Kingsoft Cloud Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 22, 2023

There are 6 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to Kingsoft Cloud's Second Quarter 2023 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 Please be advised that today's conference is being recorded. Would now like to hand the conference over to your speaker today, Nicole Shan, IR Manager.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Hello, everyone, and thank you for joining us today. Kinsta Cloud's 2nd quarter earnings release was distributed earlier today and is available on our IR website at ir. Psbaiyun.com as well as on global newswire services. On the call today from Kingsoft Cloud, we have our Vice Chairman and CEO, Mr.

Speaker 1

Cao Cao and the CFO, Mr. Henry He. Mr. Zou will review our business strategy, operations and company highlights, followed by Mr. Huo, who will discuss the financials and guidance.

Speaker 1

He will be available to answer your questions during the Q and A session that follows. There will be a conductive incorporation for your convenience and reference purpose only. In case of any discrepancy, statement in our original language will prevail. Before we begin, I would like to remind you that this conference call contains forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the U. S.

Speaker 1

Private Securities Litigation Reform Act of 1995. These forward looking statements update the company's current expectations and current market and operating conditions and relate to Yuan's data involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward looking statements. Further information regarding these and other risks, uncertainties or factors are included in the company's filings with the U. S. SEC.

Speaker 1

The company does not undertake any obligation to update any forward looking statements as a result of new information, future events or otherwise, except as the requirements are applicable law. Finally, please note that unless otherwise stated, all financial figures mentioned during this conference call are denominated in RMB. It's now my pleasure to introduce our Vice Chairman and CEO, Mr. Zou.

Speaker 2

Hello, everyone, and thank you all for joining KingsoftCloud's Q2 2023 earnings call. During the quarter, we continued to uphold the principle of high quality and sustainable development, build success based on technology and innovation, and forge our reputation throughout the entire business process with customer centricity. We have enhanced our operations management and proactively embraced the new AI era. This quarter, our profitability further improved. Total revenues reached RMB1.84 billion.

Speaker 2

Adjusted gross margin increased steadily for the 4th consecutive quarter to a new record high of 11.3%. Adjusted gross profit reached RMB207 1,000,000 more than 3 times the amount for the same quarter last year. Normalized adjusted EBITDA margin was negative 3.3%, which represents a significant improvement of 5.3 percentage points from the same quarter last year and 2.6 percentage points from the previous quarter. In terms of public cloud services, revenues were RMB1.16 billion with a gross margin of 5.2%, significantly higher than and turning positive from the negative 2.4% gross margin in the same quarter last year. We continued to focus on 3 priorities for public cloud services, namely the Xiaomi and Kingsoft ecosystem, customer mix and cost reduction.

Speaker 2

First of all, we continue to serve Xiaomi and Kingsoft ecosystem well. In particular, total revenues from Kingsoft Group increased by approximately 15% year over year. 2nd, we continued to optimize our customer mix. The revenue share of our largest customer dropped further to around 16%, while signing up more than 20 new medium sized customers. Meanwhile, we also resolutely withdrew from long term loss making projects and customers, achieving a more balanced and healthier revenue mix.

Speaker 2

3rd, we have made cost reduction and efficiency improvement an ongoing initiative. We established a dedicated cost optimization team to tackle redundancy including the cancellation, relocation, consolidation, reuse and disposal of such resources and assets, yielding remarkable results. Moving on to Enterprise Cloud Services. Total revenues were RMB675 1,000,000 with a gross margin of 21.7 percent, a significant improvement from 15.3% in the same quarter last year. In public services space, we opted to focus on core areas of Public Service Cloud and State Owned Asset Cloud.

Speaker 2

Executing a differentiated approach, we not only build cloud for customers, but also develop an end to end cloud service model covering cloud migration, cloud usage and cloud management. We have forged our core competitiveness of standardized public services cloud operation capabilities applicable to both public service cloud and state owned asset cloud. For example, we have been the partner for the Beijing Public Service Cloud for 9 consecutive years, winning a strong reputation to deliver secure, reliable and easy to use systems and services, resulting in a virtuous cycle of increased cloud adoption by more than 50 public services departments. In digital health space, we have maintained a steady and sure approach, 1st consolidating our strengths, then expanding in scale. Our proven capabilities and leadership in super large ultra complex landmark cloud projects have provided a solid foundation for further growth.

Speaker 2

On one hand, we are horizontally replicating our regional healthcare cloud model to more regions. Our model features an innovative architecture recognized by China's National Health Commission and Industry Associations and has been promoted to more than a dozen provinces as an industry reference framework, allowing us the opportunity to engage more deeply in the construction of the national public health systems and medical digitalization platforms, producing remarkable economic and social benefits. For example, we completed the first phase of the Jiangsu Medical Image Cloud project, integrating image data from over 1300 hospitals across the province with estimated annual savings of RMB2.4 billion from reduction of duplicated medical images. Building upon our successful experience of this landmark project, we have replicated our Imaging Cloud project in Chongqing Province. Meanwhile, we're working on the plan for the 2nd phase of Jiangsu Imaging Cloud project, which upon completion is expected to connect all the public hospitals across the province to the cloud platform.

Speaker 2

On the other hand, we're also vertically penetrating our business to hospital level. We are partnering with a number of top tier hospitals to facilitate cloud based next generation digital transformation. Our solution addresses a number of pain points, including high maintenance costs, server instability and low slow response to user requests. For example, we helped the Zhongnan Hospital of Wuhan University, a Grade A Tertiary Hospital transform its modular system with microservice architecture, developed an innovative data structure for Daxing Hospital, creating a loosely coupled horizontally integrated architecture for its platforms and applications enabling business process optimization and unified data management. In the financial services space, we completed and delivered a batch of big data projects for leading financial institutions as well as the 2nd phase of China Construction Bank's cloud infrastructure development project.

Speaker 2

We're now in the process of deploying the 3rd phase of this project. Turning to Camelot, during the quarter, Camelot achieved a solid business performance, signing up 6 new customers while maintaining robust relationship with existing major clients. Its profitability remains at a healthy and stable level. In terms of product and technology, we uphold our principle of building success based on technology and innovation by delivering best in class customer experience across our core product offerings. In storage space, we launched a deep ultracold data archive product, particularly well suited for data management use cases, including medical imaging, financial documents and compliance and archives.

Speaker 2

In big data space, our big data product were recognized for its overall strengths and ranked among the top 3 leading Chinese companies by IDC, a premier international institution in its Data Lakehouse Platform Technology Assessment Report 2023 in terms of its comprehensive capabilities such as data management, storage, development and security. In database space, we entered into strategic partnership with PingCap, leveraging our respective strengths to jointly provide fully managed distributed cloud database services. In enterprise cloud space, we upgraded our Galaxy Stack Management System, a unified platform facing operation and maintenance personnel and the cloud user facing cloud manager, adding dozens of new features to solve cloud management and usage pain points for enterprise cloud customers. In 2023, Trusted Cloud Summit, an authoritative and prestigious event that promotes the best practice of cloud industry standards in China and hosted by China Academy of Information and Communications Technology and China Communications Standards Association, our Galaxy SAC won 2 milestone awards, namely best practice awards for technology and best practice awards for public services cloud validating our outstanding technical strength in the domain of dedicated cloud. Ashering in the new AI era, we are beginning to see results from our rapid response to and comprehensive embrace of AIGC.

Speaker 2

Leveraging our neutral positioning, we have gained the preference of independent AI companies and signed a dozen of new AI customers. As the sole strategic cloud platform in the Xiaomi and Kingsoft ecosystem, We're working closely with Kingsoft Office on WTS AI enabling model training and inference business deployment. Partnering with industry leading large language model and vector database providers, we launched our Mass mutual trusted dedicated zone solution to bridge the trust gap in AI to be used cases. We also carried out AI targeted upgrades to our container and storage products to support InfiniBand technology and multimedia processing in AIGC use cases. In addition, we are collaborating with the Xiaomi and Kingsoft ecosystem to purchase or lease AI service from various channels, conducting tests and evaluations of domestic GPUs for alternative contingency plans.

Speaker 2

To develop and grow our Wuhan R and D Center is our significant strategic initiative, which will help us nurture new talents for maintaining our technological leadership in the medium to long run. In less than a year since its inception in last October, through voluntary relocation of key R and D staff from Beijing and Wuhan local recruitment, our Wuhan team has quickly grown to approximately 400 people, accounting for more than 1 third of our total R and D team and 50% of the Wuhan team hold a master's degree. We also organized a STAR training camp at Wuhan Center to provide aspiring university graduates with a fast track to transition from campus to workplace and attract the talents from Wuhan's top universities by fostering a sense of belongingness in our corporate family. In summary, the continuous and rapid improvement in our profitability over the past few consecutive quarters has strengthened our belief in the strategies and the directions we chosen. Looking ahead, we will nimbly uphold the principle of high quality and sustainable development and focus on technology, reputation and management to drive progress, thereby creating value for our customers, shareholders, employees and the society.

Speaker 2

I will now pass the call over to our CFO, Henry to go over our financials for the Q2 of 2023. Thank you.

Speaker 3

Thank you, Mr. Zou, and I welcome everyone for joining the call. Now I will walk you through the financial results for the Q2 of 2023. To uphold a strategy of high quality and sustainable development, we are pleased to deliver another quarter of a steady profitability improvement. Our adjusted gross profit continued to grow for the 4th consecutive quarter and achieved record high of RMB206.8 million, increased by 2 102 percent year over year, representing adjusted gross margin of 11.3%.

Speaker 3

Along with our strict expense control, our normalized adjusted EBITDA narrowed from negative RMB163.7 million in the same period of last year to negative RMB59.9 million this quarter. As a result, normalized adjusted EBITDA margin further narrowed from negative 8.6% in the same period of last year and a negative 5.9% in the last quarter to negative 3.3% this quarter. Thanks to the operational efficiency improvement, the quarter over quarter narrowing of normalized adjusted EBITDA margin outpaced the increase of adjusted gross margin. Our total revenue were RMB18 35,400,000 this quarter, of which revenue from public cloud services were RMB1159,500,000, representing a decrease of 10.1 percent compared with RMB1289.1 million in the same period of last year. As we steadily adjusted our revenue mix and proactively scaling down services to our top CDN clients.

Speaker 3

Revenue from Enterprise Cloud Services were RMB675.2 million, representing an increase of 9.5 percent from RMB616.6 million in the same period of last year. The year over year increase was mainly driven by our continued focus on selected verticals and quality projects, recovery from COVID-nineteen impact, our investment into flagship projects, Barren Foods, enhancing our capabilities to replicate the solutions and services to different regional customers. We continue to enhance our cost control measures. Total cost of revenue decreased by 11.5% year over year to RMB1628.8 million. IDC costs decreased significantly by 16.4% year over year from RMB1029.1 million to RMB860.7 million this quarter.

Speaker 3

Depreciation and amortization costs decreased by 18.8 percent from RMB249.1 million in the same period of last year to RMB202.1 million this quarter. Solution developments and services costs decreased by 7.4% from RMB489.1 million to RMB452.9 million this quarter. Fulfillment costs and other costs were RMB71.7 million and RMB41.3 million this quarter respectively. Adjusted gross profit of this quarter increased by 2 100 and 2 percent to RMB200.6.8 1,000,000 representing adjusted gross margin of 11.3% this quarter compared with 6.6% in the same period of last year. The significant margin improvement testify to be the effectiveness of strategic adjustments of revenue mix, improvement of our infrastructure efficiency, based out of loss making customers and optimize enterprise cloud project selections and efficient cost control measures, demonstrating our strong commitment to improve our profitability and delivering high quality and sustainable development.

Speaker 3

Each of our business lines achieved margin improvements. Gross profit of public cloud services was RMB59.7 million which was significantly improved from the gross loss of RMB30.7 million in the same period last year. Gross margin of public cloud services was 5.2% compared with negative 2.4% in the same period last year. The improvement was mainly due to our proactive scaling down of CDN services and adjustment of our client mix. Gross profit of Enterprise Cloud Services was RMB146.7 million compared with RMB94.6 million in the same period last year.

Speaker 3

Gross margin of enterprise cloud services was 21.7%, improved from 15.3% in the same period of last year. The improvement was mainly due to our rigorous enterprise trial project selection. In terms of expenses, excluding share based compensation and impairments of long lived assets, our total adjustment operational expenses were RMB538.1 million decreased by 9.7 percent from RMB595.8 million last quarter, of which our adjusted R and D expenses were RMB182.3 million decreased by 10% from last quarter. Adjusted selling and marketing expenses was RMB128.3 million compared with RMB1004.2 million last quarter. Adjusted G and A expenses decreased largely by 21.3 percent from RMB289.1 million last quarter to RMB227.5 million.

Speaker 3

We have been taking strict expense control over the period such as reduction of several expenses and screening of other discretionary expenses and others. As of June 30, 2023, our cash and cash equivalents and short term expenses investments amounted to RMB4.3 billion providing us with sufficient working capital and liquidity for operations. The capital expenditures for this quarter was RMB89.0 million which primarily consists of payment for service. We have been taking prudent control of our procurement of traditional CPU service such as the once useful CDN business. We have been saving our funds for high performance AI service and we are working very closely with the top leading global GPU service provider and their OEM partners to fulfill the orders.

Speaker 3

We expect the capital expenditures may increase in the second half of this year, but subject to a time line of service delivery. Our operating cash flow once again recorded net inflow after last quarter fluctuation reached RMB65,200,000. It resulted from our margin improvements as well as our internal cash control enhancements. Lastly, we are honored to see that we have been listed in the 1st edition of the Sustainable Year for China by S&P Global. The selection assessed almost 1600 Chinese companies and out of those 88 outstanding companies across 44 industries are included in the 2023 Sustainability Yearbook China of S&P Global.

Speaker 3

We would like to send S&P Global recognition of our ESG efforts. We will continue our commitment to improve our governance, decreasing our footprint of carbon emissions and making positive impact to the whole industry and the society. Looking ahead, we will continue to pursue our high quality and sustainable development strategy and unlock synergies within the Xiaomi and Kingsoft Group ecosystems, while staying agile to capture new opportunities in the new era of AI technology. Thank you.

Speaker 1

This concludes our prepared remarks. Thanks for your attention and we are now happy to take our questions. Please ask your questions in both Chinese Mandarin and English. Also. Operator, please go ahead.

Speaker 1

Thank

Operator

you. Thank Our first question comes from the line of Xiaodian Shang from CICC. Please go ahead.

Speaker 1

So thanks management for taking my questions and I got two questions here. First of all, the company has been proactively scaling down the CDM business in the past year or 2. So when do you expect the structure optimization for your public cloud business to be completed? And is there any chance that your public cloud segment will return to a positive growth in upcoming quarters? And secondly, what do management think of the prospects of incremental revenue contribution from large language models and generated AI related business?

Speaker 1

Thank you.

Speaker 2

Okay. So to respond to your question, you mentioned the structural adjustment we have been conducting in the public cloud services segment. And this can be breakdown into 2 parts. 1 is the CDM business and the other is the other public cloud services business. Now for the CDM part, actually since I took the role of CEO last year, we have communicated with the market.

Speaker 2

And I would have to say that in general the development for this adjustment of this business has been in line with what I have communicated in the past quarters. But due to the changes in the overall market situation, the speed has been a little bit faster than what we had expected. However, in general, the pace and the direction is consistent. We would expect the adjustment for the CDN business to continue for a while and we expect to complete that within half a year to 1 year. And for the non CDN business part of the public cloud services business, the business adjustment has been going through rather smoothly and we have done an excellent job in terms of cost reduction.

Speaker 2

As can be shown in our financial performances, the gross margin for the public cloud services business has improved from negative to 2.4% in the Q2 2022 to positive 5.2% in this quarter which we are reporting. So this also relates to the second question that you asked about the AI AI business. We expect that this round of AI opportunity has the potential opportunity to bring us more growth to the public cloud services business. So to answer your question, we do believe that this round of new AI opportunities will bring a lot of opportunity for us. As you can see after the Chinese Spring Festival, the GBT concept started to explosively grow, the demand for AIGC has been particularly strong.

Speaker 2

And as mentioned, our neutral positioning has enabled us to win the favor of the vast majority of venture AI companies in China and we are in the process of signing up contracts with dozens of such companies. And so this is about the in terms of supporting their computing power. In addition, as mentioned, we're also providing companies with mass model as a service business. We're also making progress in that front. For example, we have launched the mass mutual trust dedicated zone solution And we're also collaborating very closely with Xiaomi and Kingsoft.

Speaker 2

So in general, in summary, basically what we have been seeing is on the demand side, the demand is particularly strong. However, on the supply side, there is significant bottleneck in particular in terms of NVIDIA's supply chain, the supply of GPU chips. And we believe that bottleneck is relatively difficult to resolve within the short period of time. So in short, the supply far exceeds the demand far exceeds the supply in the market and that is not the situation for us as one company. It's a general situation for the industry.

Speaker 2

As a result of that, we had originally expected the revenue from AI to be shown in our financials in the 3rd quarter and that is likely to be delayed due to the shortage of supply of GPU servers through the Q4 or even the Q1 of 2024. However, I would say in terms of our overall deployment and response to this new era of AI GC, the results that we have achieved, including the contracts that we have signed, including the models, the solutions that we have launched are quite successful. In the longer in the even longer term, we believe this will become embracing the AI wholeheartedly will actually become the most core direction for Kingsoftcloud and Kingsoft Group.

Operator

Our next question comes from the line of Timothy Zhao from Goldman Sachs. Please go ahead.

Speaker 4

Thank you, management, for taking my questions. I have two questions. One is regarding the gross profit margin. As I see the gross margin of HubSpot and Enterprise Cloud has been up for trend over the past few quarters and especially for enterprise cloud, the gross margin has achieved above 20% for the past 2 quarters. Could management further elaborate on the drivers of gross margin behind that?

Speaker 4

And what is our updated view on the gross margin target for this year and in the midterm? And secondly, also regarding the enterprise cloud and the question is regarding the revenue. As I see the financial expenses, the revenue has been in the declining mode slightly in the Q2. Just wondering if there's any specific reason behind that and how should we look at the revenue trend into the second half this year? Thank you.

Speaker 3

Thank you, Tian. This is Henry. I'm happy to take on the first question and our CEO, Mr. Seo, will take on the second one. So, yes, successful actually acknowledge the improvement of the gross margin of our enterprise cloud business.

Speaker 3

Actually, there are a few things we actually discussed this earlier, but you eventually see that trend actually kept very stable and see that improvement expansion. A few things, first of all is we talk about this right client selection process. So I think that's actually the first and the beginning point that to do the right business with right people. And if you do look at our average revenue mix from enterprise cloud, we used to have some kind of heavyweights on the top clients with over 30,000,000 or even RMB 40,000,000 per contract. But right now, we're focused on the sweet spot around like RMB8 1,000,000 to about RMB10 1,000,000 per contract.

Speaker 3

So working on that range of the right clients, we have a better ability to control the cost and to make sure that all the receivables and cost control measures can actually finally deliver. I think that's the first one. The second one is really about the repeating sales for the more standardized products. So we're working very closely with the sales team and our R and D team as well. So we will make sure that we not only work with 1 client on one product, but we're working with different clients with the same product.

Speaker 3

So I think the percentage, obviously we didn't disclose the number, but from last year to this year, the standardization of the product services and solutions has been a very important driver. The second part. And the third one is really about, I appreciate all the good comments from the research analysts and our shareholders. We're actually moving up from the highest to past level of the services. And in some cases, we're actually working with clients on some past level products, especially given the AI drivers and the new phenomenon.

Speaker 3

Hopefully, we can actually go up a little bit, obviously, depends on different verticals on the right penetration of the PAS and SaaS level product, which actually narrow carry with some higher margin. So as a conclusion, Tim, we do believe we have a capacity and the willingness to keep the gross margin above 20% of the enterprise cloud services including both Kingsoft and Camelot as well. And given the right incentive for our solution and delivery team to control their own costs which were actually embedded into their own budgeting and a bonus calculation. We hopefully have more internal measures to make sure this pressure has been moving down the chair and make sure everyone working in cloud actually pay attention on the bottom line. So going forward, hopefully we can keep above 20% of gross margin of Enterprise Cloud as well as we are hoping after the AI eventually unfolded, our enterprise cloud margin can be even higher hopefully can above the 3 handles in the midterm.

Speaker 3

So I think that hopefully give you some color. Thank you, Tian. And the second question will pass over to

Speaker 2

So before I answer the details of the question, I would like to give you an overview of how we think about the enterprise cloud business. The root thinking is that we have been becoming more focused on high quality products high quality projects in terms of selecting high quality projects and also for the projects that are more sustainable for us. So in terms of project quality, in terms of reputation, in terms of deployment capabilities and services we offer to customers, we have been working very hard on those fronts. And that is why you have been seeing in the consecutive quarters, we have been experiencing improving profitability levels. And now as to your question of why the slight decrease for the revenue of enterprise platform for the Q2 versus the Q1, The answer is really just the seasonality because the revenue recognition for enterprise cloud projects, they generate delay from the time of the signing of those projects to the revenue recognition for several quarters to 1 year and in some other cases can be as long as 2 years.

Speaker 2

And therefore, the financial results you see in 1 single quarter is the added is the combined result of different projects signing at different time points and the different delays in the overall revenue recognition cycle. And therefore, I wouldn't say that a slight decrease for the financial for the revenue for Enterprise Cloud for the Q2 versus the Q1 is a reflection of the of our business performance for the Enterprise Cloud. On the contrary, we feel that the fundamentals of the Enterprise Cloud business have been going quite well. And in some future quarters, for example, in the Q4, you might be also seeing a sudden surge of our enterprise cloud revenue. However, that does not necessarily reflect an equivalent search of the business fundamentals.

Speaker 2

So that's the general idea I would like to give you. In fact, we have also been in communication with the auditors and hoping to find a metrics that would provide a real time reflection of our fundamental business situation and the alignment with that of the financial performance. We're still exploring that. We hope to find out metrics soon. Thank you.

Operator

Thank you. We'll now move on to our next question. Our next question comes from the line of Allen Lee from JPMorgan. Please go ahead.

Speaker 5

Management for taking my question. I have a follow-up question on gross margin. So for Public Cloud Services, if we exclude CDN business, what's the gross margin trend for core computing and the storage in past few quarters? And how do we think of the trend into the second half? And also Harry, you just mentioned you have increasing revenue contribution from higher margin SaaS and PaaS services.

Speaker 5

And could management share some color on how should we think about the long term revenue contribution from these two businesses? Thank you.

Speaker 3

Thank you, Allen. This is Henry. Happy to share some color. So first of all, again, while we're talking about the structure change and the client and revenue mix, CDN versus non CDN, but I want to point out that the CDM business itself is not really a problematic business. The point is a concentration risk together with the CDM products to certain clients is really a high risk flag for us.

Speaker 3

So that's why we did some changes in the past few quarters. But putting that aside, as you mentioned, there are 2 things we can share while we haven't disclosed in detail on that numbers. First of all, the margin of the CDM business does have certain fluctuations, depends on the season, depends on the time mix. And while we're cutting down certain client penetration and the client concentration, we do need to switch and reallocate certain resources, especially on the DNA and the bandwidth we need to change and cancel and renew those actions will take on some fluctuations. But I would say that in the old days, let's say last year or year before, as you mentioned, there are certain quarters our CGM business gross margin is negative, certain regions, certain nodes.

Speaker 3

But right now, we do have a relatively stable positive gross margin of the CDN business, while it's really not as high as a public cloud product. The second part is the gross margin of the cloud public cloud services including computing network and storage definitely higher and certain products are much higher than the CDN products in terms of the gross margin. And we are trying to improving the percentage of that revenue from that product. So if you're putting that everything together, think in the few quarters when we're looking ahead, given we do have a lot of efforts on the resource management and the cost control, Hopefully, the spread between the computing storage versus the CDM will be expanded. And the computing and storage database and the network products will deliver even higher gross margin going forward given the changes we have.

Speaker 3

So I don't want to provide a detailed guidance on the gross margin by products. As I mentioned, it's really a dynamic and really kind of fluid in certain situation. But overall, I can tell you that from management's perspective, we're aiming for a relative expansion for the public cloud gross margin as a whole and we'll try to manage on that. And one more point is, you don't have to split that out because one client, they will use multiple product lines and in one IDC centers, we may deliver different products and one resources we're trying to co share and provide more utilization as well. So it's not really from that very single straightforward line of calculation.

Speaker 3

So hopefully you can understand. On the second point is I think the earlier question from Tim was really regarding enterprise cloud. It's not really about the past or SaaS within the public cloud, it's really 2 different animals I put this way. So the enterprise cloud side as I mentioned our PaaS and SaaS level, they are packaging with the solution and our services and we do see that service convert to a higher margin. On the public cloud, I don't want to provide a detailed guidance because as I mentioned, once the AI is coming, all the business new model is changing When we're talking about the mask and other things, well, CEO mentioned, we don't want to kind of develop and divide it by the traditional concept of eyes and the non eyes products.

Speaker 3

But we are aiming for the mass products and services is a whole package and as a whole I think the margin will be much higher than the traditional ISE and the computing services going forward. Thank you, Adam.

Speaker 5

Thank you.

Operator

Due to time constraints, this concludes our question and answer session. So I'll hand the call back to you for closing remarks.

Speaker 1

Thank you, operator. Thank you all once again for joining us today. If you have any further questions, please feel free to contact us. We look forward to speaking with you again next quarter. Have a nice day.

Speaker 1

Thank you.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.

Powered by Quartr
Earnings Conference Call
Kingsoft Cloud Q2 2023
00:00 / 00:00