Kingsoft Cloud Announces Unaudited Third Quarter 2022 Financial Results

BEIJING, Nov. 23, 2022 (GLOBE NEWSWIRE) -- Kingsoft Cloud Holdings Limited (“Kingsoft Cloud” or the “Company”) (NASDAQ: KC), a leading independent cloud service provider in China, today announced its unaudited financial results for the third quarter ended September 30, 2022.

Mr. Tao Zou, Chief Executive Officer of Kingsoft Cloud, commented, “As we navigated through a challenging operating environment, we remained persistent in enhancing our technologies and products, stayed focused on our core businesses, and continued to strengthen our fundamental capabilities to achieve sustainable, high-quality growth in the long run. Our third quarter total revenues increased to RMB1.97 billion, in line with our guidance, and our gross margin improved from 3.4% last quarter to 6.2%, demonstrating our strong commitment to achieving profitability.”

Mr. Henry He, Chief Financial Officer of Kingsoft Cloud, added, “Although we are still implementing our strategic initiatives, including business repositioning and cost control efforts, such adjustments have already yielded positive preliminary results. Third quarter gross profit increased by 38.5% year-over-year and reached RMB122.4 million, and we recorded positive operating cash flow for the last two consecutive quarters, bringing our total cash reserve to a strong and sustainable level of RMB5,328.9 million (US$749.1 million). We believe the ongoing strategic initiatives will propel the sustainable, long-term development of the Company. Meanwhile, as we previously announced, we had duly repurchased our ADSs in the last quarter. Going forward, supported by our ample cash reserve, we expect to continue to execute from time to time under the US$100 million, 12-month period repurchase program mandated by the Board. These efforts fully demonstrate our Board and management’s strong commitment and confidence in the long-term business prospects of the Company, as we strive to reward our shareholders for their support, and believe our share price will eventually reflect the Company’s true value.”

Third Quarter 2022 Financial Results

Total Revenues reached RMB1,968.8 million (US$276.8¹ million), in line with our guidance, a decrease of 18.4% from RMB2,413.8 million in the same period of 2021, but increased steadily quarter-over-quarter. The decrease was mainly due to our proactive scaling down of CDN services, with its gross billings decreased by 27.6% on year-over-year basis, the impact of the resurgence of COVID-19, as well as more stringent project selection of enterprise cloud services. 

• Revenues from public cloud services decreased by 20.2% to RMB1,346.0 million (US$189.2 million), compared with RMB1,686.0 million in the same quarter of 2021. The decrease was mainly due to the above-mentioned scaling down of our CDN services.
• Revenues from enterprise cloud services were RMB622.0 million (US$87.5 million), representing a decrease of 14.4% from RMB726.9 million in the same quarter of 2021. The decrease was mainly due to the impact of the resurgence of COVID-19, as well as more stringent project selection.
• Other revenues were RMB0.8 million (US$0.1 million).

Cost of revenues was RMB1,846.4 million (US$259.6 million), representing a significant decrease of 20.6% from RMB2,325.4 million in the same quarter of 2021. IDC costs decreased significantly by 23.6% year-over-year from RMB1,410.9 million to RMB1,078.3 million this quarter. Depreciation and amortization costs increased by 26.9% from RMB200.0 million to RMB253.7 million. Solution development and services costs increased from RMB160.0 million to RMB443.1 million this quarter, the increase was mainly due to the consolidation of Camelot since September last year. Fulfillment costs and other costs were RMB31.9 million and RMB39.3 million this quarter.

Gross profit was RMB122.4 million (US$17.2 million), significantly increased by 38.5% from RMB88.4 million in the same period in 2021. Gross margin was 6.2%, compared with 3.7% in the same period in 2021. Non-GAAP gross profit² was RMB124.7 million (US$17.5 million), compared with RMB92.2 million in the same period in 2021. Non-GAAP gross margin² was 6.3%, compared with 3.8% in the same period in 2021. The solid improvement of our gross margin was mainly due to our strategic adjustment of revenue mix and efficient cost control measures.

Total operating expenses were RMB626.6 million (US$88.1 million), compared with RMB617.2 million last quarter and RMB557.5 million in the same period in 2021.

Selling and marketing expenses were RMB143.4 million (US$20.2 million), compared with RMB146.2 million last quarter and RMB132.2 million in the same period in 2021.

General and administrative expenses were RMB235.1 million (US$33.0 million), compared with RMB250.1 million last quarter and RMB156.6 million in the same period in 2021.

Research and development expenses were RMB248.1 million (US$34.9 million), compared with RMB220.9 million last quarter and RMB268.7 million in the same period in 2021.

Operating loss was RMB504.2 million (US$70.9 million), compared with operating loss of RMB552.0 million last quarter and RMB469.1 million in the same quarter of 2021.

Net loss was RMB801.4 million (US$112.7 million), compared with net loss of RMB810.5 million last quarter and RMB506.7 million in the same quarter of 2021. The year-over-year increase of net loss was mainly due to the significant depreciation of RMB against USD, resulting in a foreign exchange loss of RMB218.9 million this quarter, which is a non-cash item.

Non-GAAP net loss was RMB487.4 million (US$68.5 million), compared with net loss of RMB451.7 million last quarter and RMB363.7 million in the same quarter of 2021.

Non-GAAP EBITDA was RMB-158.7 million (US$-22.3 million), compared with RMB-147.7 million last quarter and RMB-140.6 million in the same quarter of 2021. Non-GAAP EBITDA margin was -8.1%, compared with -7.7% last quarter and -5.8% in the same quarter of 2021.

Basic and diluted net loss per share was RMB0.22 (US$0.03), compared with RMB0.22 last quarter and RMB0.15 in the same quarter of 2021.

Cash and cash equivalents and short-term investments were RMB5,328.9 million (US$749.1 million) as of September 30, 2022, representing strong and sustainable cash reserve, and largely stable compared to RMB5,352.0 million as of June 30, 2022.

Operating cash flow amounted to RMB100.9 million, representing the second consecutive quarter when we recorded positive operating cash flow.

Share Repurchase. During the quarter ended September 30, 2022, the Company repurchased approximately 4.3 million of ADSs, each representing 15 ordinary shares, from the open market for a total consideration of approximately US$10.2 million pursuant to the currently effective share repurchase program announced in September, 2022.

Outstanding ordinary shares were 3,608,380,825 as of September 30, 2022, equivalent to about 240,558,722 ADSs.

Business Outlook

For the fourth quarter of 2022, the Company expects total revenues to be between RMB2.0 billion and RMB2.2 billion, representing a quarter-over-quarter increase of 1.6 % to 11.7%. This forecast reflects the Company’s current and preliminary views on the market and operational conditions, which are subject to change.

Conference Call Information

Kingsoft Cloud’s management will host an earnings conference call on Wednesday, November 23, 2022 at 7:00 am, U.S. Eastern Time (8:00 pm, Beijing/Hong Kong Time on the same day).

Due to the outbreak of COVID-19, operator assisted conference calls are not available at the moment. All participants must preregister online prior to the call to receive the dial-in details. 

Participants can register for the conference call by navigating to https://s1.c-conf.com/diamondpass/10026944-pikxqe.html. 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.

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 (gain) loss, other gain, net and other (income) expense, net, 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 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 RMB7.1135 to US$1.00, the noon buying rate in effect on September 30, 2022 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) 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: ksc-ir@kingsoft.com

Christensen
In China
Mr. Eric Yuan
Phone: +86-10-5900-1548
Email: eric.yuan@christensencomms.com

In US
Ms. Linda Bergkamp
Phone: +1-480-6143004
Email: lbergkamp@christensenir.com

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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 RMB7.1135 to US$1.00, the noon buying rate in effect on September 30, 2022 as certified for customs purposes by the Federal Reserve Bank of New York.

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.