Earnings Call: Q2 2013

Aug 27, 2013

Ladies and gentlemen, thank you for standing by, and welcome to the 2013 second quarter interim results announcement conference call. At this time, all participants are in a 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. I must advise you that this conference is being recorded today, Tuesday, August 27, 2013. I would now like to hand the conference over to your first speaker today, Ms. Michelle Harnett. Thank you. Please go ahead. Thank you. Ladies and gentlemen, good evening and good morning. I would like to welcome everyone to our 2013 Q2 earnings call. I am Michelle Harnett, the Company Secretary of Kingsoft. I would like to start by reminding you that some information provided to you during the earnings call might include forward-looking statements, which may not be relied on in the future for various reasons. These forward-looking statements are based on our own information and on information from other sources we believe to be reliable. Please refer to other public disclosure documents for detailed discussions of risk factors, which might affect our business and operations. Having said that, let me introduce our management team who join us today. Dr. Zhang Hongjiang, our Executive Director and CEO. Mr. Francis Wu, our Executive Director and CFO. Now I am turning the call to our Executive Director and CEO, Dr. Zhang Hongjiang. Thank you, Michelle, and thank you, everyone. Welcome to this session. I would like to start by saying that we are very delighted to report another strong quarter, and also the first half of 2013. With the revenue for the first half ramping to CNY 953 million, we achieved healthy growth across all of our major business lines. According to the iResearch, the total active users of our Kingsoft network PC-based product reached 155 million at the end of June 2013 from 105 million a year ago. This is our KIS result. Also supported by the expanded user base, the advertising revenue from KIS continued its strong growth momentum in the first half of this year. Online game revenue for the KIS achieved a tremendous growth year-over-year. We have also been very actively growing our mobile user base. In June, our mobile browser, codenamed Cheetah, was officially launched, and it was very well received. With the innovative product and also the very outstanding user experience, the Cheetah mobile browser brings the user an excellent experience in the internet surfing as well as in movie chasing. Overall, in the first half of 2013, we acquired also several mobile apps both in China and the international market. With those acquisitions and with that add-on to our user base, together with the homemade mobile apps, our mobile product users of KIS expanded to over 100 million at the end of July from 41 million at the end of January this year. This is the overview of our KIS business. I am also very pleased to report that the Kingsoft WPS Office achieved a very solid revenue growth in the first half, with revenue posted a 13% year-over-year growth. Bear in mind, last year, it was a record high. What we are seeing here is another record high income of revenue for our WPS Office. We are very excited to report that we have signed a contract with ICBC, the largest bank in China, on the adoption of WPS Office very recently. This contract, I would say, is a milestone for WPS. It simplifies that WPS is not a very popular product among the consumers and the government users, but also it is capable of providing all the needs that the banking industry requires. Also, we have successfully monetized the ever-growing PC user traffic for our free version of WPS for consumers with very promising results. on July 17th, last month, our Kingsoft Office, the new version, 2013, was officially launched and has gained very positive feedback from our users. With the introduction of the Team Office, which is a new function we introduced for enterprise users. The users in the enterprise can easily share and update documentations across devices and within or across teams. WPS 2013 also offers very rich online templates to help its users to produce high quality and professional presentations, and various type of office documentation in a very easy manner. Meanwhile, the global monthly active user of our WPS Mobile Office ramped up significantly to over 20 million in June from 4 million a year ago. This is a very significant achievement here, as we are expanding our investment in the mobile office area. Let me move on to our Online Game division. The top line for online gaming for the first half posted a year-over-year growth of 34%. This has largely outpaced the growth rate of MMO gaming market in China. In particular, I would like to point out our flagship 3D MMO, the JX Online 3, has achieved a historical high in term of both the revenue and also ADA, thanks to the release of An Shi Rebellion, [Foreign language], this year. This is this year's largest expansion pack. Of course, we are going to continue to release new expansion pack in the rest of this year. Also, another MMO game, the MAT, has demonstrated accelerated growth in the second quarter since the release of expansion pack, Gun Fate Version of MAT. In September, a new expansion pack for MAT and also another new expansion for JX Online 3 will be launched. We believe with the launch of those expansion packs, we should continue to grow the user base and the revenue of those two 3D games. Also, I would like to point out, those two are the major driver of our increase, both in term of user base and also revenue for our games. The closed beta testing for The Young Elf King are very promising, and the weekly active user of this game has risen to more than 1.2 million. We are now actively improving The Young Elf King, aiming at to have it commercially launched in September. In addition to the second episode, The Young Breaking for The Young Jera is also in the pipeline. We shall continue to increase our investment in the mobile game, and we have already have a number of teams in place and a number of mobile games in the pipeline. We will continue to grow the game portfolio and also user base of mobile games. We hopefully will turn our mobile game into our new growth catalyst for our game division. Let me move on to our fourth major business, that is Kingsoft Cloud. As a leading player in the cloud storage service area in China, Kingsoft Cloud has been focusing on user need and user's experience. In June, the new commercial version of Kingsoft Cloud App, we call it Kingsoft Kuaipan commercial version, with the refined functionalities and improved user experience, was released. That has been very well received by our enterprise, especially small and medium enterprise users. In July, Kingsoft also entered into a strategic agreement with ChinaCache to provide SMEs with one-stop solution for virtual services. To leverage the robust growth of social platform, in particular, Tencent's WeChat, Kingsoft has released a WeChat version in July and has seen its user base grow very rapidly in the past few weeks. More importantly, Kingsoft Cloud has issued a Series A preferred share to the investment firm, to the VC firm, venture capital firm led by Yuri Milner. This is the Series A round of funding fundraise. This particular round of fundraise has raised about US dollar $20 million. We believe that with the introduction of Applido as a strategic investor, Kingsoft Cloud should be better positioned in terms of our strategy and market leading and market leadership, and also it will accelerate the development of this initially internal venture business. Let me stop here, and I would like to turn the call to Francis, who is our CFO. Francis? Should I open this? No. Got this. Okay. Thank you, Dr. Jiang. Good evening, everybody. I am now going to discuss the Q2 and the first half of 2013 operation and financial results. As usual, I will start from Q2 using CNY as a currency. As Dr. Jiang just mentioned, we continue to report a very strong financial result for Q2 2013. Q2 revenue increased 9% quarter-on-quarter and 54% year-on-year to CNY 497 million. The revenue speed was 54% for online games and 44% for application software. The revenue from our online game increased slightly by 1% quarter-on-quarter and 30% year-on-year to CNY 271 million. The Q1 increase was mainly due to the strong performance of JX Online 3 with its popularity and revenue achieved another historical high in June, upon the release of expansion pack, "An Shi Rebellion," on the 8th of June. The year-on-year increase was primarily due to the growth of JX Online 3 and MAT, the release of the new games. As you can see that the expansion pack of JX3 was launched at the end of Q2, so the impact will mostly fall in Q3. The daily average PCU decreased 2% quarter-on-quarter, and half back year-on-year to 0.6 million. The monthly APA increased 13% QOQ and 37% year-on-year to 2 million. The increase was primarily attributable to doubling the active paying account for JX3 compared to the same period last year. Our monthly ARPU decreased 9% quarter-on-quarter and year-on-year to 43. That was primarily due to that the increase in APA was primarily driven by JX Online 3. As we all know that the ARPU for the time-based game is relatively low as compared to our other item billing games. Also in particular, when they increase new users. Yes, the new user, that will affect the ARPU and also the PCU, because they tend to spend less time on a game as compared to the experienced gamer. The cost of revenue increased 7% quarter-on-quarter and 62% year-on-year to CNY 66 million. The quarter-on-quarter increase was primarily due to the increase in the bandwidth and server cost as a result of last scale upgrade of KIS. The year-on-year increase was primarily due to the higher bandwidth and server cost with the expansion of user base and also increasing user activity of Kingsoft Cloud and KIS. Our gross profit increased 9% quarter-on-quarter and 53% year-on-year to CNY 431 million, and the group's growth profit margin half back quarter-on-quarter and year-on-year to 87%. Our R&D expenses increased 80% quarter-on-quarter and 57% year-on-year to CNY 136 million. These sequential and year-on-year increase in R&D costs were primarily due to the investment in high talents for mobile application development. That was also mentioned by Dr. Jiang earlier. Our strategy was focusing on the mobile capability and opportunities. The selling and distribution expenses increased 6% quarter-on-quarter and 79% to CNY 72 million. This quarter-on-quarter increase was primarily attributable to an increase in advertising and marketing expenses in conjunction with the launch of the expansion pack for JX3. The year-on-year increase was mainly due to the combination of the increase in marketing activity for Cheetah Browser, the mobile application of KIS, and also the higher advertising expenses for the launch of expansion packs for the existing games, mainly the JX3. Our administrative expenses decreased 4% quarter-on-quarter and increased 19% year-on-year to CNY 44 million. The year-on-year increase was mainly due to the increase in office rental and staff costs. But of course, you can see that the rate of increase in administrative expenses was much lower than the increase in the other variable costs. The share-based compensation cost increased 93% quarter-on-quarter and 38% year-on-year to CNY 20 million. The increase in share-based compensation costs primarily reflected the new grants of groups and certain subsidiary shares to selected employee. Probably a lot of us have already noticed that in our announcement with the new grant of share-based compensation. The other income gains and gains decreased 66% quarter-on-quarter and 30% year-on-year to CNY 5 million. This decrease was primarily due to the decrease of government grants recognized in this quarter. Our operating profits, excluding the impact of ESOP, increased 4% quarter-on-quarter and 46% year-on-year to CNY 179 million. This was due to a combination of reasons mentioned above. The operating margin, excluding the impact of ESOP, decreased two percentage points quarter-on-quarter and year-on-year to 36%. The finance income increased 7% quarter-on-quarter and 8% year-on-year to CNY 29 million. Our income tax expenses decreased 33% quarter-on-quarter and increased 4% year-on-year to CNY 16 million. Our effective tax rate decreased two percentage points quarter-on-quarter and three percentage points year-on-year to 8%. As a result, our profit to owners of parent decreased 26% quarter-on-quarter and increased 30% year-on-year to CNY 145 million. This decrease quarter-on-quarter was primarily due to some of the non-recurring items that was not repeated in Q2. Profit to our owners of parent, excluding ESOP, decreased 21% quarter-on-quarter and increased 29% year-on-year to CNY 160 million. The profit margin, excluding ESOP, was 32%, 45%, and 38% for the three months ended June 30th, 2013, March 31st, 2013, and June 30th, 2012, respectively. Let's move on to the first half 2013. Revenue increased 55% year-on-year to CNY 953 million. Our online game make up 56%, increased 34% year-on-year to CNY 537 million. Application software make up 43% and increased 101% year-on-year to CNY 407 million. Our gross margin increased by two percentage points to 87%. The profit to owners of parent increased 71% year-on-year to CNY 341 million. The number excluding the ESOP increased 66% year-on-year to CNY 364 million. The profit margin excluding ESOP was 38% for the first half of 2013, versus 33% for the same period in 2012. In our statement of financial position, we continue to report a very strong cash and time deposit of CNY 3.2 billion at June 30th, 2013. This represented cash per share of RMB 2.8. Our deferred revenue was CNY 191 million compared to CNY 200 million at the end of 2012, and the decrease was primarily due to the decrease of deferred government grants as a result of completion of the final inspection of a government-subsidized project on WPS, namely the He Gao Ji project. Operating activities increased 139% year-on-year to CNY 354 million. Our capital expenditure increased 115% year-on-year to CNY 103 million. That was primarily used on the acquisition of additional server for our cloud and other business. Now, I'm going to turn the floor back to Dr. Zhang Hongjiang to give some highlights on the outlook. Dr. Zhang Hongjiang. Thank you, Francis. Again, ladies and gentlemen, thank you for your attention. Looking forward, I am very confident along all of our business lines. First, JX Online 3 and the MAT games will continue the growth momentum as we keep on introducing new excitement to gamers. Also, our focus on potential user need, product and innovation, and user experiences will continue to support our effort to grow user bases for our KIS product and for the Cheetah Browser across devices. It will increase our monetization capacity on both PC and mobile users. Strengthened collaboration between KIS and Tencent will help KIS leverage the fast development of QQ and WeChat platform. Also as a Chinese leading office service provider, WPS will continue to capitalize on a historical opportunity as the government continues to improve IPR environment and the explosive growth of mobile internet. I want to say it again, the contract we have with the ICBC Bank will help us open new opportunities in the enterprise market. With more and more enterprise users from the finance, energy, infrastructure, and business sectors to adopt WPS as the office solution, the WPS Office will achieve long-term health growth in the coming years. Also, the fast expansion of mobile internet users will bring in great opportunity to have WPS Office in providing mobile office solutions. The impressive growth of monthly active users of WPS PC and WPS Mobile has laid a very solid foundation for the long-term development of our office business. With the healthy development of all of our major business lines, we are well on our way to achieve our goals set for 2013. On behalf of Kingsoft, I would like also to extend our appreciation to Kingsoft consumers, shareholders, 7,000 employees and partners, and you all for supporting us. I think now we may start Q&A. Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star followed by 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. Your first question comes from the line of Jiong Shao from Macquarie. Please ask your question. Thank you very much for taking my questions, and congrats on the very good results. I am going to kick off with a couple questions. First, on your ICBC win, could you please elaborate a bit on, is that for the whole wholesale upgrade or migration, rather, away from a competitive product onto the WPS platform? If it is across the whole corporation, how long that is going to take, and what the pricing? Is that based on the sort of maintenance model or is it based on fees? Any additional color would be helpful. That is my first question. You have a few questions about ICBC. This is Hongjiang Zhang, the CEO of Kingsoft. Let me take this question. I am very pleased that we have signed this milestone contract with ICBC. I think it basically signifies that WPS is a product, WPS Office is a product. After this many years of effort, we have come to a point that all its functionality and stability and scalability are on par with our key competitor and can meet, if not all, but definitely a vast majority of the need for the banking industry users. Bear in mind that ICBC is the largest bank in China and is number 2 in the world. We are really pleased with this result. I do not want to talk too much about the detail, but this is a site contract, site license contract with ICBC, and just like what we usually do with the enterprise and with government users, this is a site license, and just like every other one, it is a 3 years period, and we can continue renew the contract. That is pretty much our standard contract with enterprises. Okay. Thanks, Dr. Zhang. My second question is on the Kingsoft Cloud. You briefly mentioned in your prepared remarks about a special sort of customer-designed Kingsoft Cloud product just for WeChat. Is that personal storage cloud for WeChat? Could you please provide additional sort of color? Thank you. Thank you for that question. Yes, as WeChat gaining popularity among users, the usage of WeChat in term of both the number of time you use it and the total time you spend on WeChat each day has increased tremendously. People using WeChat now to share their data, their document. So, we have introduced this WeChat version for personal users, for consumers, to enable them to a better sharing experience. Okay. Thanks, Dr. Zhang. My last question is on a financial side of things to just keep Francis busy. 6 months ago, you guided for the full year profits, I think to grow sort of a single digit, given the heavy investment you are making in different businesses you have now after first 6 months of very strong results. I was just wondering, do you have an update for us in terms of your expectations for the profit growth for the whole year? Thank you. Thank you, Strong. This is Francis. Let me give a response to your question on the guidance. Yes, you are right. We will be still posing a relatively conservative guidance on our profitability. As you can see that in the first half, even though we have reported a very strong result continuously, both on Q1 and Q2, you will see that our determination in investing in our initiative on the mobile strategy continue. So, you will probably see that even though we have already have a milestone contract signed with WPS, it is our determination to continue to further improve our functionality and compatibility, in particular on the mobile version. So, you will see that the investment in both our R&D and also on our marketing and selling expenses will continue. So, I will stick onto the guidance that we give early in the year. Let me add a few sentence on what Francis has just said, and reemphasize that on our strategy to continue increase our investment in our mobile push, both in the WPS and also in our KIS business. In particular in KIS business, we have a very strong momentum in our user base growth in the mobile apps. As you heard before, we reach over 100 million, and compared to the beginning of this year, this number, beginning of this year, it was only 41 million. So it more than doubled in 6 months. We would like to continue the strong growth in that area, as well as the strong push for our mobile office. So we are going to continue investing in those two areas in addition to the push in mobile games. So that is why Francis gave you the guideline on the profit margin. Okay. Great. Thank you very much, guys. Very helpful comments. Thank you. The next question comes from the line of Thomas Chung from BOCI. Please ask your question. Hi, good evening, everyone. Hi, Dr. Zhang and Francis. I have a couple of questions. The first question is regarding your cooperation with Tencent, WeChat, and Mobile QQ. Can management provide me some color about the synergies with respect to mobile games and KIS? How should we think about the monetization models with WeChat in the subsequent quarters? My second question is regarding the online gaming business in the second quarter. Can you just provide me some color about the year-on-year growth for JX3 in the second quarter, similar to past quarters? The online gaming revenue growth grew by 1% quarter-on-quarter. I just want to see what are the performance of other games such as Legend of the Moon. Well, thank you. You have quite a few questions. I hope I've picked them up all. This is Hongjiang Zhang, CEO of Kingsoft. Let me answer your first question about our cooperation with QQ and WeChat. I would say that we are still in the very early stage, and we are not ready to reveal any detail yet, in addition to what I have already mentioned on the leveraging of WeChat by the Kingsoft Cloud Storage service. Francis, you want to pick up other questions? Sorry, I just lost track. You also mentioned about the online games, JX3, JX Online 3 in particular. I would say we are very pleased with the continued growth of the JX3 Online after the 100% increase last year. The first half of this year, we achieved a slightly lower but a very close growth rate again. We are expecting the growth rate will continue. MAT actually is a pleasant surprise in the first half year with very high growth, not as high as JX3, but very close. We are continuing improving our other online games, and we are pushing very hard on our portfolio of mobile games. We should expect a very steady growth for the rest of this year for online games. On your question on the Kingsoft Cloud after the fundraise, I don't think our investor like to reveal too much details on this particular part. I'm sorry that I can't really talk too much about that. Have I addressed all your questions? Thanks, Dr. Zhang, for your helpful answer. I have additional two questions, is about KIS. Can you remind me about the revenue breakdown between advertising and value-added service, which I suppose is mobile games? The second question is about the operating margin trend in the second half. Should we expect the operating margin to rebound sequentially from the second quarter? Thanks. This is Francis. Thank you, Thomas, for your question. First, the revenue from KIS is still mainly derived from the advertising revenue. The game revenue, this is one of our focus that will pick up in 2013, but since the base in 2012 on this area is very small, even though we have achieved a very strong growth trend on the game center revenue. But as compared to the advertising revenue, it will still comprise a relatively small portion of KIS revenue. I want to emphasize, the growth rate is tremendous. Yeah, the growth rate, first, it's a strong growth, and the other is because of a relatively small base. The growth rate for our game revenue will be very strong. Game platform revenue will be very strong. As to the operating margin, as I mentioned earlier, that we'll continue to invest in our R&D and selling and marketing expenses. So the operating margin will still keep on the guidance that we give earlier in the year. Thanks, Francis and Dr. Zhang. Thank you. Your next question comes from the line of Kim Yun from Nomura. Please ask your question. Hi, it is Yun calling for Jin. I have two questions on the WPS front. I think you previously mentioned that the guidance for WPS revenue is like 20% year-over-year growth. In the first half, we see that the growth is around 10%. My question is that, are we still on track to achieve the target for the full year? Secondly, you mentioned that you have started to monetize the PC user traffic of the free version of the WPS. Can you give us some more color on the monetization methods? Also, how much revenue should we expect from that front? Thanks. Let me get the first question. This is Francis. On the guidance for the growth of WPS, we are still confident that we are able to achieve the guidance we gave earlier in the year. Primarily due to the reason that as you look at our number, actually, the users, on one hand, the contract that mentioned by Dr. Jiang earlier on ICBC was recently signed. That was a relatively large contract, but the revenue will be recorded in Q3. One thing I wanted to draw your attention to is that when you look at the WPS, don't just look at the top-line growth. You should also be looking at the other KPI on WPS because we have spent a lot of effort and have exciting news on the growth of our user base and also on mobile. Two things. One is that we are still confident to deliver what we guide in the early of the year. Second, I would also urge you to look at our other exciting KPI performance in WPS. Yeah. Let me answer your second question about the value-added service, value-added income for the WPS. There are two numbers that you look at. For the PC, one thing I quickly mentioned earlier, but I would like to share a little more detail, is on the WPS PC user base. This is not counting the enterprise users, the company users. This is the free version of WPS PC users. In July, has reached very close to 60 million monthly active users. Also, the daily installations of WPS is over 300,000 per day. So bear in mind, a monthly active user close to 60 million for any app is a huge user base and very active users. Based on that, we started to do a little monetization exercise and just look at the template, the office template in particular, template for the presentation and also template for Word. The users there has increased tremendously. Download and upload, in particular download some popular template, has increased tremendously. That actually brought a lot of traffic to our website. So we start doing advertising on that website for WPS, basically, we have a website called Stockerz. Combined with some paid template as well as advertisement, we have already achieved some income. Compared to the license revenue, this is still insignificant, but the trend is very promising. Got it. Thanks very much. Thank you. Your next question comes from the line of Billy Leung from RHB. Please ask your question. Hi. Thanks for taking my question and congratulations on the strong results and all your development as well. Just a few questions. The first one is on your cloud computing development, and you've been making strong headwinds in this segment. I was wondering what the end game for the cloud computing would be. How would you expect the monetization, the business model going forward and, yeah, exactly, and just what kind of business model are you looking at going forward for your cloud computing services? Thank you for the question. This is Jiang Yang. Let me take the question. The end game for cloud computing and business models. Those are two very tough questions and very difficult ones so that everyone in this space, they're trying to answer. In our case, the Kingsoft Cloud, we provide service at three different levels. First, the consumer version of cloud storage, the Kuaipan consumer version. At this moment, I think that the business model will be a combination of storage space as well as VAS, value-added service. We are still exploring various types of value-added service there. The paying users for both storage space and the VAS service are increasing, although the base is still very small. So this will be a long-term pursuit. Another service that we provide is the Kuaipan, or the cloud storage commercial version. This is for small and medium enterprises, and we just launched it, actually, the beta in April and updated version in July, and has received a warm welcome from the small and medium businesses. At this moment, there are over 1,000 trial users, 1,000 enterprises that are trial users. So that one, the commercial version, is a paid version. So enterprises will pay based on the storage space they require. Beneath these two services, both are front-end service, that is the cloud storage foundation service, a platform service, which is a Kingsoft Cloud Storage. You can relate it to Amazon's S3. So this is a service provided to developers and companies like Xiaomi and Skyworth Cloud TV. Basically, it will provide an API, then you build on top of that, your apps that require storage services. Xiaomi's phone user has increased tremendously in the last six months, and active Mi Cloud users have increased even faster. Just give you one number, the daily upload from Xiaomi phone users, the photos, now it is exceeding 15 million per day. All those images are uploaded into Mi Cloud, which is basically supported by Kingsoft Cloud. Basically, those data are stored in Kingsoft Cloud, and those are paid services as well. As you can see, we have three services, and at this moment, two are guaranteed to be paid. One challenge is the consumer version of it. Thank you. Hope I answered your question. Sure. That is very helpful. My second question is just a more overall question is, initially, a lot of the internet platform revenue is driven by advertising, which is what is driving a lot of growth with a lot of your segment as well. But I guess going forward, you would be wanting to rely less and less on advertising related and more on value-added services. When do you see sort of that happening when you rely less on advertising related? If you look at our KIS business as well, that business has been the most mature mobile internet service business from Kingsoft. I would say in the next year or so, we will still largely rely on advertising revenues. Although the format of advertising will change. Certainly, we will see an increased weight on our online gaming, the web game, and mobile game revenue for our mobile internet and KIS business. I do not think the change you mentioned will come overnight. For our mobile type of KIS, the good news is the user base, the active monthly user is already exceeded over 22 million monthly users. We are looking into how to monetize it, but very frankly, this is not our priority, to monetize it. Our priority is still to continue to grow the user base. Okay, thanks for that. Just one final question, more for Francis. For the effective tax rate, it was quite low this quarter. Could you just show us the reason and sort of give us a guidance for the full-year effective tax rate? Thank you. Thank you, Billy. The effective tax rate, as you can see, in this quarter, it was quite low. There is a 2%-3% percentage point drop in effective tax rate. That was primarily due to that we have utilized some of the tax credit bring forward. The guidance for the whole year will probably bounce back to the earlier numbers. Subsidiaries. Some of our subsidiaries are still in the preferential tax period. We will expect that for the whole year, it will increase a bit from this quarter, more close to what we have in the earlier of the year. Okay. Thank you, Dr. Jiang. Thank you, Francis. I will get back to queue. Thank you. Thank you, Billy. Due to time constraint, we shall take the last question, and it comes from the line of from the China Merchants Securities. Please ask the question. Hi, Dr. Jiang and Francis. I have some questions about mobile internet business. The first question is about, I noticed that you have been promoting for quite a while the Kingsoft Mobile Assistant, by integrating into the. Can you share some operating data, such as the user base or total downloads? Do you have any revenue generated from mobile assistant product? Thanks. Question is on the user base for our mobile internet. Okay. I hope that I got your question right. Our strategy on the mobile security side is not just one product, but a collection of mobile tools, including the Battery Doctor, the Cheetah Browser, and the mobile assistant, and lately the three new apps, Clean Master and Photo Grid and AnTuTu. Most of them are homemade and some are acquired. As I mentioned earlier, the total user base, monthly active users of this class of product has already exceeded 100 million. At this moment, we are not in a hurry to monetize this traffic in term of advertising. But definitely we are benefiting from those traffic in term of online gaming, mobile gaming distribution. This is just the beginning and if you look at other products, most of them actually only come out in the last six months. Moving forward, we think the user base will continue to grow and will keep the momentum. Also we are going to invest more in marketing those apps. By the end of the year, hopefully we'll see another very strong growth. I wanted to add on what Dr. Jiang just mentioned, is that the user base for our mobile app for our KIS product group is actually increased tremendously. The number at the beginning of the year is 41 million user. What Dr. Jiang just mentioned is that it is the number in July. We exceeded 100 million in July. At the end of June this year, 2013, is still below 100 million. It is 88 million. But the number increased tremendously during the past seven months. Okay. Thanks. My final question is about the mobile apps you acquired. Can you talk about what apps have you acquired or what type of apps? Thanks. Let us talk about AnTuTu, which is a site that produce third-party evaluation for phone performance and also the Photo Grid. Photo Grid is the number one photo app in the U.S. market. AnTuTu is the number three in term of mobile phone benchmark. So, those two are the highlights of our acquisition. For our own new product, the Kingsoft Mobile Assistant, and also our Clean Master, in Chinese called [Foreign language]. Those are the two homemade product that has experienced tremendous growth as well. Okay. Just a quick follow-up. Do you have the user base data for Clean Master? I don't have the latest number, but I would say this is the product that has the fastest growth in the last three months, yeah. Okay. Thank you. Thank you very much. Thank you. Ladies and gentlemen, we have come to the end of the Q&A session, and I would now like to hand the conference back to our CEO, Dr. Zhang Hongjiang, for his closing remarks. Thank you. Thank you very much. Ladies and gentlemen, again, thank you for your continued support to Kingsoft and for all the questions. Do we end here? Yes. Okay. Thank you. We end the session today here, and again, thank you very much. Thank you. Good night. Thank you. Good night. Thank you. Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.