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KINGSOFT CLOUD(KC) - 2024 Q4 - Annual Report
KCKINGSOFT CLOUD(KC)2025-04-15 10:45
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Customer Metrics - The total number of Premium Customers decreased from 537 in 2022 to 486 in 2023, with a slight recovery to 492 in 2024[533]. - Average revenues per Premium Customer decreased from RMB 14.9 million in 2022 to RMB 14.2 million in 2023, and further to RMB 14.0 million in 2024[542]. Revenue Performance - Public Cloud Services revenues were RMB 5,360,282 thousand in 2022, decreasing to RMB 4,381,741 thousand in 2023, but projected to rise to RMB 5,007,251 thousand in 2024, representing 64.3% of total revenues[544]. - Enterprise Cloud Services revenues were RMB 2,816,976 thousand in 2022, slightly declining to RMB 2,663,993 thousand in 2023, with a forecasted increase to RMB 2,777,777 thousand in 2024, accounting for 35.7% of total revenues[544]. - Revenues increased by 10.5% from RMB7,047.5 million in 2023 to RMB7,785.2 million (US1,066.6million)in2024,drivenbystrongdemandfromAIbusinessandenterprisecloudprojects[559].−Revenuesfrompubliccloudservicesroseby14.31,066.6 million) in 2024, driven by strong demand from AI business and enterprise cloud projects[559]. - Revenues from public cloud services rose by 14.3% from RMB4,381.7 million in 2023 to RMB5,007.3 million (US686.0 million) in 2024, primarily due to AI business demand[560]. Profitability and Losses - Gross profit increased by 57.7% from RMB850.2 million in 2023 to RMB1,340.9 million (US183.7million)in2024,withgrossprofitmarginimprovingfrom12.1183.7 million) in 2024, with gross profit margin improving from 12.1% to 17.2%[563]. - Operating loss decreased by 17.5% from RMB2,108.6 million in 2023 to RMB1,739.0 million (US238.2 million) in 2024, with operating loss margin improving from 29.9% to 22.3%[567]. - Net loss decreased by 9.4% from RMB2,183.6 million in 2023 to RMB1,979.0 million (US271.1million)in2024,withnetlossmarginimprovingfrom31.0271.1 million) in 2024, with net loss margin improving from 31.0% to 25.4%[574][575]. - The adjusted net loss for Kingsoft Cloud decreased from RMB 2.69 billion in 2022 to RMB 1.98 billion in 2024, indicating an improvement of about 26%[603]. - The adjusted EBITDA is projected to turn positive in 2024, reaching RMB 638.9 million, compared to a loss of RMB 755 million in 2022[603]. - The adjusted gross margin improved from 5.3% in 2022 to an estimated 17.2% in 2024, showing a significant increase of 224%[601]. Expenses - Research and development expenses were RMB 971,216 thousand in 2022, decreasing to RMB 784,807 thousand in 2023, and projected to rise to RMB 845,989 thousand in 2024[551]. - Research and development expenses increased by 7.8% from RMB784.8 million in 2023 to RMB846.0 million (US115.9 million) in 2024, mainly due to rising personnel-related expenses[564]. - Operating expenses increased from RMB 2,680,952 thousand in 2022 to RMB 2,958,720 thousand in 2023, with a forecast of RMB 3,079,936 thousand in 2024[551]. - General and administrative expenses decreased by 21.2% from RMB1,060.0 million in 2023 to RMB834.9 million (US114.4million)in2024,primarilyduetoreducedcreditlossexpenses[566].CashFlowandFinancing−ThecompanygeneratednetcashfromoperatingactivitiesofRMB628.4million(US114.4 million) in 2024, primarily due to reduced credit loss expenses[566]. Cash Flow and Financing - The company generated net cash from operating activities of RMB628.4 million (US86.1 million) in 2024, contrasting with a net cash outflow of RMB169.1 million in 2023[619][620]. - Net cash used in investing activities was RMB3,620.4 million (US496.0million)in2024,primarilyduetothepurchaseofpropertyandequipmentamountingtoRMB3,672.1million(US496.0 million) in 2024, primarily due to the purchase of property and equipment amounting to RMB3,672.1 million (US503.1 million)[623]. - The company recorded net cash generated from financing activities of RMB3,255.4 million (US446.0million)in2024,mainlyfromshort−termborrowingsofRMB2,465.9million(US446.0 million) in 2024, mainly from short-term borrowings of RMB2,465.9 million (US337.8 million)[626]. - Kingsoft Cloud's accumulated deficit reached RMB14,292.0 million (US1,958.0million)asofDecember31,2024,withnetcurrentliabilitiesofRMB2,318.6million(US1,958.0 million) as of December 31, 2024, with net current liabilities of RMB2,318.6 million (US317.7 million)[614][617]. - Kingsoft Cloud made a capital contribution of RMB 431.3 million (US59.1million)toitsWFOEsin2024[605].−ThecompanyprovidedloansamountingtoRMB219million(US59.1 million) to its WFOEs in 2024[605]. - The company provided loans amounting to RMB 219 million (US30 million) to the VIEs in 2024, while repaying RMB 50 million (US6.9million)[606].TaxationandRegulatory−KingsoftCloud′sPRCentitiesbenefitfromapreferentialincometaxrateof156.9 million)[606]. Taxation and Regulatory - Kingsoft Cloud's PRC entities benefit from a preferential income tax rate of 15% as High New Technology Enterprises, which will continue until 2026 for several subsidiaries[595]. - The company is required to set aside at least 10% of its after-tax profits each year for statutory reserve funds, which limits the distributable profits available for dividends[611]. - Kingsoft Cloud's management believes the likelihood of incurring double taxation due to non-deductible transfers is remote, despite potential tax planning challenges[610]. Market and Competitive Landscape - The competitive landscape remains challenging, with increased competition potentially affecting the company's financial condition and results of operations[539]. - The company aims to enhance the quality and efficiency of existing products and solutions to retain and acquire new customers[534]. - The company plans to continue investing in technology and infrastructure to enhance product capabilities and expand resources[537]. Asset Management - The fair value of the Cloud service and solutions reporting unit as of September 30, 2024, was RMB4,205.0 million (US576.1 million), exceeding its carrying amount by RMB1,169.9 million (US160.3million)or39160.3 million) or 39%[644]. - Impairment losses for long-lived assets associated with the public cloud asset group were recognized at RMB919.7 million (US126.0 million) for the year ended December 31, 2024[651]. - The company entered into a non-cancelable one-year IDC service agreement with total contractual minimum purchase commitments of RMB600.0 million (US82.2million)[636].−TheremainingpurchasecommitmentforIDCservicesasofDecember31,2024,wasRMB252.9million(US82.2 million)[636]. - The remaining purchase commitment for IDC services as of December 31, 2024, was RMB252.9 million (US34.6 million)[636]. - As of December 31, 2024, financial lease liabilities were RMB1,182.0 million (US161.9million),primarilyrelatedtoelectronicequipmentanddatacentermachinery[634].BorrowingsandLiabilities−AsofDecember31,2024,short−termthird−partyborrowingsamountedtoRMB2,225.8million(US161.9 million), primarily related to electronic equipment and data center machinery[634]. Borrowings and Liabilities - As of December 31, 2024, short-term third-party borrowings amounted to RMB2,225.8 million (US304.9 million) and long-term borrowings were RMB1,660.6 million (US227.5million),bothwithfixedannualinterestratesrangingfrom2.70227.5 million), both with fixed annual interest rates ranging from 2.70% to 5.97%[631]. - Kingsoft Cloud has not declared or paid any dividends and intends to retain available funds for business operations and expansion[607]. - The company experienced net operating cash outflows in 2023, highlighting ongoing liquidity challenges despite improvements in cash generation in 2024[614][620]. - Kingsoft Cloud's future working capital and capital expenditures will be financed through cash generated from operations and potential additional financing, with a focus on maintaining prudent capital management[615]. - Capital expenditures for 2024 reached RMB4,124.7 million (US565.1 million), with property and equipment purchases accounting for 99.7% of total capital expenditures[630].