter-over-quarter to CNY 93 million. The year-over-year increase was primarily due to the increased staff-related costs and professional services fee. The quarter-over-quarter decrease was mainly due to the reduced professional service fee. Share-based compensation costs decreased 21% year-over-year and quarter-over-quarter to CNY 31 million. Operating profit before share-based compensation costs increased 97% year-over-year and decreased 24% quarter-over-quarter to CNY 416 million as a result of the combination of the above reasons. The operating profit margin before share-based compensation costs increased by 12 percentage point year-over-year and decreased by 1 percentage point quarter-over-quarter to 36%. Net other gain of CNY 3 million were recorded as compared to the net loss of CNY 1 million for the first quarter 2019 and the net other gain of CNY 48 million for the fourth quarter 2019. The net other gain in the fourth quarter 2019 were mainly due to a gain on a deemed disposal of partial interest in a subsidiary. Share of losses of associate of CNY 64 million were recorded compared to a share of losses of CNY 78 million for the first quarter 2019 and a share of losses of CNY 402 million for the fourth quarter of 2019. Losses were mainly due to losses recognized in Cheetah Mobile in this quarter. Income tax expense increased 48% year-over-year and decreased 18% to CNY 64 million. Losses for the periods for discontinued operation reflected losses from Kingsoft Cloud, which was loss of CNY 481 million as compared to a loss of CNY 296 million in the first quarter 2019 and a loss of CNY 333 million in the fourth quarter 2019. The increased losses in absolute amount were in line with Kingsoft Cloud's revenue growth and business expansion. As a result, the profit attributable to the owners of parents was CNY 6 million as compared to a loss of CNY 68 million for the first quarter 2019 and a losses of CNY 100 million for the fourth quarter of 2019. Profit attributable to the owners of parent, excluding ESOP, was CNY 55 million, compared to a loss of CNY 33 million for the first quarter of 2019 and a loss of CNY 56 million for the fourth quarter of 2019. On our statement of financial position, we have a cash and bank deposit of around CNY 12 billion as at 31st March 2020. Net cash from operating activities was CNY 545 million, compared to a net cash used in operating activity of CNY 50 million, and from operating activity of CNY 493 million for the three months ended March 31st, 2019, and December 31st, 2019, respectively. Capital expenditure was CNY 328 million, CNY 279 million and CNY 341 million for the three months ended March 31st, 2020, March 31st, 2019 and December 31st, 2019, respectively. We are pleased to achieve a satisfactory performance in the first quarter amidst the COVID-19 outbreak. Our business has shown strong resilience, and we are confident in the strength of our business model and our development going forward. Looking ahead, we will continue to increase our investment in key areas, improving our product and service capability, innovate on our business model, with our ultimate focus being the provision of high-quality product and services to our customers. This concludes my brief introduction. Now I hand over the board for questions. Hi, operator, we're ready for the Q&A session. Certainly. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Once again, if you wish to ask a question, please press star one on your telephone keypad. Your first question comes from the line of Thomas Chong of Jefferies. Please ask your question. Hi. Good evening. Thanks management for taking my questions and congratulations on a solid set of results. My question is about the business trend in the month of April and May. What do we observe about the gaming trend in PC and mobile after Q1? How should we think about the trend in the second half, given that there may be a shortening in summer holidays? 我来翻译一下我的问题。谢谢管理层接受我的提问，也恭喜我们这个solid set of result。我主要想问一下，疫情过后，我们在四月份跟五月份，在我们的客户端跟移动端的游戏现在的表现，跟Q1来比，可以分享一下最新的情况吗？然后就是看下半年的话，因为今年大家可能都要多花一点时间上课，对summer holiday缩短的影响可以分享一下下半年的展望吗？然后我还有第二个问题，就是因为我们现在已经是五月底，现在如果是看全年，我们在online games跟WPS，还有margin的预期，会不会跟之前会有变化呢？And my second question is about the full year guidance in gaming and WPS as well as the margin trend after the discontinue of the business. Thank you. 好了，这次你来回答吧。我说这个问题交给你，说一下吧。OK，好，没关系，我先说，然后翻译帮我翻译，好吗？首先第一个，谢谢Thomas。你问到我们的四五月份的游戏的trend，跟下半年的展望。首先第一个，我很高兴地跟大家介绍一下的，我们的JX3，它的PC的走势非常强劲。你看到我们first quarter已经是非常强了，不管我们的收入以及我们的独立IP跟用户时间的话，都受到非常好的刺激。那么在Q2的话，尤其是我们有新的资料片发出来，所以我们对于Q2以及全年都是非常有信心的。这个就是我回答第一个关于Q2四五月份的状况。其余下半年的话，我觉得是这样子：一，刚才讲到剑3的趋势是非常好，我觉得是可以预期的，全年都有一个非常好的靓丽的成绩。那么其余second half的话，我觉得另外更多要看其余部分，就是我们其他游戏的上线的时间。那目前几款大的游戏的话，首先第一个就是指尖江湖。指尖江湖现在我们暂定是在6月下旬的时候，会重新发指尖江湖。而且大家可以回看一下指尖江湖的话，西山居跟腾讯也会把这个游戏作为一个新的游戏上线去推。所以相对来讲，支援的力度也会加大。那么另外还有几款游戏，包括我们剑2应该目前已经在测试，那么按目前的进度，当然最后也要看测试的结果，预估初步可能会是在八九月份的这个时候上线。另外还有几款游戏陆陆续续都会在下半年上线。所以今年的游戏，我觉得肯定是会比去年好。但是现在我们也没有对于我们的剑2跟指尖江湖，因为我们把这个东西归纳成为在内部算的不可预期收入的那个部分，所以我们目前不会放太高的预期。但是怎么说呢，今年上半年以及全年都会比去年游戏，不管在收入以及在利润方面，都会有进步。 Okay, I'll translate for Francis. Talking about our game performance in April and May. For our JX3 PC game, it has been performing very well. The first quarter both revenue and the number of users have increased in the first quarter. In the second quarter, we are very confident because we have also launched a new expansion pack. We believe that the second quarter and including second half of this year, the JX Online 3 PC game is going to perform very well. Talking about the second half outlook, we believe that the JX3 PC game is going very strong, the trend is very good. Also we have other mobile games to be launched in the second half. We have the JX3 mobile game, which we are planning to do the public relaunch in the second half of June. Both Seasun and Tencent are going to put resources in promoting this game, and we are going to treat this game as a new game. The level of resources we put in the promotion of this game will be quite high. The JX2 mobile game, we are testing the game right now. The final launching time will be depending on the testing results. Currently, we are planning for August or September launch time for the JX2 mobile game. Also we have a couple of other games to be launched in the second half of this year. Overall, the outlook for this year should be better than last year. But currently, we are not going to put too much expectation from the JX Online 2 and JX Online 3 game in our budget, as the gross billing, we cannot predict the gross billing at this stage. But we believe that overall this year should be better than last year. Thank you. Thomas，你还有一个问题，就是问到WPS的margin，是吧？那个是游戏。游戏margin。对。首先第一个，根据我刚才所讲的，游戏方面，因为我们的剑3 PC会有一个比较好的表现，所以可能大家也知道，剑3的PC版，我们的利润是非常丰厚的。所以这个部分应该是可以令我们放心，就是说游戏的margin要比去年有一个比较好的进步。其实WPS margin，首先第一他们也是上市公司了，他们还没有发布它的业绩，我不想超前太多，但是你问我的话，我会预期可能跟2019年的会差不多，略好一点。因为今年其实有几个方面的趋势，WPS其实就是说，一，我觉得WPS在这一次的疫情，把我们对于online的协同办公确实是一个非常历史性的推进。但是与此同时，有两个方面，一个方面就是说我们上半年的线下的一些licensing签约是会受到影响的。我们线上的话会表现得很好，但是我们线下的licensing会有一定的影响，再包括我们之前非常hot topic的国产的一些替代的部分，这个趋势是没有改变的，但时间的话，可能上半年多多少少会有点影响，所以这个也有一定的趋势。但整体的WPS margin，我认为还是能够保持去年，甚至会比去年好一点点这个情况。 Okay, I will translate for Francis. For the game margin performance expectation, because we just said that the JX Online 3 PC game is going to be very strong this year, and the game itself has a very good margin level. We are confident that the margin level for the overall game business should improve from last year, 2019. For the WPS business, WPS now is an independently listed business, so they are going to give their own guidance. From our point of view is that we think that the WPS margin in 2020 should be similar to what we had in 2019 or slightly better than what we had in 2019. Because under the current COVID-19 outbreak, all industries are promoting the remote working and online collaboration. This will benefit our online businesses for WPS. On the other hand, there are some negative impact on the offline business, especially in the licensing business, where the offline contract signing will be affected due to the COVID-19 outbreak. Overall, we believe that the margin for WPS should be similar to what we had last year or slightly better. Thank you. Thank you. Hi, operator, we are ready for the next question. Once again, if you wish to ask a question, please press star 1 on your telephone keypad. For the benefit of our participant in today's call, please ask your questions to management in both Chinese and English if possible. Thank you. Your next question comes from the line of Liping Zhao of CICC. Please ask your question. 谢谢周总。Francis，晚上好，我这边有三个问题。首先第一个问题是，我们几块业务在疫情期间发展都还不错，那管理层觉得这些发展的趋势是长期的吗？还是只是短期的？那疫情在逐渐恢复的过程中，我们几块业务往下看两三个季度和长期来看的话，这个进展是怎么样的？然后第二个问题是关于递延收入，我看刨去金山云之后，我们递延收入还是比较多的，那这边可不可以拆分一下，看多少是来自于游戏，多少是来自于我们的金山办公？然后第三个问题是关于游戏业务，这块想了解一下游戏业务一季度它的OP margin大概的水平是怎么样的？然后全年看我们游戏的OP margin应该能做到什么水平？我自己翻译一下。Good evening, management. I have three questions. First, could you update us on the development of WPS Office and cloud business as China is gradually recovering from COVID-19? So is the trend long-term or it's just a short-term trend? My second question is related to the deferred revenue. We noticed that even though we ex-ed out Kingsoft Cloud, we still maintain a high level of deferred revenue. Can you provide a breakdown of that? How much is from the gaming and how much is from WPS Office? My third question is related to the OP margin of gaming. Can you tell us what's the OP margin level in the first quarter and what's the expected margin level for the full year? Thank you. 谢谢利平。我来回答你的一个问题吧。首先第一个，你提到我们COVID对我们业务上面的影响到底是短期的还是长期的？我觉得分几个方面，一个对于我们的办公跟云这方面的影响的话，我觉得跟游戏方面可能可以分开来讲。游戏的话，在这个COVID期间，我觉得整个行业都是受惠的，因为大家可能在家的时间，不能去外的时间比较多，所以online entertainment肯定是在这段期间里面会有一个好的影响。但是一旦开始复工以后，我觉得它更会多恢复到原来那个状态。该玩游戏的玩游戏，该去干别的就干别的。所以这个对游戏的优势，可能COVID这个事情的话，可能更多是限于COVID这段期间。当然这个也不是说没有长远的一个优势，因为比方说在上半年的话，我们剑3一方面是我们推出一些很好的expansion pack，但是在during期间里面的话，我们的独立IP跟旧的玩家，回来再玩这个游戏的，我们也发现明显是有帮助的。那这样子的话，过了疫情，它也可能能够抬高了我们的user base的话，对后面的话也会有一定的影响。这个是一个方面。但是对于办公跟云方面的话，我觉得这个是一个颠覆性的改变。大家看到我们举了一个例子，我们去年年底推出了一个WPS Docs。去年年底的MAU是在6,000万，到了3月份疫情期间的话，它翻了4倍。这种颠覆性的推进，我觉得是不可逆转的。虽然过了COVID，这个数据可能从急剧高峰会下来一点，但对于整个人们对于远程办公，包括一些云服务的话，这个是革命性、颠覆性的往前。一旦推进了这方面习惯的话，它就不会往后走了。所以我觉得在这个数字化转型方面的话，我觉得这个影响是更深远的。所以你问我长期短期的看法就是这样子。那我先让Francis翻译一下好吗？ OK. I'll translate for Francis. Talking about the COVID-19 impact on our business, we'll talk separately on WPS and Kingsoft Cloud, and on game business. For the game business, we think that the whole game industry is benefiting from the COVID-19 outbreak. People are staying home longer time, so online entertainment should be benefited during this period. But we believe that once people start to go back to work, once the COVID-19 outbreak starts to recover, the gaming business should go back to normal. We believe that the impact on the game business may be limited to the COVID-19 period. But for Kingsoft, for the first half, we launched our expansion pack for JX Online 3. We noticed that both the independent number of IPs and also a lot of the old users came back to play the game. These users have increased our user base for the game, and these users may stay in the game and play the game even after the COVID-19 period. There may be some long term effect on the game business for us. But on the WPS and Kingsoft Cloud business, we think that the impact is very large and very different. It has unprecedented change in the whole industry. We always talk about an example on WPS Docs. By the end of last year, 2019, the user base was only 16 million for WPS Docs, but by March 2020, the number of users is four times more than what we had by the end of last year. We believe that the change in this industry in remote working and online working is unprecedented. It's going to be a long term effect on the whole industry, on users acceptance and transfer to the idea of remote working on online collaboration. We think the digital transformation here in these industries is not going to go backward after the COVID period. Thank you. 另外我就回答一下关于你立平问的那个递延收入。递延收入的话，我们看全量的话，事实上跟办公大概是一半一半，总的大概是CNY 10.7亿左右，两边是五个多亿。从增长方面来讲的话，跟上一季度比，办公的增长就比较多一点，大概有增长了一个亿，事实上增长了6,000万左右。这个其实可以看作对我们来说是一个非常好的信号。因为事实上玩家的充值大于消耗，所以有一些增加了递延收入。至于办公方面的话，也是我们WPS跟稻壳会员的充值所导致的，所以增加了我们的递延收入，这个都是一个好的信号。 I'll translate for Francis. For the deferred revenue breakdown, in total we have about CNY 1 billion. The breakdown between WPS and game business is roughly about half and half. There's about CNY 500 million each. WPS increased roughly about CNY 100 million, and the game business increased about CNY 60 million. We think that this is a good signal for both the WPS and the game business, as people are paying more to play the games and also more people are paying for the WPS members and Docer memberships. Thank you. 最后一个问题，你问到游戏的margin。根据我所讲，我们两个方面，一个方面是JX3 PC game今年的增长是非常好，这个是非常高毛利的。另外一个方面的话，就是手游方面，我们也讲了，有几款游戏会陆续上线。因为我们目前不放太多的收入的数字在我们预算方面，我们把它列为不可预算的。所以为了保守起见，我内部放的那个数据是比较低。我现在看到，按照我现在的预算，今年的operating margin也会比去年的高，有一个high single digit的percentage point的提升。好的，谢谢 Francis。Thank you. Okay, I will translate for Francis first. We are talking about the game business margin. We just said for the PC games, JX3 is going to go very strong this year, and this game itself has a very good margin level. For the mobile games, we have a few mobile games to be launched in 2020. Although we do not put too much expectation on these games go selling in our budget, we believe that overall this year in 2020, the game margin should be higher than last year by a high single-digit percentage point. Thank you. Hi operator, we are ready for the next question. The next question comes from the line of Elsie Sheng of Goldman Sachs. Please ask your question. 管理层你们好，谢谢接受我的提问。我这边可能有两个问题。第一就是想follow up一下游戏业务，想问一下海外游戏业务这边的发展情况和预期有没有一个update。然后第二可能还是想再问一下刚刚提到的游戏的margin问题，因为我们新的游戏，我不知道这个single digit margin的improvement是不是已经包括了我们对下半年手游的研发和市场营销费用的部分。然后第二个问题可能是想问一下capital allocation，因为我们云业务的单独上市，我们账上现金也是宽裕了很多，所以想请管理层大概分享一下在未来两到三年，或者更长期，我们业务发展的重点，主要的投资的方向可能会专注在哪一边。然后我们之前做CB的时候也提到一些可能投资的机会，所以想请公司分享一下，可能会比较关注哪些行业。那我快快的自己翻译一下。Thank you management for taking my question. I have two questions. One is to follow up on the games overseas, any strategy update on overseas gaming business. Just clarify on the margin outlook, which is mentioned on the game section. Have we booked in the R&D and sales and marketing spend that could potentially go with the mobile pipeline that we just mentioned? Second question is about our capital allocation with Cloud IPO. I mean we have actually ample cash on our balance sheet. Just would like to invite management to share a little bit more about the capital allocation strategy or investment focus into the next two to three years. Thank you. 谢谢你的问题，我来回答一下。首先第一个，你问到我们海外的游戏的进展。你这个问题问得很好，其实我们现在目前并不想讲太多，之前没有讲太多。但是我们对海外游戏的机会，现在其实我们是已经在酝酿当中，其实也已经有一些动作了。但是这个我想可能等我们有多一点的成绩的话，再跟大家讲吧。因为目前我们有一队人其实是盯着海外的一些机会，目前我可能卖个关子。但是回答你的问题，我们对海外的市场是有想法的，有准备的。第二个你问到我们的game margin，刚刚我讲了，有一个high single digit的percentage point increase在我们的经营利润上面。你问我有没有包括了我们mobile game的R&D。答案是positive的，我是有考虑到的。因为比方你说《指尖江湖》、《剑二》，包括我们其他几个游戏，都不是在今年刚刚开始研发的，其实已经酝酿了一段时间，好像《剑二》已经有两个三年以上的时间。所以这些的研发费用每一年都进了我们的损益表，我们并没有资本化的。那么今年的话其实也是一样。最后一个问题，你问到我们未来的两三年业务发展的方向，包括你也提到我们现在融了资以后，也会留意市场上面一些机会，那么机会的方向是在哪里？那么首先第一个，我们是非常有信心跟大家讲现在金山集团的现金储备处于一个非常优良的状态。尤其是我们觉得在目前的疫情期间，包括现在geopolitical和geographic经济上面一个非常不明朗的状况，包括中美贸易，包括最近很多各种的一些news，比如说美国对我们中国的企业有增加的一些监管的一些态势。有了这个现金储备的话，我们觉得肯定是会比较安全。第二，基于我们之前也讲了，我们也会留意在这个时间里面有一些可以让我们加快数字转型的机会。具体方面的话，我觉得都会围绕着我们金山集团现有的几块业务的那个方向去的，包括刚才你问到海外游戏，包括我们刚才介绍到在中国的一些我们国产的一些机会，一些我们协同办公，一些云上面的机会，我们集团其实都会跟我们几个子公司共同一起来看这些机会。好。 Okay, I will translate for Francis. Talking about the game business in the overseas market. At this stage, we do not want to talk too much on this. We are still in the planning stage. But we actually have a team that focus in the oversea opportunities. We already took some action in the oversea gaming business, but at this stage, we do not want to talk too much. We will wait until we reach to a more mature stage, or we have more mature products, and then we can share with the market. For the game margin question, like I said earlier, we are expecting a high single digit improvement on the game OP margin level from last year. Yes, this has already included the mobile game R&D for JX Online 3, JX Online 2. For these games, they are not only developed this year, for example, the JX Online 2 mobile game, we have been developing this game past 2 to 3 years. Our R&D investment has been expanded during the past years as well. So it has already reflected in our P&L. For the last question on capital allocation, we do have a good cash level on hand right now. Especially under the current COVID-19 period, and also under the current unstable geopolitical situation, and also under the U.S.-China tension, we think that having a good cash level will make our business stronger and safer, and also it will accelerate our digital transformation. We will also look for digital transformation opportunities, and the direction will be around our current business, which include the oversea gaming business, include the online collaboration and the cloud office product. Thank you. Thank you, Francis. Thank you, Francine. 可以了。 Hi, operator. This will conclude our presentation for today. Hi, operator, this will conclude our presentation today. Ladies and gentlemen- 谢谢大家。 Go ahead, sir. Just say thank you. All right. Ladies and gentlemen, that concludes our conference for today. Thank you for participating. You may now all-