Earnings Call: Q3 2019

Nov 13, 2019

Earnings release

Ladies and gentlemen, thank you for standing by, and welcome to Q3 2019 Kingsoft Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. I would like to hand the conference over to our first speaker today, Ms. Francie Lu. Thank you. Please go ahead. Thank you, operator. Ladies and gentlemen, good evening and good morning. I would like to welcome everyone to our 2019 third quarter 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. Mr. Zou Tao, our executive director and CEO. Mr. Francis Ng, our executive director and CFO. Now I turn the call to our executive director and CEO, Mr. Zou Tao. I will do the translation for Mr. Zou. Our various businesses continued to show good momentum in the third quarter of 2019. Our flagship JX3 online PC game and JX Online 1 mobile game maintained their popularity among users and achieved satisfactory revenue growth quarter-on-quarter. Our cloud services business achieved rapid growth, and we officially released a new range of finance cloud solutions to expand our customer portfolio for this segment. Meanwhile, the revenue from the WPS value-added services maintained strong growth, and WPS also strengthened its global presence with the international debut of WPS Office 2020 International Suite in August 2019. We are glad to see the listing of Beijing Kingsoft Office Software Inc. on the Science and Technology Innovation Board on the Shanghai Stock Exchange expected to take place on November 18, 2019. Our revenue for the third quarter was RMB 2,022.9 million, up 32% year-on-year, and 8% quarter-on-quarter. Revenue of cloud services continued to grow rapidly year-on-year, driven by our competitive advantage in mobile videos and the internet market, as well as breakthroughs in the enterprise and government market. Now I am turning the call to our executive director and CFO, Mr. Francis Ng. Hi. Thank you, Francie. Hi, everyone. In the third quarter, revenue from our flagship JX Online 3 PC game and JX Online 1 mobile game increased quarter-on-quarter. On August 28, 2019, we celebrated the 10th anniversary of JX3 PC game in Xi'an and shared with our gamers with development outlook on technological innovation, user operation, and content creation. Regarding mobile games, we continue to pursue a diversified product strategy, and the mobile game Double Life World was launched in Japan on September 20, 2019. The domestic version of the game will be released in the very near future. In the fourth quarter, we plan to launch a new expansion pack for JX Online 3 PC game to provide players with new game content and better experience. Leveraging the company-leading infrastructure and technology, Kingsoft Video Cloud successfully supported the live broadcast of Autohome 818 Robocar Night Gala and the National Day Parade on the PRC 70th anniversary celebration. During the Asia Pacific Content Delivery Network Summit 2019, Kingsoft Cloud won the CDN Leader Award for top 10 outstanding operating enterprise. In terms of Game Cloud, together with the China Telecom Corporation Limited and Intel Corporation, Kingsoft Cloud jointly released a cloud gaming solution to achieve the fast cloud streaming from the player end. In terms of finance cloud development, Kingsoft Cloud has achieved a financial ecosystem from the most basic cloud infrastructure construction by launching full-stack smart cloud solution and Kingsoft Blockchain as a Service. We name it KBaaS, commercial blockchain platform. Angang Cloud, an industrial cloud platform jointly built by Kingsoft Cloud's government cloud and Angang Steel Company Limited, was recognized as one of the top 10 case studies in cloud migration in 2019. The company secured strategic cooperation with Xiqing District of Tianjin to jointly develop the Xiqing Cloud and with the government of Chibi City and Shuangliu District of Chengdu to build a big data industrial ecosystem. Looking in the future, Kingsoft Cloud is committed to empower enterprise client in digital transformation across a variety of industry by leading the integration and innovation of cloud computing, big data, artificial intelligence, and other cutting-edge technology. Our office software and services business continue to show sustained growth. By providing a complete coverage of office use case scenarios, the performance of personal value-added service of WPS Office remain robust. In addition, we launched a new version of WPS Office for Linux, which utilizes technological capability, including knowledge base, AI, data mining. By introducing AI technology into Office products, WPS further enhanced user experience and service capability on Linux system. This in turn strengthened our capability to drive our government cloud business. In terms of overseas expansion, we have released a WPS Office 2020 International Suite in New Delhi, India on August 28, 2019. As WPS Office flagship office software suite in overseas market, WPS Office 2020 International Suite features a comprehensive suite of functions and services, including the pre-built template and PDF editing function, et cetera, as well as Mac office support. Looking ahead, we are committed to provide a variety of cutting-edge office products and services, creating the best office user experience for global customer through technology empowerment. I will now discuss the Q3 operational and financial result using CNY as currency. Revenue increased 32% year-over-year and 8% quarter-over-quarter to CNY 2,023 million. The revenue split was 33% for online game, 48% for our cloud services, and 19% for office software and services and others. Revenue from our online game business decreased 2% year-over-year and increased 16% quarter-over-quarter to CNY 663 million. The year-over-year decrease primarily reflected decreased revenue from existing games, which partially offset by revenue contribution from newly released mobile game this year. The quarter-over-quarter increase was mainly due to the revenue growth of our flagship game, JX Online 3 PC game, which are the result of the continuous improvement in our user experience through constant content updates and revenue contribution from our JX Online 3 mobile games launch in June 2019. Revenue from the cloud services increased 62% year-over-year and 6% quarter-over-quarter to CNY 976 million. The year-over-year increase was mainly driven by an increased customer usage from mobile video sector and increased revenue from enterprise cloud. The steady quarter-over-quarter increase was mainly due to the revenue growth from the enterprise cloud, which is supported by our progress in expanding into particular industries. Revenue from office software and services and others increased 15% year-over-year and decreased 1% quarter-over-quarter to CNY 383 million. The year-over-year increase was mainly due to the strong growth from value-added services of WPS Personal Edition, driven by enhanced user experience and increased paid user with more practical functions and high-quality resources provide. The slight quarter-over-quarter decrease was primarily due to the weak seasonality in the first quarter. Cost of revenue increased 42% year-over-year and 3% quarter-over-quarter to CNY 1,200 million. The year-over-year increase was primarily due to the higher bandwidth and internet data center costs resulting from the increased customer usage of our cloud services. Gross profits increased 18% year-over-year and 15% quarter-over-quarter to CNY 823 million. The gross profit margin decreased by four percentage points year-over-year and increased by three percentage points quarter-over-quarter to 41%. The year-over-year decrease of the gross profit margin was largely due to our change in sales mix. The quarter-over-quarter increase of gross profit margin mainly reflected improved operating efficiency of our cloud business. Net R&D costs increased 4% year-over-year and decreased 7% quarter-over-quarter to CNY 534 million. The increases were mainly due to an increase in personnel-related expenses, as we engage in developing new value-added products and features, as well as new technology. Selling and distribution expenses increased 19% year-over-year and 13% quarter-over-quarter to CNY 272 million. The increases were primarily due to the increased spending on channel and promotional marketings. Administrative expenses increased 9% year-over-year and 16% quarter-over-quarter to CNY 125 million. The increases were mainly due to the increased professional services fee. Share-based compensation costs increased 18% year-over-year and 5% quarter-over-quarter to CNY 60 million. The increases were primarily due to the new grant of awarded shares and option to selected employees of certain subsidiaries of the group. Operating loss before share-based compensation costs was CNY 72 million, compared to a loss of CNY 134 million for the third quarter 2018 and a loss of CNY 86 million for the second quarter 2019. Net other loss was CNY 87 million, compared to net other loss of CNY 83 million for the third quarter 2018 and CNY 1,327 million for the second quarter 2019. As you can remember, the losses in the second quarter 2019 were mainly due to the provision for impairment on the carrying value of the investment in Cheetah Mobile Inc. Share of profit of CNY 128 million were recorded, compared to a share of profit of CNY 28 million for the third quarter 2018 and a share of losses of CNY 58 million for the second quarter 2019. The increase in the third quarter 2019 was mainly because Cheetah Mobile recognized a gain on the deemed disposal of a subsidiary. Income tax expenses decreased 1% year-over-year and increased CNY 455 million to CNY 29 million. As a result, profit attributable to owners of parent was CNY 36 million, compared to the losses of CNY 59 million for the third quarter 2018 and CNY 1,450 million for the second quarter 2019. Profit attributable to the owners of parent, excluding the ESOP, was CNY 81 million, compared to the losses of CNY 22 million for the third quarter 2018 and CNY 1,372 million for the second quarter of 2019. Our statement of financial position, we have cash and bank deposits of CNY 9 billion as of September 30th, 2019. Net cash generated in operating activities was CNY 87 million, compared to a net cash generated from operating activity of CNY 6 million and CNY 294 million for the third quarter 2018 and the second quarter of 2019, respectively. Capital expenditure was CNY 418 million, CNY 532 million and CNY 325 million for this quarter, the third quarter 2018 and the second quarter of 2019, respectively. On the whole, we are pleased to achieve a satisfactory performance in the third quarter amidst a challenging environment, and we continue to see the convergency of innovation and digital transformation. Kingsoft will maintain its competitive edge in the industry. Looking ahead, we expect our business performance to remain robust, driven by sustained growth of the cloud services business and office software and services business. We are confident to meet our 2019 target and endeavor to generate long-term value for our shareholders. Now, I let the floor back to question and answer. Thank you. Hi, operator. We are ready for the Q&A session. 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. For the benefit of all callers participating in today's call, please ask your question in Chinese if you can, and then kindly repeat the question in English. Your first question comes from the line of Thomas Chung from Jefferies. Please ask your question. 晚上好，谢谢管理层接受我的提问。我有两个问题。第一个问题是想多了解一下我们2020年现在的展望，可不可以跟大家分享一下，在online games、云跟WPS我们未来的发展方向大概是什么情况？第二个问题是我们的WPS确实也在Q3做得非常好。看到我们的operating level，其实亏损也是比大家的预期要少。所以想问一下WPS未来的一个展望，还有我们的operating profit会不会比之前大家的预期再更好一些，或者是在Q4可以turn into profitable。谢谢。Thanks management for taking my questions. I have two questions from my side. The first one is about 2020 outlook. Can management comments about the strategy for online games, cloud as well as WPS as we go into next year? My second question is more about WPS. Given the strong growth momentum in Q3, how should we think about the trend in coming quarters as well as the overall group operating profit? Given that the loss in Q3 is less than what market expected, should we expect to turn into profit in Q4 or any visibilities for next year would be great? Thank you. 就展望，我来回答，然后Joe补充。首先谢谢你Thomas。我先用中文讲，然后Francis帮我翻译，好吗？Thomas你问到2020游戏与WPS的一个展望，然后就是说在我们operating profit的一个outlook in 2020。当然我们现在是Q3，一般我们在Q4的时候才会对下一年做出一个更强势的展望。我们现在正在做我们的预算，我在统筹整个group的预算当中。所以更准确的话，可能要稍等一下。但是你今天问到的话，我们其实也有一个感觉，可以框架性地跟你讲一下。我感觉现在的预期是2020年肯定是会比2019年更好。原因有几点，这个其实挺容易看。首先第一个，大家可以看到我们WPS，下周一就在上海的科创板上市。我先不说它对股价的影响，因为各人的看法不一样。基本上在科创板的话，大家将会非常乐观看好。但是另外一个，我们看2020年的业绩表现的话，我觉得更多看它的fundamental，就是基本面。WPS其实是处于一个非常好的势头。我想在未来一两个月会更清楚它一些新的发展方向，尤其是它在中国的授权软件的销售，因为会有很大的支持。因为以我们在中国受欢迎的程度，包括现在我们很多企业对一些中国软件的一些偏好跟需求，这个将会对我们WPS不仅仅是2020年，可能是在现在开始未来的几年的话，都有一个非常强劲的增长。那么这个是软件销售方面。至于我们个人的话是刚起步，大家看到我们个人增值服务业务方面的增长是非常快的，尤其是非广告类的。广告方面大家知道我们有意压低它，但是非广告方面的会员增值服务化非常快。那么你可以看到从我们的一些基本面，包括我们的MAU、DAU跟会员的付费人数的数据的增长都非常惊人，而且我们预期未来一段时间会持续。那在这个背景底下，简单来讲，我不讲那么远，因为海外的那个我先不讲，就讲近期的这几个方面都是一个非常强劲的增长势头。当然这个也会反映在我们的operating margin的提升。我们之前讲过WPS在未来几年的话都会保持一个高速的增长。在年初的时候讲，在今天我们再去审视这个没有改变，但上面多了一层的overlay，就是在国内的对软件的强劲的需求。那么这一块对于我们的成本方面没有太多的增加成本，我们可能会在销售团队里面的力量会加强，但是基本上我们的软件已经是成型的，比较typical的软件的销售。所以这是我们WPS的一个展望，非常强劲。第二个，我想讲一讲金山云。金山云其实一直没有变，从今天我们跟大家介绍的这两个quarter都是给予我们惊喜。金山云是一个我们all in cloud非常大的投入的一个板块。我们也看过它过往几年发展的趋势，当中经历过跑马圈地，也经历过价格竞争。可以看到在云的公司里面，都体现到大家前面都是叫投入或者是亏损，就是亏损着来投入这个状态。但今年你看到金山云除了保持一个非常强劲的收入的增长以外，我们的毛利跟经营利润率的提升都比我们在年初给大家的指引要超出我们的预期。而且我们看到这个势头还是持续。所以这一点令到我们非常大的欣慰在这个方面。也意味着从这个趋势看的话，我们所谓的投入或者亏损，一直在收窄当中。当然在很快的时间里面，大家还会看到我们有一些更大的动作，是令到我们金山云方面，对于它自身的发展，令到它推上另外一个台阶。这个我相信大家很快就会知道我今天所讲的是什么事情。所以这一块，刚才讲了，它的增长在2020年会expect持续保持一个高速的topline的增长，但是它的经营利润率会进一步收窄，亏损进一步收窄。所以这个对我们2020年也是一个非常好的支持。那么第三块我讲一下游戏。游戏在今年我们经历过一个也给到大家有满意也有失望的地方，尤其是我们手游的推出，确实是《指尖江湖》遇见一些波折，一些困难，这个是在收复当中。那么我们预期它在未来一段时间还会出一个重新的公测，正在修改这个版本当中。大家也看到我们在10月份也推出了一个更新版，按照郭伟伟这样讲的，介绍了不停更新，我们是有更新版，而且大的更新版准备在未来的可能两三个月会推出来。这个我们只希望它肯定是会比现在要好。但是现在我跟周总也在商量，今天董事会也商量，明年的游戏一方面稳住就要看我们的金山的端游。金山的端游我们预期今年是会稳下来，起码不上去年这样子是一个衰减。因为我们可以看得出它的势头，现在2019年应该是可以达到不差的这么一个状态。那么我们也有信心我们在2020年也是会保持这个态势，金山端游方面稳住它。那么另外一个，我们还有一个3+3的pipeline战略。在明年当中，我们《剑二》、《剑侠情缘》——《剑歌行》，还有我们的《魔域》——《魔域3D》，还有我们的《卧龙吟》。这三个已经是我们预期。那么我们其实就很快，刚才我也讲了，在电话会上面，我们的《双生世界》在日本上了，可能在非常快的，可能就是在未来的一周里面，我们也会在国内上。这个我们也看到它的测试的数据也非常不错，大家可以预期，看一下，留意一下。所以我觉得游戏方面，明年我们也是审慎乐观，可能会有惊喜。要是比方说我们《指尖江湖》在公测的时候，我们现在可能不放太多预期在这个上面去，大家之前都听我们讲那么多次了，我反而把重点放在其他几个3+3的游戏，放在我们端游方面。所以我讲得比较长，但是我不担心，因为Francis其实都非常清楚了，所以翻译方面我不担心，Francis你翻译一下吧。 Okay, I'll do the translation for Francis. Thanks, Thomas, for your question. Regarding the 2020 outlook on our online game cloud and WPS businesses, we are currently in the third quarter, and we're still doing our budget for 2020. But we'll give out a more specific guidance in the fourth quarter earnings call. But now I can give you a more general feel for 2020. Generally speaking, we think that 2020 should be better than 2019 for a few reasons. First, for WPS. WPS will become separately listed on the new Sci-Tech Innovation Board next Monday. Not only mentioning our optimistic outlook on its stock price performance, but we focus more on its fundamentals, which are all very strong. In the next one or two months, we'll also have more colors to share with you in the development of the licensed software business, especially in China, due to its strong popularity and also for the enterprise demand for domestic software products. Not only for this year, 2020, we are quite optimistic about this business segment in the next few years as well. For the consumer product, the value-added services are still growing very fast, especially the non-advertisement business. We are trying to intentionally control the growth of the advertising business, but the non-advertising business are growing very fast. In terms of MAU, DAU, the number of paying members, are all increased at a fast pace. This will also reflect in our improvement in the operating profit margin performance, especially in the next few years. The growth in the licensed software, we have good expectation for this business and the revenue will increase, but the cost will not increase accordingly. That will also reflect in the improvement in our operating profit margin. For the cloud business, we have all in cloud investing strategy. In the past few years, we have experienced different development periods for the cloud business. We are still in the investment period, so the business is still at a loss. This year, the cloud business, including the first 2 quarters and also in the third quarter, the revenue is growing very strong. It is exceeding our expectation. Not only the revenue, the gross profit margin, and also the operating profit margin are also improving, and this momentum will continue in the future. Our loss level has been improved this year significantly. In the very near term, we also have another big plan, big movement for the cloud business, to help the business to go to the next level. All the analysts, investors will see this in the near future. In 2020, we still expect high revenue growth momentum for the cloud business, and the loss level will continue to improve. Lastly, we will talk about the game business. There have been some satisfactory and also some disappointing moments this year for the game business. For the JX3 mobile game, it experienced some difficulties in the beta testing version. Now we are still optimizing the product, and we are going to launch its official commercial launch in the next 2 or 3 months. We did a minor update in October, but the big update will be released in the next 2 to 3 months. For the JX3 PC game in 2019, we expect the game to remain quite stable. Its revenue may stay flat from 2018, and this momentum is going to continue into 2020. We want to maintain this stability in next year as well. In 2020, we have a pipeline, it is called 3+3. We have 3 games that are quite ready in terms of development, including the JX Online 2 mobile game, the Moreyus 3D mobile game, and also Wolong Yin. We have another game, it is called 盛世. Its domestic version will also be launched shortly, within a week, in China. Also, we have good expectation for this game based on its testing data. Next year, we are also quite cautiously optimistic about the game business as well. Thank you. Thank you. Your next question comes from the line of Hill Chan from Citigroup. Please ask your question. 中班的一些title，还有他们开发的情况，还有可能launch的时间的进度是怎么样的。我另外一个问题是关于我们海外游戏的发展，刚才也提到双生世界在日本的launch，也想问一下我们在未来一到两年，我们在海外游戏的一个策略是怎么样的，然后我们有什么游戏储备是为海外的一个市场去推广的。我觉得就这两个问题，我很快翻译一下。Thank you management for taking my question. I would like to have more color on the 3+3 game portfolio and as to which game would be bigger in size, and also what is the status of game development of these selected title and the timeline as well. How should we think about overseas game expansion strategy in the coming 2 years and the timeline for the overseas market? Thank you very much. 好，我来回答这个问题。第一个，因为刚才Francis说了，明年我们新游戏，就是3+3这个模式。所谓的3+3就是有三款我们认为达到了上线的标准，版号这些也都有。所以是上线概率非常高的三款产品。还有后面加的那个3，其实就是说明年是很可能上，但是具体要看它的一些数据的情况。因为后面加的那个3，其实我们是创新性蛮强的，可能西山居过去都没有太做过的一些品类。因为在前几个季度我都跟大家说过，我说我们不光是现在看到的游戏在研发，肯定还有其他的，指的就是这些品类，也就是到明年可能会分别处于不同的测试阶段，或者说根据测试的情况，也是有可能上线的，是这么一个情况。具体的，可能到了等我们Q4的时候，可能会给大家一个更准确的上线时间表的一个预期。第二个关于海外的。其实这几年我以前也说过，其实你看我们在越南、泰国这些东南亚市场的，我们本身就是过去这样那样，包括我们MAT这些设计的游戏，就是已经在发。现在我们会逐步像这次双生世界是去日本，也就是说我们针对日本、欧美，也包括一些发展中的地区的游戏，我们都有一些布局。尤其是明年，整个在游戏这边，可能到Q4的时候大家会看到更大的一些动作，我们也正在积极地布局海外，尤其一些特定的区域，当作重点发展的一个目标去做。更多细节，我觉得还是等年底Q4的时候，我们来跟大家沟通。谢谢大家。 Okay, I will translate for Mr. Zou. Thanks Hillman for the question. We mentioned that next year for the game business we have a 3+3 strategy. The first 3 is the 3 games that we think they are quite ready for launching in terms of its development and also they have all already got the licenses, so it is very highly likely these 3 games will be launched next year. The plus 3 are the 3 games that it is possible for them to be launched next year, but still based on their development and the other factors, because these plus 3 games, they are quite innovative. Some include some game categories that Seasun have never tried in the past. We will have more specific launching time or more specific timelines for these games in the fourth quarter by the end of the year. For the overseas games development. In the past, we have already launched JX series and also the MAT series in Vietnam, Thailand, and now this year we also launched the 双生世界 in Japan as well. Next year we also have more movement and we are still planning for the overseas game development next year as well. We will have more specific plans to share with you in the fourth quarter, closer to the end of the year. Thank you. 谢谢周总。Frank有问题。 Your next question comes from the line of Linden Yan from GF Securities. Please ask your question. Good evening management。晚上好，管理层能听到吗？我大概有几个问题想请教一下。我第一个问题是关于WPS这块。WPS的话想问一下这个WPS的OP margin大概现在是在一个什么样的趋势？因为我们看到第二季度可能会有一些波动，然后第三季度是怎么变化？然后另外刚才也提到说现在增长得非常强劲，而且对增长前景也比较乐观，所以就想请教一下现在的付费用户增长速度大概是怎么样？另外就是ToB业务这一块，国产软件授权的这一块的增长情况，就是增速情况。然后第二个问题就是关于游戏的剑网3的更新版，刚才就说在未来两三个月会上线，这个能不能有一个展望？然后第三块就是云业务，因为云业务的话也提到，因为今年整体增长是非常强劲的，刚才也提到说明年增长也会非常好，所以就想请问一下，是哪一个行业是增长的驱动？然后另外就是，我们也非常高兴地听到说我们的亏损率一直是在收窄的，那是不是可以预期，会不会有一个盈利，或者您会平衡的哪一年的时间表？那我自己翻译一下，the first question is about the WPS business, what about the OP margin of this business? Could you give us some more color about more details about the growth of pay users and ToB business group? The second question is about game. I want to ask about the 剑侠情 mobile game and more color about this game performance. The third question is about cloud. As of cloud, which vertical industry is the driver of this business? Which year do your management think will break even? Thank you. 我来回答一下这个问题吧。首先第一个问题的话，包含很多小问题在里面，所以我希望我能记得，记不住的话你提醒我一下。首先我听到你讲的，就问了一个WPS margin的问题。这个分两个方面，一个就是刚才我一开始回答Thomas问的问题，在2020年，这个WPS margin肯定是会比2019年或者2018年有一个比较大的提升。因为我刚才所讲的，在国内的一些授权软件的业务，会在2020年之后的几年都有一个非常强大的增长。所以margin方面的话，我分了中长期，长期来讲的话，它是会有一个很大的提升。那么在我们的2019年，那几年比2018年略有几个点的下降，这跟我们之前所讲的也是符合的。因为大家应该记得我介绍这个问题，WPS top line有40%~50%的增长，年增长。然后operating margin可能为20%以上，去年大概是25%，今年维持在20%以下，可能会有两三个点的下滑。原因很简单，我们WPS处于一个非常好的势头，所以我们在R&D投入方面投入得非常大。那么举个实际上的例子，就2019年的WPS研发的人员的数量是2018年一年前的翻倍。这个是准备我们的各个刚才所讲的功能上面的补足，包括我们在海外的一些布局方面，我们大幅的投入在我们的R&D里面。所以这个top line增长得非常好。在2019年我们的operating margin比2018年要低几个点，但是也保持在20%以上，在19年。那么2020年之后有一个比较大的提升，因为在授权软件方面会有一个非常强劲的demand。这个是第一个问题。第二个问题，芳姐你翻译一下吧。 Okay, for the WPS operating profit margin, in 2020, it will be much better than 2019 or 2018. There will be a significant improvement due to the demand from domestic enterprise license sales increase. This will also drive the improvement in the operating profit performance. In 2019, the operating profit margin is a few percentage points lower than 2018. Like I said earlier in the year, in 2019, our operating profit margin will be 20% plus. In 2018, the operating profit margin was about mid 20. This is in line with our strategic development, because we have a lot of good opportunities for the WPS business. We have increased our investment in R&D. For example, the number of engineers in 2019, is actually double the number of engineers in 2018. We kept on improving our products capabilities and also to expand in the overseas markets. The 2019 OP margin is a few percentage points lower than 2018, but it's still 20% and up. In 2020 it will improve significantly due to the strong demand from the enterprise license sales in China. For the number of paying members, it's also growing very fast, more than 100% growth rate. By the end of September, we already have 6.7 million paying members. It is 120% year-over-year growth rate. The cloud business is going very strong. The whole industry is still in the initial development stage, so we have a lot of good opportunities. The industry is growing very fast. We are very strong in the Kingsoft Video Cloud vertical, and the Kingsoft Video Cloud business is still growing at a very fast pace. We are even more excited in the new verticals that we expand into, especially the financial cloud. Like we mentioned earlier in the year that we have got a few major contracts from some major banks in China. The growth in government cloud is also very fast. For the break-even point, already answered in the earlier question, the cloud revenue is growing very strong, but also more importantly, the loss is improving. For this year, the loss margin is improving better than our expectation quarter over quarter. So we still keep expecting the loss improvement to continue in the next year. We cannot tell you a specific date on the break-even point, but we could say that it is not going to be too far away. Once again, ladies and gentlemen. Okay. Sorry. In addition, we are very happy to say that in the third quarter, the overall gross profit margin is already turned positive. In the past quarters, some verticals in the cloud business, their gross margin have already been positive, but some other verticals are still negative. In the third quarter, the overall cloud business, its gross margin already turned positive. Once again, ladies and gentlemen, if you wish to ask questions, please press star one on your telephone keypad. Hi, everybody. I think this will conclude our conference call for today. Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may all disconnect. Thank you.