Kingsoft Cloud Announces Unaudited Second Quarter 2023 Financial Results

BEIJING, Aug. 22, 2023 (GLOBE NEWSWIRE) -- Kingsoft Cloud Holdings Limited (“Kingsoft Cloud” or the “Company”) (NASDAQ: KC and HKEX: 3896), a leading independent cloud service provider in China, today announced its unaudited financial results for the second quarter ended June 30, 2023.

Mr. Tao Zou, Chief Executive Officer of Kingsoft Cloud, commented, “With our top priority remaining to achieve high-quality and sustainable development, we keep our focus on selected verticals and invest in core technologies to build our competencies and improve our efficiencies. Our execution of these strategies is well reflected in the sustained robust growth momentum of our gross profit and Non-GAAP EBITDA in the second quarter of 2023. Meanwhile, we are maintaining a high level of agility and quick response to AI trends. This quarter, we launched our Model-as-a-Service solutions to serve AI customers by providing turn-key solutions and to build secure and trusted structures to better connect Large Language Model companies and model usage companies. Looking forward, we will leverage and amplify the synergy with Xiaomi and Kingsoft Corporation ecosystem to fully embrace the opportunities in the AI trend.”

Mr. Henry He, Chief Financial Officer of Kingsoft Cloud, added, “Our gross margin continued its upward trend and recorded a historical high of 11.3%, increasing for another consecutive quarter and rising by a significant 7.9 percentage points year-over-year. Within that, gross margin of public cloud services increased to 5.2% from negative 2.4% in the same period last year and gross margin of enterprise cloud services reached 21.7% from 15.3% in the same period last year. Our adjusted EBITDA margin narrowed down largely from -8.6% in the second quarter of 2022 and -7.0% last quarter to -3.3% in this quarter, demonstrating our revenue quality improvement as well as effective expense control. This quarter, we once again recorded operating cash inflow of RMB65.2 million, resulting from our enhanced management of accounts receivables and cash usage. We believe we are directing to a more balanced and healthy business structure and improving financial performance.”

Second Quarter 2023 Financial Results

Total Revenues reached RMB1,835.4 million (US$253.1¹ million), representing a decrease of 3.7% from RMB1,906.5 million in the same period of 2022. The decrease was mainly due to our proactive scale-down of services for two largest CDN customers, and phasing-out of loss-making clients.

• Revenues from public cloud services decreased by 10.1% to RMB1,159.5 million (US$159.9 million), compared with RMB1,289.1 million in the same quarter of 2022. The year-over-year decrease was mainly due to the above-mentioned scale-down of our CDN services.
  
  
• Revenues from enterprise cloud services were RMB675.2 million (US$93.1 million), representing an increase of 9.5% from RMB616.6 million in the same quarter of 2022. The year-over-year increase was mainly driven by our focus on selected verticals and high-quality projects, recovery from Covid-19 impact and more smooth and standard delivery process.
  
  
• Other revenues were RMB0.7 million (US$0.1 million).
  

Cost of revenues was RMB1,628.8 million (US$224.6 million), representing a significant decrease of 11.5% from RMB1,841.3 million in the same quarter of 2022. We continue to enhance our cost control measures. IDC costs decreased significantly by 16.4% year-over-year from RMB1,029.1 million to RMB860.7 million this quarter. Depreciation and amortization costs decreased by 18.8% from RMB249.1 million to RMB202.1 million. Solution development 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, which is in line with our enterprise cloud projects’ quality control strategy.

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¹ This announcement contains translations of certain Renminbi (RMB) amounts into U.S. dollars (US$) at a specified rate solely for the convenience of the reader. Unless otherwise noted, the translation of RMB into US$ has been made at RMB7.2513 to US$1.00, the noon buying rate in effect on June 30, 2023 as certified for customs purposes by the Federal Reserve Bank of New York.

Gross profit was RMB206.6 million (US$28.5 million), which is a record-high quarterly gross profit, representing a significant increase of 216.9% from RMB65.2 million in the same period in 2022. Gross margin was 11.3%, compared with 3.4% in the same period in 2022. Non-GAAP gross profit² was RMB206.8 million (US$28.5 million), compared with RMB68.4 million in the same period in 2022. Non-GAAP gross margin² was 11.3%, compared with 3.6% in the same period in 2022. The significant improvement in our gross profit and margin was mainly due to our strategic adjustment of revenue mix, optimized enterprise cloud project selection and efficient cost control measures, showing our strong commitment to improving our profitability and delivering high-quality and sustainable development.

Within that, gross profit of public cloud services was RMB59.7 million (US$8.2 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%, which improved significantly from negative 2.4% in the same period last year. The improvement was mainly due to our proactive scale-down of CDN services and adjustment of our clients’ structure. Gross profit of enterprise cloud services was RMB146.7 million (US$20.2 million), compared with RMB94.6 million in the same period last year. Gross margin of enterprise cloud services was 21.7%, improved from 15.3% in the same period last year. The improvement was mainly due to our more stringent enterprise cloud project selection.

Total operating expenses were RMB569.7 million (US$78.6 million), compared with RMB792.1 million last quarter and RMB617.2 million in the same period in 2022. Among which:

Selling and marketing expenses were RMB129.3 million (US$17.8 million), compared with RMB88.1 million last quarter and RMB146.2 million in the same period in 2022. The year-over-year decrease was mainly due to our strict expense control and the quarter-over-quarter increase was caused by share-based compensation.

General and administrative expenses were RMB246.5 million (US$34.0 million), further decreased from RMB488.6 million last quarter and RMB250.1 million in the same period in 2022. The quarter-over-quarter decrease was mainly attributable to the high comparison base of the first quarter, which was due to long-lived assets impairment loss of public cloud asset group of RMB185.1 million and loss on disposal of property and equipment of RMB20.2 million therein, as well as our continued expense control this quarter.

Research and development expenses were RMB193.9 million (US$26.7 million), slightly decreased from RMB215.4 million last quarter and RMB220.9 million in the same period in 2022, which was mainly due to the enhanced research and development efficiency and the region re-allocation of personnel in Beijing and Wuhan.

Operating loss was RMB363.1 million (US$50.1 million), compared with operating loss of RMB597.9 million last quarter and RMB552.0 million in the same quarter of 2022.

Net loss was RMB498.3 million (US$68.7 million), compared with net loss of RMB608.8 million last quarter and RMB810.5 million in the same quarter of 2022.

Non-GAAP net loss³ was RMB315.0 million (US$43.4 million), significantly narrowed from net loss of RMB412.5 million last quarter and RMB467.7 million in the same quarter of 2022.

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² Non-GAAP gross profit is defined as gross profit excluding share-based compensation allocated in the cost of revenues and we define Non-GAAP gross margin as Non-GAAP gross profit as a percentage of revenues. See “Use of Non-GAAP Financial Measures” set forth at the end of this press release.

³ Non-GAAP net loss is defined as net loss excluding share-based compensation, foreign exchange loss (gain) and impairment of long-lived assets, and we define Non-GAAP net loss margin as adjusted net loss as a percentage of revenues. See “Use of Non-GAAP Financial Measures” set forth at the end of this press release.

Non-GAAP EBITDA⁴ was RMB-61.9 million (US$-8.5 million), compared with RMB-130.5 million last quarter and RMB-163.7 million in the same quarter of 2022. Non-GAAP EBITDA margin was -3.3% this quarter, compared with -7.0% last quarter and -8.6% in the same quarter last year. Excluding loss on disposal of property and equipment, normalized Non-GAAP EBITDA was RMB-60.4 million this quarter, improved from RMB-110.3 million last quarter and RMB-163.7 million in the same period last year. Normalized Non-GAAP EBITDA margin was-3.3%, compared with -5.9% last quarter and -8.6% in the same quarter of 2022.

Basic and diluted net loss per share was RMB0.14 (US$0.02), compared with RMB0.17 last quarter and RMB0.22 in the same quarter of 2022.

Cash and cash equivalents and short-term investments were RMB4,286.7 million (US$591.2 million) as of June 30, 2023, representing strong and sustainable cash reserve.

Outstanding ordinary shares were 3,539,136,595 as of June 30, 2023, equivalent to about 235,942,440 ADSs.

Conference Call Information

Kingsoft Cloud’s management will host an earnings conference call on Tuesday, August 22, 2023 at 8:15 am, U.S. Eastern Time (8:15 pm, Beijing/Hong Kong Time on the same day).

Participants can register for the conference call by navigating to https://register.vevent.com/register/BI579a3b8455434f7c9d9b4cca23824533. Once preregistration has been completed, participants will receive dial-in numbers, direct event passcode, and a unique access PIN.

To join the conference, simply dial the number in the calendar invite you receive after preregistering, enter the passcode followed by your PIN, and you will join the conference instantly.

Additionally, a live and archived webcast of the conference call will also be available on the Company’s investor relations website at http://ir.ksyun.com.

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⁴ Non-GAAP EBITDA is defined as Non-GAAP net loss excluding interest income, interest expense, income tax (benefit) expense and depreciation and amortization, and we define Non-GAAP EBITDA margin as Non-GAAP EBITDA as a percentage of revenues. See “Use of Non-GAAP Financial Measures” set forth at the end of this press release.

Use of Non-GAAP Financial Measures

The unaudited condensed consolidated financial information is prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In evaluating our business, we consider and use certain non-GAAP measures, Non-GAAP gross profit, Non-GAAP gross margin, Non-GAAP EBITDA, Non-GAAP EBITDA margin, Non-GAAP net loss and Non-GAAP net loss margin, as supplemental measures to review and assess our operating performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. We define Non-GAAP gross profit as gross profit excluding share-based compensation allocated in the cost of revenues, and we define Non-GAAP gross margin as Non-GAAP gross profit as a percentage of revenues. We define Non-GAAP net loss as net loss excluding share-based compensation, foreign exchange loss (gain) and impairment of long-lived assets, and we define Non-GAAP net loss margin as adjusted net loss as a percentage of revenues. We define Non-GAAP EBITDA as Non-GAAP net loss excluding interest income, interest expense, income tax (benefit) expense and depreciation and amortization, and we define Non-GAAP EBITDA margin as Non-GAAP EBITDA as a percentage of revenues. We present these non-GAAP financial measures because they are used by our management to evaluate our operating performance and formulate business plans. We also believe that the use of these non-GAAP measures facilitates investors’ assessment of our operating performance.

These non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. These non-GAAP financial measures have limitations as analytical tools. One of the key limitations of using these non-GAAP financial measures is that they do not reflect all items of income and expense that affect our operations. Further, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore their comparability may be limited.

We compensate for these limitations by reconciling these non-GAAP financial measures to the nearest U.S. GAAP performance measure, all of which should be considered when evaluating our performance. We encourage you to review our financial information in its entirety and not rely on a single financial measure.

Exchange Rate Information

This press release contains translations of certain RMB amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from RMB to U.S. dollars, in this press release, were made at a rate of RMB7.2513 to US$1.00, the noon buying rate in effect on June 30, 2023 as certified for customs purposes by the Federal Reserve Bank of New York.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the Business Outlook, and quotations from management in this announcement, as well as Kingsoft Cloud’s strategic and operational plans, contain forward-looking statements. Kingsoft Cloud may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (“SEC”), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including but not limited to statements about Kingsoft Cloud’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Kingsoft Cloud’s goals and strategies; Kingsoft Cloud’s future business development, results of operations and financial condition; relevant government policies and regulations relating to Kingsoft Cloud’s business and industry; the expected growth of the cloud service market in China; the expectation regarding the rate at which to gain customers, especially Premium Customers; Kingsoft Cloud’s ability to monetize the customer base; fluctuations in general economic and business conditions in China; the impact of the COVID-19 to Kingsoft Cloud’s business operations and the economy in China and elsewhere generally; China’s political or social conditions and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in Kingsoft Cloud’s filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Kingsoft Cloud does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

About Kingsoft Cloud Holdings Limited

Kingsoft Cloud Holdings Limited (NASDAQ: KC and HKEX:3896) is a leading independent cloud service provider in China. With extensive cloud infrastructure, cutting-edge cloud-native products based on vigorous cloud technology research and development capabilities, well-architected industry-specific solutions and end-to-end fulfillment and deployment, Kingsoft Cloud offers comprehensive, reliable and trusted cloud service to customers in strategically selected verticals.

For more information, please visit: http://ir.ksyun.com.

For investor and media inquiries, please contact:

Kingsoft Cloud Holdings Limited
Nicole Shan
Tel: +86 (10) 6292-7777 Ext. 6300
Email: [email protected]