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Kingsoft Cloud (KC) Q2 Earnings call transcript Aug 20, 2024
AInvestTuesday, Aug 20, 2024 8:30 pm ET
2min read
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In the recent earnings call, Kingsoft Cloud, a leading Chinese cloud service provider, shared their financial performance for the second quarter of 2024. The call was led by the Vice Chairman and CEO, Tao Zou, the CFO, Haijian He, and the IR Director, Nicole Shan. The call highlighted the company's strategic shifts, financial achievements, and future prospects.

Strategic Shifts and Achievements

Kingsoft Cloud reported a significant improvement in their financial metrics, with gross margins increasing from low-single digit to 17%. The company has also made substantial progress in embracing artificial intelligence (AI) opportunities, with AI-related revenue contributing 26% to public cloud services, a leading figure in the industry. This strategic shift towards AI has been a key driver of Kingsoft Cloud's growth, as evidenced by their impressive revenue of RMB 1.89 billion, marking a 3.1% year-over-year increase.

The company's efforts to phase out low-margin businesses, such as CDN services, have also been noteworthy. This strategic decision has not only led to a decrease in single large customer concentration risk but also allowed Kingsoft Cloud to focus on high-value services. The company's cost management has been commendable, with quarterly costs and expenses decreasing by approximately RMB 300 million, representing 15% of quarterly revenues.

Financial Performance and Guidance

Haijian He, the CFO, provided a detailed analysis of Kingsoft Cloud's financial performance. The company has seen a positive trend in their financial metrics, with adjusted gross profit increasing by 56.4% year-over-year. The adjusted EBITDA margin has also improved significantly, reaching 3.2%, marking a sequential improvement after turning positive in Q1 and a significant increase of 6.5 percentage points year-over-year. The net operating cash inflow amounted to RMB 150 million, demonstrating the company's cash-generating ability from operating activities.

Looking ahead, Kingsoft Cloud is committed to enhancing profitability and cash-generating capabilities while deepening collaborations with Xiaomi and Kingsoft ecosystem. The company also aims to strengthen its Wuhan Research Center and explore new opportunities in AI.

Investor Questions and Responses

During the Q&A session, investors raised questions about the company's CapEx guidance and the return on investment (ROI) of their AI investments. Haijian He provided detailed insights into the company's strategic investments in AI, emphasizing the potential for long-term recurring revenue and the secure financing channels to support these investments. He also highlighted the company's focus on electric vehicles and autonomous driving as promising areas of growth, as well as the potential of robotics and Model as a Service (MaaS) in the inference and application of AI capabilities.

Conclusion

Kingsoft Cloud's second quarter 2024 earnings call painted a positive picture of the company's financial health and strategic direction. The company's focus on AI and high-value services, coupled with their successful cost management and strategic partnerships, position Kingsoft Cloud well for future growth. As the company continues to invest in AI and explore new opportunities, it remains committed to enhancing profitability and delivering value to its customers, shareholders, and employees.

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