Kingsoft Announces 2022 Annual And Fourth Quarter Results

On 21 March 2023, Kingsoft Corporation Limited ("Kingsoft" or the "Company"; HKEx stock code: 03888), a leading Chinese software and Internet service company, has announced its 2022 annual results and fourth quarter results for the period ended 31 December 2022.

For the year of 2022, the revenue of Kingsoft increased 20% year-on-year to RMB7,636.7 million. Revenue from the office software and services and online games and others represented 51% and 49%, respectively, of the Company's total revenue for the year of 2022. Gross profit for the year of 2022 increased 18% year-on-year to RMB6,177.0 million, while operating profit amounted to RMB1,868.7 million.

For the fourth quarter of 2022, the Company's revenue increased 16% year-on-year and 15% quarter-on-quarter to RMB2,112.4 million. Revenue from the office software and services and online games and others represented 52% and 48%, respectively, of the Company's total revenue for the fourth quarter of 2022. Gross profit for the fourth quarter of 2022 increased 20% year-on-year and 19% quarter-on-quarter to RMB1,740.8 million, while operating profit amounted to RMB618.7 million.

Mr. Jun LEI, Chairman of Kingsoft, commented, "2022 was full of challenges and uncertainties, in which we actively embraced changes, maintained strategic focus, and further strengthened our core competitiveness. Kingsoft Office Group was committed to empowering the digital transformation of institutional customers and enhancing the cloud office user experience for individual users. Our business performance showed resilience, with the strategy of 'multi-screen, cloud, content, artificial intelligence ("AI") and collaboration'. Online games business focused on the development of premium games, and our flagship and new launched titles gained popularity. All these achievements have given us confidence to keep advancing our strategy in the enterprise services and online games sectors."

Mr. Tao ZOU, Chief Executive Officer of Kingsoft, added, "The Group's businesses continued to make robust progress in 2022, with total revenue reaching RMB7,636.7 million, increasing by 20% year-on-year. In 2022, the office software and services business maintained solid growth with revenue of RMB3,890.6 million, up 19% year-on-year. Notably, individual and institutional subscription businesses grew robustly. The online games and others business experienced solid growth, with annual revenue reaching a new record high of RMB3,746.2 million in 2022, up 21% year-on-year, as the result of outstanding performance of JX World III mobile game. Operating profit of the group was RMB1,868.7 million in 2022, increasing significantly by 37% year-on-year. These results reflected the resilience of our business model, efficiency of our business execution, as well as years of investment in R&D of our Group's core products."

BUSINESS REVIEW
Office Software and Services
In 2022, revenue from office software and services business increased 19% year-on-year to RMB3,890.6 million. The year-on-year increase was mainly due to the sustainable growth of individual subscription business, and fast growth of institutional subscription business, partially offset by the decreases in institutional licensing and internet advertising businesses of Kingsoft Office Group. Revenue in the fourth quarter increased 21% year-on-year and 9% quarter-on-quarter to RMB1,090.2 million. The year-on-year increase was mainly due to the sustainable growth of individual subscription business, and robust growth of institutional subscription business of Kingsoft Office Group.

Despite the sluggish shipments of global PC and smartphone markets, the number of monthly active devices of Kingsoft Office Group's main products continued to grow against the trend in 2022. We constantly optimized the user experience of our products in cross-platform scenarios such as cloud and collaboration to encourage users to use cloud document services continuously. By the end of 2022, the number of documents uploaded to the public cloud platform has exceeded 175.2 billion, up 35% year-on-year. We continued to add membership privileges of WPS and Docer to attract users to become paying subscribers, enhance user loyalty, achieve stable growth in the number of paying subscribers, increase the proportion of long-term members, and optimize the membership structure.

Kingsoft Office Group deeply served the digital transformation of domestic government and enterprises, catered for their needs of efficiency improvement, data management, information security and industry scenario applications, and continued to promote their end-to-cloud integration and collaboration process. In response to the government's demand for standardized, efficient, and long-term electronic document management, we launched an electronic document resource library product. Making full use of cloud computing, big data, AI and other technologies, we assisted party and government agencies in building electronic document resource library platforms and supported the full lifecycle management of electronic documents in digital government construction. For premium enterprise customers, we provided modular digital office empowerment services, continuously advancing the enterprise cloud integration process, addressing core pain points of enterprises, such as "improving efficiency, enhancing data security, and controlling costs", and assisting enterprises in achieving cost reduction and efficiency improvement. For the public cloud service, our full range of digital office platform products with tiered versions were utilized to encourage customers to use cloud and collaboration applications in high frequency, which enhanced user engagement and payment retention.

Kingsoft Office Group has closely monitored the localization industry policy changes and customer demand, and taken the initiative to tap local government and industry localization markets in advance. Starting from the replacement needs of industries such as finance, operators, and energy, we promoted the adoption of the Windows/Linux dual-version annual venue mode and deepened their cloud and collaboration office process.

Looking forward, following the strategy of 'multi-screen, cloud, content, AI and collaboration', Kingsoft Office Group will focus on AI to achieve more breakthroughs in technology applications, and continue to explore innovative business models and optimize user experiences. At the same time, we will continuously improve service quality, empower government and enterprises with high-quality products and technological services, and assist them in achieving digital transformation more effectively.

Online Games and others
Revenue from the online games and others business for 2022 increased 21% year-on-year to RMB3,746.2 million. The year-on-year increase was mainly due to the successful launch of several mobile games which broadened our games portfolio in the fourth quarter of 2021, such as JX World III and JX I: Gui Lai, partially offset by decreased revenue from existing games. Revenue for the fourth quarter of 2022 increased 11% year-on-year and 23% quarter-on-quarter to RMB1,022.3 million. The year-on-year increase was mainly due to revenue contribution from JX World III mobile game released in the fourth quarter of 2021, and revenue growth from JX Online III driven by continuous improvement in content, gameplay and overall user experience, partially offset by decreased revenue from existing games.

Online games business continuously cultivated key IP franchises more deeply and broadly, and further enhanced the value of core IPs. Flagship JX Online III marched into its thirteenth year and remained steady, and we put our focus on driving players' engagement. We launched two expansion packs and conducted multiple in-game events and campaigns to improve player activeness in 2022. In October, the number of daily active accounts achieved a recent high with the successful release of the anniversary expansion pack for JX Online III, Heng Dao Duan Lang. To further enrich our game content, we actively incorporated traditional cultural elements and launched a series of IP crossover campaigns in this game.

JX World III mobile game, one of the classic JX IP, performed strongly in 2022. In order to bring more immersive and authentic wuxia world experience to players, we continued to introduce distinctive gameplay and content to keep players engaged and entertained. We launched three expansion packs in 2022 on the basis of weekly updates. In August, we released the open beta across all platforms in Chinese mainland.

Looking ahead, we will proactively make progress in new game genres and overseas markets. Our new anime games, Snowbreak: Containment Zone and The Other Shore, have received the approval of gaming licenses and are expected to be released in China and aboard from the second half of 2023. We will focus on long-term operation of existing titles. The upgrade version of JX Online III PC game is expected to be launched by the end of 2023, laying the foundation for JX3 Ultimate and ensuring high-quality game iteration.

Mr. Jun LEI concluded, "In 2022, we achieved steady growth. In 2023, we will continue to seek progress while maintaining stability, and drive business growth with technology and service innovation. For office software and services business, we will continue to empower enterprises' digital transformation, focus on AI to achieve more breakthroughs in technology applications, reconstruct and optimize the membership system, further promote the transformation of subscriptions. For online games business, we will continue to extend the longevity of premium games based on original IPs, actively expand new game genres and pursue opportunities in overseas markets. Amid increasingly fierce industry competition, we believe that by relying on technological innovation, products and services enhancements and operations optimization, we will achieve further high-quality development."

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