Earnings Call: Q2 2019

Aug 20, 2019

Ladies and gentlemen, thank you for standing by, and welcome to the Q2 2019 Kingsoft Corporation earnings conference call. At this time, all participants are listen only mode. There will be a presentation followed by question and answer session, at which time if you wish to ask a question, you will need to press star one on your telephone. I would now like to hand the conference over to 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 2019 second quarter and income result 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 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, and Mr. Francis Ng, our Executive Director and CFO. Now I'm turning the call to Mr. Zou. I'll do the translation for Mr. Zou. We maintained a stable performance in the second quarter of 2019. The debut of JX Online 3 mobile game in June received positive market response, and we're aiming to bring better experiences to attract more gamers in the second half. Kingsoft Cloud services business experience robust growth with a significant increase in revenue, we fully expect it to maintain its growth momentum throughout the year. Meanwhile, our value-added services of office software business have been growing quickly, and we will keep improving our products and services to provide better experience for the users. However, the second quarter of 2019 was also a challenging period for Kingsoft, as we had to make provisions for impairment on the carrying value of investments in SINA, which directly affect our earnings, even though it would not affect our operating profit or cash flows. We still remain firmly committed to our core businesses, and are on track to address the problems we're currently facing. Our revenue for the second quarter was RMB 1,874 million, up 39% year-on-year, and 9% quarter-on-quarter. Revenue in the first half of 2019 was RMB 3,600 million, up 38% year-on-year. Building upon the solid momentum achieved in the first quarter, revenue generated from Kingsoft Cloud services and office software and services and other businesses maintained a steady growth in the second quarter of the year, up 96% and 31% year-on-year respectively. Now I'm turning the call to Francis, our CFO. Thank you, Francie. Hi, everybody. Let me talk about the financial results for Q2 2019. Throughout the quarter, revenue from online game remained stable. JX Online 1 mobile game launched in 2016 still contribute a steady monthly growth for us. on June 12, the long anticipated title, JX Online 3 mobile game was officially released, and it was ranked as number 1 in the iOS download chart for games in China on its debut, according to App Annie data. Meanwhile, we have been fixing technical issues, such as improving the stability of our server and optimizing the game content to meet the demands for our users. Together with Tencent, we will provide large-scale content and features. We also launched a new season for our flagship JX3 PC game on June 20, and we celebrate its 10th anniversary in the third quarter. In the first half of the year, we are going to launch Final Fantasy Brave Exvius in China and 99 Worlds in Japan. We aim to make breakthroughs in different genres. In the second quarter, the revenue of cloud service business remained rapid growth. Our game video cloud business focus on innovative technologies, such as promoting edge computing, edge node computing platform, high definition, and AI, artificial intelligence, and helps to boost the product bandwidth capability to the next level. Meanwhile, our financial cloud business achieved a significant result by launching our four solution system: Financial Cloud Structure, Financial Cloud Intelligence, Financial Cloud Native Application, and Financial Cloud Value Chain. We make a strategic cooperation with Xiaomi Finance, Nanjing Yangzi State-owned Investment Group, and Nanjing Digital Finance Industrial Research Institute to jointly operate China's first digital financial integrated service platform, helping the Jiangbei new district to become a financial hub. Our government cloud services achieve rapid growth and help to develop regional smart city projects, including a cutting-edge security program for the Beijing Belt and Road Summit, World Horticultural Exhibition, et cetera. According to the International Data Corporation, IDC, Kingsoft Cloud was among the top 10 public cloud service provider in the world in 2018, and was also featured in Gartner's latest global CDN report, making it one of the world's leading CDN service provider. Looking ahead, we will continue to leverage our experience and unrivaled expertise in the cloud business, AI, edge computing, and CDN fields. We work with our partners to create better quality and user-friendly industrial solutions to help to accelerate the digital transformation of enterprise customers. Let me turn to the WPS. Our office software and services and other business maintain a strong momentum in the second quarter. We optimize the membership benefit for WPS and WPS Office. We launch product and services that improve the user experience, which in turn promoted the growth of personal value-added service of WPS Office. We collaborate with China National Offshore Oil Corporation and other key enterprise customer to develop full life-cycle platform of WPS+ Cloud Office. We enter into a strategic cooperation with Shanghai Development Research Center for Economy and Information, and also other government enterprises on the deployment of smart government technologies. Regarding the foreign market, WPS Office actively expanded its presence overseas. As of June 2019, the MAUs of WPS Office overseas exceeded 80 million. During that period, we continued to push forward the Cloud plus AI strategy. At the 2019 Fourth Conference on Machine Translation, our AI lab team won the English-Chinese translation task on news text. We will continue to identify global customer needs and transform technological capabilities, product and services, to capture more opportunities. I now turn to the discussion of Q2 and first half of 2019 operation and financial results. Let's start with the Q2 using CNY as currency. Revenue increased 39% year-over-year and 9% quarter-over-quarter to CNY 1,874 million. The revenue split was 30% for online games, 49% for cloud services, and 21% for office software and services and others. Revenue from our online game business decreased 2% year-over-year and 5% quarter-over-quarter to CNY 517. Decrease was mainly due to the natural declining of life cycle of certain existing games, partially offset by the revenue contributed from the newly launched. Revenue from cloud services increased 96% year-over-year and 9% quarter-over-quarter to CNY 918 million. The increases were mainly driven by the fast-growing demand from the mobile video and internet sector, as well as the increased revenue from enterprise cloud through continuous improvement of our cloud services and further development of our enterprise cloud market. Revenue from the office software and services increased 31% year-over-year and 34% quarter-over-quarter to CNY 386 million. These healthy increases were largely due to the sustainable growth from the value-added service of WPS Office Personal Edition, and also the sales office, the enterprise edition, which was in turn driven by the increased paid user resulting from the continuous improved product and services. Cost of revenue increased 72% year-over-year and 9% quarter-over-quarter to CNY 1,160 million. The increases were primarily due to a higher bandwidth and IDC cost resulting from increased customer usage of cloud services. Our gross profit increased 6% year-over-year and 9% quarter-over-quarter to CNY 714 million. Our group's gross profit margin decreased by 12 percentage points year-over-year and kept flat quarter-over-quarter at 38%. The decrease of the group's year-over-year gross profit margin was mainly due to larger revenue contribution from our cloud services, which has a relatively low gross margin and a higher growth potential. Our research and development expenses increased from 60% year-over-year and 3% quarter-over-quarter to CNY 498 million. The year-over-year increases were primarily attributable to the increased investment in technology and enhancement of products and services. Selling and distribution expenses increased 53% year-over-year and 54% quarter-over-quarter to CNY 240 million. The increases mainly reflected our further expansion in the enterprise market, and more marketing and promotion activity for online games. Administrative expenses increased 1% year-over-year and decreased 3% quarter-over-quarter to CNY 27 million. Share-based compensation costs increased 10% year-over-year and 2% quarter-over-quarter to CNY 57 million. The increases were primarily due to the new grants of awarded share options to selected employees of certain subsidiaries of our company. Operating loss, excluding the impact of ESOP, was CNY 86 million as a result of the combination of the above reasons, compared with the profit of CNY 65 million in the corresponding period last year, and a loss of CNY 26 million for the first quarter of 2019. Net other losses were CNY 1,327 million, compared to the loss of CNY 74 million in last year's, gain of CNY 25 million in the first quarter of 2019. The losses in this second quarter, we all know that from our recent announcement, that was mainly due to the provision for the impairment of carrying value of investment in Cheetah Mobile. We recorded share of losses of associate of CNY 58 million, compared to a share of profit of CNY 66 million for the second quarter 2018, and a share of losses of CNY 78 million for the first quarter 2019. Income tax expenses decreased 91% year-over-year and 89% quarter-over-quarter to CNY 5 million. As a result, the loss attributable to the owners of the parents was CNY 1,450 million, and a profit of CNY 101 million, and the losses of CNY 68 million for the three quarter ended June 30th, 2019, June 30th, 2018 and March 31st, 2019 respectively. Loss to the owners of parent, excluding the ESOP, was a profit of CNY 139 million and loss of CNY 33 million for the three months ended June 30th, 2019, June 30th, 2018 and March 31st, 2019 respectively. Net profit and loss margin, excluding ESOP, was negative 3%, 10% and negative 2% for the three months ended June 30th, 2019, June 30th, 2018 and March 31st, 2019 respectively. Let me go on to talk about the first half of 2019. Revenue increased 38% year-over-year to CNY 3,601 million. Online game make up 32%, increased 4% year-over-year to CNY 1,169 million. Cloud services make up the 49% and increased 98% to CNY 1,758 million. Office software and service and others make up the remaining 90% and increased 33% year-over-year to CNY 674 million. The GP margin decreased 11 percentage points year-over-year to 38%. As a result of the above reasons, loss attributable to the owners of the parent was CNY 1,483 million and profit of CNY 219 million for the six month ended June 30th, 2019 and June 30th, 2018 respectively. Loss attributable to the owner of parent, excluding ESOP, was CNY 1,406 million. Compared to a profit of CNY 296 million in the prior year period. Net profit margin, excluding ESOP costs, was negative 39% and 11% for the six months ended June 30th, 2019 and June 30th, 2018 respectively. Now, statement of financial position. We have a cash and bank deposit of CNY 9 billion as of June 30th. Net cash from operating activity was CNY 244 million and CNY 353 million for the six months ended June 30th, 2019 and June 30th, 2018 respectively. The cash used for capital expenditure was CNY 604 million and CNY 499 million for the six months ended June 30th, 2019 and June 30th, 2018 respectively. Today of our first half performance, we have outlined our target for the second half of 2019. We expect a solid organic revenue growth on account of steady growth and development of cloud services business and office software and services business, as well as the launch of new mobile games. We are confident in our strategy, the strength of our business model and our development going forward. We remain committed to create long-term value for our shareholders through steady growth and sustainable development. On behalf of Kingsoft, I would like also to expand our appreciation to Kingsoft customers, shareholders, employees, and partners, and you for supporting us. We may now start the Q&A session. Hi, operator, we are 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 keypad and wait for your name to be announced. If you wish to cancel your request, please press pound or hash key. Please repeat your questions in English and Mandarin. Once again, it is star one to ask your question. Once again, it is star one to ask your question. Please repeat your questions in English and Mandarin. The first question comes from the line of Thomas Chang from Jefferies. Please go ahead. Hi, good evening. Thanks management for taking my questions. I have a question about our full year guidance. Can management give us any updates about the full year guidance for games, cloud and WPS, given we are already past the first half of the year? Any changes in the guidance that we should expect? My second question is about the JX Online 3 mobile. Can management give us some color about the monthly grossing and how we should expect it trending in the second half of the year? 谢谢管理层接受我的提问。我有两个问题，第一个就是关于我们之前给的年度的guidance，就是从游戏、云或者是WPS，我们现在还是维持我们上个quarter的那个指引，还是我们要重新再revisit，因为我们都过了半年了。第二个问题主要想问一下，就是剑侠3的手游，可不可以分享一下月流水，然后我们的下半年对这款游戏的预期呢？谢谢。 Thomas，我是Francis，谢谢你的问题。我来回答你的第一个问题，关于全年指引的问题。然后Joe总再跟你分享一下当部的状况。首先第一个，谢谢你这个问题，因为我们应该也是经历过大半年时间，应该也是一个position去给一个update on the guidance。我们年初给的guidance的话，其中三块业务，先讲cloud services，其实我们年初给的话是60% plus，但是到了Q1的时候，我们已经是把这个指引upward revised到全年的大概70%的growth。这个按目前projection来讲的话，还是非常强，还保持这个指引。它的operating margin的一部分继续出于我们二季度讲的，未必去年会有很明显的进步。这个趋势，我们跟上次距离又多了两三个月，我们还是非常有信心。第二个，我们的办公年初讲的话，我们这个指引的话，会是在top line会比去年大概有一个35%到40%的增长。那么我们的operating margin会保持在20%以上的水平。这个也是跟云一样，到今天的话，我们越来越有信心。第一个就是说，突出这个指引的话，应该可以达到，不会有一个改变。那么我们top line也是在35%到40% around high end，然后operating margin也是非常健康地保持在20%以上。所以这两块都是一个非常好的，高兴地跟大家去汇报，我们三块业务当中的两块。到最后一块，就有一点压力，就是由于我们游戏方面，其实大家在过往一段时间，不需要等到今天的earning call，其实各行专家都有去关注游戏的那个状况。等会周总也会跟大家分享一下。但是我在这边可以跟大家介绍，我们6月12号上的那个《九天江湖》遇到挺大的挑战。上线首日遇到一个比较大的技术性的大幅了一个大半天，导致一系列的负面影响。再加上在我们磨合配合运营这个线上游戏新的发放平台上面，也是需要有进一步的调整优化的必要性。简单而言，就是说9月流水，以及现在过了两个多月，收入没有达到我们原来的预期。这样也会影响到大半年，以及2019年全年的游戏收入。目前我们其实做了很多的应对的方法，包括四川机构委委，包括腾讯的一些核心的团队，这期间都挺努力研究不同的解决的方法方案，也已经在推。所以在下半年，刚才也讲过了，应该是在11月以后，我们有一些新的动作跟大家分享一下。因为以上我们收入有一个比较具体的调整。所以预估收入按照目前比较保守，四季度的效果会有多好，按照目前这个趋势，我们用一个比较保守的话，可能今年这个游戏下调下滑。目前我们可能要是你问我，我给一个可能大约是10%的growth。所以整体里面这样子一算，会影响到我们的operating margin也是比较重的，因为按照这样子的话，一个比较保守的，刚才我说用游戏比较保守的一个action的话，下半年以及2019年全年的operating margin将会是一个负的数字。按照我目前的比较保守的估算，可能operating margin会在一个负5%到负百分之的一个projection。当然，要是我们那个《九天江湖》在四季度有一个很明显的反弹，可以把我这个危险……最主要的话，它也是可能这些改动，就是我们所谓的可能也会在四季度的那一段，所以对18年会很明显。这个大概就是我对于我们2019年revised的三个业务，以及综合的利润的看法。谢谢你，Thomas。 I will do the translation for Francis first. So after the first half of the year, we now will have an update on the guidance for all three businesses. First, for the cloud business, in the beginning of the year, we guided the market that the revenue growth will be 60% and over. In the first quarter, we already revised upward the guidance to 70%. Now we are confident that we will be able to maintain this guidance. Also the operating profit margin will also improve as we guided earlier. So we are quite confident on this trend. For the WPS business, early in the year, we guided the market that the top line growth will be 35%-40%, and the operating profit margin will be 20%+. Same with the cloud business, we are confident that we are able to maintain this guidance. For the revenue guidance, for the 35%-40% range, it may be more close to the upper end of the range. Also we are able to maintain the operating profit margin at 20% over. For the game business, we launched the JX Online 3 mobile game in June. Mr. Zou later will talk about more on the gross billing and the performance of this mobile game. But when it was first launched, we did face some challenges, face some technical difficulties. This had an impact on this financial performance. Also for the JX3 PC game, we also launched that on the new platform. We'll also have to continue to optimize that game. For the JX3 mobile game, after the first couple of months of launching, its gross spending has now met our expectations, so it will affect our full year and also the second half of the year game business performance. We did many things to fix the problem, including the team from Seasun and also Tencent. We will continue to optimize game and we will have an update of version to be released in the fourth quarter. For the game business guidance, now we do need to have a significant downward adjustment. Conceptually speaking, for 2019, the game business will have a year-on-year down 10% comparing to 2018. For the overall business operating margin, we now give a guidance for negative 5% to negative 10% for the whole year 2019. This does not take into consideration if the new JX3 to be launched in the fourth quarter. If the gross billing rebounds, it may have a better performance in the second half of the year, but we think the more the adjustment will have a greater impact on the game performance for next year, 2020, because we believe that the update will be released more towards to the end of the year. Now I turn the call to Mr. Zou. 好，我来回答一下第二个问题。先介绍一下到现在。我们是6月12号进行的第三档测试，到现在差不多两个月吧。确实这次遇到一些问题，包括第一天整个手游的游戏基本上整个都进不去，可能大家也都关注到了，这个对我们后续的整个的问题，因为手游进不去，到晚上之后去了，导致现在很多服务器的整个的游戏的生态没有达到我们预期的效果。当然同时也暴露出一些其他在PR1、PR2没有暴露的问题，这些问题我们跟腾讯通过之后觉得，如果不解决，对于这个游戏长线很大影响，所以我们在三档测试的两周左右，我们就停止了导量，腾讯这边就我们决定暂时先停。这是整个背景，坚持把一些暴露出的对长远发展有影响的一些核心问题，我们重点要去把它解决掉。所以基本上从这个角度看，首月导的量基本上当初占了55%左右，所以后来我们就没导，停止导量了，包括第二个月也基本上没有再去推广。在这种情况下，基本上首月是在1.5亿左右。这个肯定是没有达到我们最初想的完整的量导进来的一个预期目标，但我个人认为，改掉，坚持去，这样的话可能会对整个游戏的口碑会产生一些不利的影响，这样的话对于我们长期去发展，应该说达不到我们长期发展的一个战略目标。好吧，这是一个大体情况。接下来，我们跟腾讯两边经过这一两个月的不断的完善，基本上会把我们发现的几个核心的问题陆陆续续去掉。所以我们在下一轮还会启动正式的公测，包括公测当中的一些问题。我们跟腾讯依然还是很有信心。但是另外一个情况我必须说明一下，因为今年是国庆，所以受政策的影响，中国内地这边是在9月中到10月中，一到一个半月左右的时间，是不允许发行产品的。所以这个导致我们目前比较稳妥的时间表的公测，就只能放到后吧，10月底、11月初的样子。这就导致了刚才谈的我们整个全年的游戏的收入会产生比较大的影响。因为受这个的影响，我们的剑侠情缘2的手游，剑歌行的也没有办法在之前推出了。因为整个现在大家的精力都放在，包括运营团队，精力都放在了指尖江湖上，所以这导致我们这个剑歌行正式上线。这几个原因加在一起，就使得今年跟我们预期可能会有比较大的出入。好吧，反正我主要是把前因后果还是跟大家讲清楚，希望大家能理解，好吧。 OK, I'll do the translation for Mr. Zou. When we first launched JX3 mobile game in June, we did face some problems on the technical side. When the game was first launched, a lot of the gamers will not be able to log into the mobile game section. They had to switch to the WeChat. It also exposed a lot of problems that we didn't notice in the PR1 and PR2 testing. Together with Tencent, we believe that in the beta testing version, we had stopped our promotion after 2 weeks, after we noticed these problems with Tencent together. The user we were able to attract when we first launched the games were only 55% of the total expectation that we have for JX Online 3 mobile game. That will have impact on the monthly gross billing. The initial first monthly gross billing for this game was around CNY 150 million. This has definitely not met our expectation for the game. In the future, we will continue to optimize the game content, and we will have another official launch of the game in the fourth quarter. Both we and Tencent, we are confident on the optimized version of this game. We are planning to launch the game after the national holiday. The game will be launched around the end of October or early November. That is what Francis meant earlier that this updated version will have more impact on next year's game performance rather than this year. Due to our optimization on JX3 and our focus on the optimization, we will not be able to launch JX Online 2 by the end of this year, because both Seasun and Tencent will be more focused on the JX Online 3 optimization for this year. Thank you. Operator, we are ready for the next question. Thank you. Certainly. The next question comes from the line of Hillman from Citi. Please go ahead. Hi，管理层你们好，谢谢接受我的提问。也是顺着刚才那个游戏的那个问题的，我想请教一下最近的那个游戏的pipeline，那个时间表，特别是那个JX2会在明年什么时候，还有那个Final Fantasy，看在那个script里面也有提到，那个timeline会在什么时候？然后我们的那个预期，他们的表现预期会是怎么样的呢？然后也看到我们最近在那个ChinaJoy也出了一些新的名字，比方说那个Caribbean游戏，还有那个Code Break，看到他们就不是我们平常比较喜欢的那种RPG，然后他们的IP也是比较不一样的。所以就想问一下，我们在游戏开发这方面，未来的策略还有最终会不会有一点不一样？这个是第一个问题，那我自己翻译一下吧。So my first question is to have an update on the latest timeline for the launches, including mobile JX2 at what time next year, and also Final Fantasy, how we should think about the performance of them. Also noticing that the new announcements on the Caribbean title and also Code Break outside of the role play game genre that we are more specialized in. Just want to have a sense on how we are thinking in terms of the strategy and focus of our game development effort going forward. Thank you. 我来回答一下你的问题。刚才剑歌行2的手游我已经说过了，因为现在整个的运营团队都在忙着指尖江湖的公测的事情。而指尖江湖的公测，内部外部的因素加一起，我们现在觉得可能会在10月底或者11月初的样子。所以今年暂时就没有办法去发布这个剑歌行了。具体什么时候发布，我们还是会，我以前就说过，至少要跟那个江湖隔开一个季度左右。所以从这个角度来讲，最快会在明年的Q1的三月份，这是最快的一个时间表。你谈到的最终幻想FFBE那款，如果不出意外，我们其实这个月iOS苹果服就会先开放。安卓服大概会在苹果服后面的两到三周陆续开放。但是我们最终幻想的打法套路可能不会跟以前不太一样。我们还是先走核心向用户，然后通过核心向用户逐渐往外辐射的这种方式。我们不会一上来就投入大量的推广资源去拉用户。具体的呢，其实我们暂时还没有去对它做预期，还是首先看看推出去之后，根据用户的数据，我们再来做更详细的规划。至于你在ChinaJoy上看到展出了一些其他的、可能跟以往西山居风格不太一样的游戏，这个我其实这一两年我都说过很多次了，西山居除了把武侠剑侠情缘这条线做深做出之外，一直也在积极探索其他的品类。所以也包括我们之前推出的云裳羽衣，包括我们成都团队做的少女咖啡枪，现在叫双生视界，也会不久在日本先上线。这都是跟以前的剑侠情缘不同的玩儿法，不同的风格。所以包括这次在ChinaJoy上看到的，也依然是西山居，它绝对不仅仅是说只做剑侠情缘这个武侠这一个品类，我们还是会积极地去探索一些新的方向。此外，我们后面陆陆续续还有一些游戏，这些我们可能会在九月初，我们与腾讯会做一个更全面、更系统的一个沟通。这个开完之后，我们的整个游戏上线的计划会有一个更准确的预估。 I'll do the translation for Mr. Zhou. For the JX Online 2 mobile game, because like I said earlier, our operating team is very focused on the optimization of JX Online 3 to be launched by end of October or early November. The JX Online 2 mobile game will be delayed to next year. I have explained earlier that the JX Online 2 and JX Online 3 launch time will be at least one quarter apart. I expect the fastest launch time for JX Online 2 mobile game will be next year, March. For the FFBE game, we will launch the iOS version later in this month, and for the Android version will be 2-3 weeks after the iOS version. The launching plan for the FFBE will be quite different, as we will focus on the core gamers first and then extend to others. We will now plan to do aggressive promotion right after the launch of FFBE. As you said that we have other titles that you noticed on display in ChinaJoy. As I explained earlier that our game studio Seasun, we are planning actively to extend to other game types, other IPs. We are not only focusing on the JX IP. Like we have launched Yun Shang Yu Yi last year, and also we have another game called Girl Cafe Gun by our Chengdu studio. We are also launching the Girl Cafe Gun 2 overseas in Japan in the near future. We are not only doing the JX IP, but we are also actively extending to other game title and other IPs. We also have other games on our pipeline, and we will start a more comprehensive communication with the Tencent team in early September. After our communication with Tencent, we will have a more clear picture on our pipeline for next year. Thank you. 好，谢谢。那我很快追问一下关于云的部分，我们云现在的收入增长还是很快，然后 margin guidance 也会比去年要提高。那想问一下，往 2020 看的话，我们觉得竞争的情况会怎么样呢？会变得更好，还是会跟现在一样，或者恶化，然后这个 margin 的变化在 2020 会怎么样？或者是 break even 的点。那我很快翻译一下。So as our cloud revenue maintain fast growth and also our margin guidance is improving from last year, how we should think about the competition going into 2020 and also the margin profile next year? Thank you. 我来回答这个问题。云的这个市场，我依然是这个观点，老观点没变过。你看这几家云公司都依然在保持一个高速的成长。我个人的判断就是云从互联网企业渗透到传统企业的这个过程，其实这个市场还远没有饱和，甚至说很多都是刚刚开始。这也是为什么能解释几乎整个云行业，大家都保持一个比较高的增速，我们也不例外。所以我个人还是坚信，从整个云行业、云产业的角度来看，未来几年依然能够保持一个比较高速的发展，也不会出现这种全面的恶意竞争的这种格局出现，因为毕竟云市场相比万亿级的云市场，现在整个的规模都还算小。但是不排除在某些领域依然还会出现竞争比较激烈的，这是不排除的。因为毕竟现在整个云的竞争格局还没有最终形成，大家都还是在你追我赶的过程当中。这是对整个大的云的竞争格局，我的判断就是大的，我认为依然是还会保持一个比较高速的成长，大家都是分别去抢占不同的山头。但是在某些局部领域有可能会产生比较激烈的竞争，这是我的判断。然后经营利润率、毛利润率的持续改善，我记得我们去年包括今年Q1，我们上次也多次跟大家介绍过，我们其实内部的一个目标，其实也是逐渐去收窄，亏损的收窄。从今年上半年执行的情况来看，是非常好的，达到了我们的预期。如果不出意外的话，我们将会继续去收窄，按照我们之前既定的一个节奏，或者说一个收窄的趋势去前进。当然现在基本上还在中国，国内的几家友商，在做云的，其实都在加大投入，甚至有些是不计亏损地谋求增长，我觉得这个其实也会给我们比较大的压力。到底是说我们先求快速的成长，跟上友商的节奏，不怕亏损呢？还是说保持适度的亏损的收窄，我们放慢一点的增速。我想在未来，这种指导策略也有可能会随着市场竞争的变化，我们也会做出相应的调整。应该说这不是一成不变的，有可能我们根据市场的这个发展情况，我们也许会做出策略上的调整，都是有可能的。只是到目前为止，我们还是按照一个既定的方式在前进。 I'll do the translation for Mr. Zou. My view on the overall cloud market has not changed. As I said earlier in the year, I think that all of the big cloud companies are still able to maintain a high revenue growth rate currently. This is because the whole cloud market is still in the initial developing stage. The market is not mature yet. All these competitors are developing very fast in different areas. I am quite confident that this trend will continue for the next couple of years. This does not mean that in certain narrower categories that we may face some more aggressive competition. But overall, the whole market is still in the high-growth period, and our OP margin will continue to improve. This is our goal earlier in the year. Based on the first half of the year performance, our performance is on track, and we have met our expectation, and we will continue to improve our margin in the future. As you know, some of the competitors, they are investing heavily in the market, not regarding their profit levels. We do face some pressure here. We do have to sometimes think about whether we need to still maintain a high growth at the same rate with our competitors, or we choose to balance between the high growth rate and revenue and also operating profit margin improvement. The plan of our cloud business may adjust according to different market competition developments. But as of now, we are still on track, and we are still growing very fast in revenue, and we are still improving in the operating profit margin. Thank you. 这是周总，这是Francis。谢谢。 Hi operator, I think we're ready to end this conference call. Sure. Thank you, ma'am. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect now. Thank you.