KC Kingsoft Cloud Holdings Ltd

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of August 2024

 

Commission file number: 001-39278

 

 

Kingsoft Cloud Holdings Limited

(Exact Name of Registrant as Specified in Its Charter)

 

 

Building D, Xiaomi Science and Technology Park, No. 33 Xierqi Middle Road,

Haidian District

Beijing, 100085, the People’s Republic of China

(Address of Principal Executive Offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F x                    Form 40-F ¨

 

 

 

EXHIBIT INDEX

 

Exhibit No.		Description
99.1		Announcement - Interim Results Announcement for the Six Months Ended June 30, 2024

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	Kingsoft Cloud Holdings Limited
Date: August 20, 2024	By:	/s/ Haijian He
		Name:	Haijian He
		Title:	Chief Financial Officer and Director

 

 

 

Exhibit 99.1

 

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

 

 

Kingsoft Cloud Holdings Limited

金山云控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 3896)

(Nasdaq Stock Ticker: KC)

 

INTERIM RESULTS ANNOUNCEMENT

FOR THE SIX MONTHS ENDED JUNE 30, 2024

 

The board (the “Board”) of directors (the “Directors”) of Kingsoft Cloud Holdings Limited (the “Company”) is pleased to announce the unaudited interim consolidated results of the Company, its subsidiaries and consolidated affiliated entities (collectively, the “Group”) for the six months ended June 30, 2024 (the “Reporting Period”), together with the comparative figures for the corresponding period in 2023. These unaudited condensed consolidated financial statements for the six months ended June 30, 2024 have been prepared under generally accepted accounting principles in the United States (the “U.S. GAAP”) and reviewed by the audit committee of the Company (the “Audit Committee”).

 

In this announcement, “we”, “us”, and “our” refer to the Company and where the context otherwise requires, the Group.

 

FINANCIAL HIGHLIGHTS

 

		For the six months ended June 30,								Year-on-
		2023				2024				year Change
		RMB’000				RMB’000				%
Revenues			3,699,803				3,667,464				-0.9	%
Gross profit			400,791				611,600				52.6	%
Loss before income taxes			(1,100,722	)			(725,814	)			-34.1	%
Net loss			(1,107,093	)			(717,334	)			-35.2	%
Net loss attributable to Kingsoft Cloud Holdings Limited			(1,106,333	)			(712,586	)			-35.6	%

 

 

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 have considered and used certain non-GAAP measures, including 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 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 those 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.

 

Adjusted Gross Profit and Adjusted Gross Margin (Non-GAAP Measures)

 

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. The following tables reconcile our non-GAAP gross profit for the six months ended June 30, 2023 and 2024 to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP.

 

		For the six months ended June 30,
		2023				2024				2024
		RMB’000				RMB’000				US$’000
Gross profit			400,791				611,600				84,159
Adjustments:
– Share-based compensation expenses (allocated in cost of revenues)			393				10,890				1,499
Adjusted gross profit (Non-GAAP Financial Measure)			401,184				622,490				85,658

 

		For the six months ended June 30,
		2023				2024
Gross margin			10.8	%			16.7	%
Adjusted gross margin (Non-GAAP Financial Measure)			10.8	%			17.0	%

 

 

Adjusted Net Loss and Adjusted EBITDA (Non-GAAP Financial Measure)

 

We define non-GAAP net loss as net loss excluding share-based compensation expenses, foreign exchange loss and impairment of long-lived assets, and we define non-GAAP net loss margin as non-GAAP 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 (benefit) and depreciation and amortization, and we define non-GAAP EBITDA margin as non-GAAP EBITDA as a percentage of revenues. The following tables reconcile our non-GAAP net loss (margin) and non-GAAP EBITDA (margin) for the six months ended June 30, 2023 and 2024 to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP.

 

		For the six months ended June 30,
		2023				2024				2024
		RMB’000				RMB’000				US$’000
Net Loss			(1,107,093	)			(717,334	)			(98,709	)
Adjustments:
– Share-based compensation expenses			43,106				149,244				20,537
– Foreign exchange loss			151,422				49,736				6,843
– Impairment of long-lived assets			185,135				–				–
Adjusted net loss (Non-GAAP Financial Measure)			(727,430	)			(518,354	)			(71,329	)
Adjustments:
– Interest income			(39,636	)			(18,315	)			(2,520	)
– Interest expense			58,234				110,480				15,203
– Income tax expense (benefit)			6,371				(8,480	)			(1,167	)
– Depreciation and amortization			510,519				528,450				72,717
Adjusted EBITDA (Non-GAAP Financial Measure)			(191,942	)			93,781				12,904
– Loss (gain) on disposal of property and equipment			21,672				(23,821	)			(3,278	)
Excluding loss or gain on disposal of property and equipment, normalized Adjusted EBITDA			(170,270	)			69,960				9,626

 

		For the six months ended June 30,
		2023				2024
Net loss margin			-29.9	%			-19.6	%
Adjusted net loss margin (Non-GAAP Financial Measure)			-19.7	%			-14.1	%
Adjusted EBITDA margin (Non-GAAP Financial Measure)			-5.2	%			2.6	%
Normalized Adjusted EBITDA margin			-4.6	%			1.9	%

 

 

BUSINESS REVIEW AND OUTLOOK

 

Business Review for the Reporting Period

 

We uphold the principle of high-quality and sustainable development and “build success based on technology and innovation”. We forge our reputation throughout the entire business process with customer centricity, while enhancing our business and operations management.

 

During the Reporting Period, total revenues reached RMB3,667.5 million (US$504.7 million). Revenues from public cloud services were RMB2,421.9 million (US$333.3 million) and revenues from enterprise cloud services were RMB1,245.4 million (US$171.4 million). Gross profit was RMB611.6 million (US$84.2 million), increased by 52.6% from RMB400.8 million in the first half of 2023. Gross margin was 16.7%, compared with 10.8% in the same period of 2023. Non-GAAP gross profit was RMB622.5 million (US$85.7 million), increased by 55.2% from RMB401.2 million in the same period of 2023. Non-GAAP gross margin was 17.0%, compared with 10.8% in the same period of 2023. Adjusted EBITDA turned profit and achieved RMB93.8 million (US$12.9 million), significantly improved from RMB-191.9 million in the same period of 2023. Adjusted EBITDA margin was 2.6%, increased by 7.8 percentage points from -5.2% in the same period of 2023.

 

Products and Industry-Specific Solutions

 

We provide a full suite of cloud products based on our extensive infrastructure, and are developed based on the same suite of underlying technology capabilities. Our modularized cloud products, including unified IaaS infrastructure, PaaS middleware, SaaS applications, AI capabilities and deployment services, can be utilized to design different solutions to meet various business needs. Our cloud products primarily consist of cloud computing, storage and delivery.

 

We have designed various industry-specific solutions that can unleash the full potential of our infrastructure resources and add value to our customers. Leveraging our profound industry insights, we have strategically expanded our footprints into selected verticals as an early mover and have established a leading market position through relentless execution. As we continuously serve vertical leaders, our products and solutions continue to iterate and pivot based on customers’ feedback. By partnering with vertical leaders, we have accumulated proprietary industry know-how and formed in-depth view of each selected vertical, which enables us to stay forefront of industry-specific cloud solutions. We have designed industry–specific solutions covering a wide spectrum of industry verticals, including Internet, public service, healthcare, and financial service, among others.

 

While upholding the principle of “building success based on technology and innovation”, we constantly iterate our products at a fast pace to create a top-notch customer experience with our core products. During the Reporting Period, to enrich our customer application use cases, we completed the upgrade and release of multiple key products, including our core self-developed products, such as elastic computing, network security, cloud native, database, object storage, cloud storage, big data and Galaxy Stack. Among them, Galaxy Stack released its new solutions for dedicated cloud, providing computing intensive, block storage intensive and object storage in- tensive types of solutions. Targeting at different vertical demands, it significantly enhanced the cloud experience for enterprise customers in terms of ease of use and cost efficiency. We also launched new version of cloud server SE9, with improving computing, storage and networking performance.

 

 

Infrastructure

 

Our distributed infrastructure is the foundation of our technology. As of June 30, 2024, we owned two data centers and around 100,000 servers primarily throughout China, and achieved exabyte-level storage capacity. We have been investing in our infrastructure to upgrade our computing power and storage capabilities, in order to deliver higher-quality cloud service and enhance the economies of scale. We purchase servers, network equipment and network resources, and lease data centers from industry-leading suppliers to ensure the reliability and availability of our network infrastructure. Our suppliers primarily include Internet Data Center (IDC) operators, telecommunication operators and server providers in China.

 

During the Reporting Period, we have reaffirmed our original aspiration for sustainable high- quality development strategy and resolutely implemented cost reduction and efficiency initiatives. Adhere to our business plan, we prudently allocate our capital expenditure into strategic areas and focus on improving our efficiencies, and optimize our resources in an effort to improve overall profitability, sustainability and long-term competitive edge.

 

Research and Development

 

Developing and strengthening our research and development center in Wuhan (the “Wuhan Research and Development Center”) is our important strategic initiative, which is expected to help us nurture new R&D talent in the medium-to-long run. During the Reporting Period, through voluntary transfer of key staff and local recruitment, our Wuhan team has quickly grown to approximately 600 people (including part-time staff), accounting for more than one-third of our R&D team. 50% of the Wuhan team hold a master’s degree. We also organized “Star Training Camp（星雲訓練營）” at the center to provide aspiring university graduates with a fast track to transit from campus to workplace, and attract talent from Wuhan’s top universities by fostering a sense of belongingness in the firm.

 

We aim to sustainably enhance our R&D capabilities, injecting momentum into our R&D initiatives and helping cement our industry leadership while maintaining a disciplined R&D budget.

 

During the Reporting Period, our research and development expenses were RMB435.9 million (US$60.0 million) and our research and development personnel reached 1,186 as of June 30, 2024.

 

Business Outlook

 

Looking ahead to the second half of the year, we will continue to promote high-quality and sustainable development by upholding the principle of “building success based on technology and innovation” to solidify our core capabilities, and continuously improve our profitability. Meanwhile, we will continue to focus on the AI sector and enhance our services to our strategic customers within the Xiaomi and Kingsoft Group ecosystems, thereby creating long-term value for our customers, shareholders and employees.

 

 

MANAGEMENT DISCUSSION AND ANALYSIS

 

KINGSOFT CLOUD HOLDINGS LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(All amounts in thousands, except for share and per share data)

 

 

		For the six months ended June 30,
		2023				2024				2024
		RMB				RMB				US$
Revenues:
Public cloud services			2,313,183				2,421,912				333,266
Enterprise cloud services			1,385,152				1,245,400				171,373
Others			1,468				152				21
Total revenues			3,699,803				3,667,464				504,660
Cost of revenues			(3,299,012	)			(3,055,864	)			(420,501	)
Gross profit			400,791				611,600				84,159
Operating expenses:
Selling and marketing expenses			(217,306	)			(242,460	)			(33,364	)
General and administrative expenses			(550,042	)			(484,944	)			(66,731	)
Research and development expenses			(409,290	)			(435,922	)			(59,985	)
Impairment of long-lived assets			(185,135	)			–				–
Total operating expenses			(1,361,773	)			(1,163,326	)			(160,080	)
Operating loss			(960,982	)			(551,726	)			(75,921	)
Interest income			39,636				18,315				2,520
Interest expense			(58,234	)			(110,480	)			(15,203	)
Foreign exchange loss			(151,422	)			(49,736	)			(6,843	)
Other loss, net			(19,787	)			(16,036	)			(2,207	)
Other income (expense), net			50,067				(16,151	)			(2,222	)
Loss before income taxes			(1,100,722	)			(725,814	)			(99,876	)
Income tax (expense) benefit			(6,371	)			8,480				1,167
Net loss			(1,107,093	)			(717,334	)			(98,709	)
Less: net loss attributable to non-controlling interests			(760	)			(4,748	)			(653	)
Net loss attributable to Kingsoft Cloud Holdings Limited			(1,106,333	)			(712,586	)			(98,056	)

 

 

Total Revenues reached RMB3,667.5 million (US$504.7 million), representing a decrease of 0.9% from RMB3,699.8 million in the same period of 2023. The decrease was mainly due to our proactive scale-down of services for content delivery network (CDN) customers, and was offset by the strong revenue growth of AI-related customers.

 

·	Revenues from public cloud services increased by 4.7% to RMB2,421.9 million (US$333.3 million), compared with RMB2,313.2 million in the same period of 2023. The year-over-year increase was mainly due to the growth of AI-related services.

 

·	Revenues from enterprise cloud services were RMB1,245.4 million (US$171.4 million), representing a decrease of 10.1% from RMB1,385.2 million in the same period of 2023. The year-over-year decrease was mainly driven by our focus on selected verticals and high-quality projects.

 

·	Other revenues were RMB0.2 million (US$0.02 million), compared with RMB1.4 million in the same period of 2023.

 

Cost of revenues were RMB3,055.9 million (US$420.5 million), representing a decrease of 7.4% from RMB3,299.0 million in the same period of 2023. We continue to enhance our cost control measures. IDC costs decreased significantly by 13.6% year-over-year from RMB1,733.2 million to RMB1,496.8 million (US$206.0 million) in the first half of 2024. The decrease was mainly due to our proactive scale-down of CDN services and our strict cost control. Depreciation and amortization costs increased by 5.3% from RMB426.7 million to RMB449.5 million (US$61.8 million) in the first half of 2024. The increase was mainly due to the procurement of new servers to support AI-related services. Solution development and services costs increased by 6.9% from RMB876.5 million to RMB937.1 million (US$128.9 million) in the first half of 2024. Fulfilment costs and other costs were RMB73.8 million (US$10.2 million) and RMB98.8 million (US$13.6 million), respectively in the first half of 2024.

 

Gross profit was RMB611.6 million (US$84.2 million), representing a significant increase of 52.6% from RMB400.8 million of the same period of 2023. Gross margin was 16.7%, compared with 10.8% in the same period of 2023. Non-GAAP gross profit was RMB622.5 million (US$85.7 million), compared with RMB401.2 million in the same period of 2023. Non-GAAP gross margin was 17.0%, compared with 10.8% in the same period of 2023. The significant improvement in our gross profit and gross margin was mainly due to our strategic adjustments of revenue mix, AI-related revenue growth, optimized enterprise cloud project selections and efficient cost control measures, showing our strong commitment to improving our profitability and delivering high-quality and sustainable development.

 

 

Total operating expenses were RMB1,163.3 million (US$160.1 million), compared with RMB1,361.8 million in the same period of 2023. Among which:

 

·	Selling and marketing expenses were RMB242.5 million (US$33.4 million), compared with RMB217.3 million in the same period of 2023. The year-over-year increase was mainly due to the increase of share-based compensation.

 

·	General and administrative expenses were RMB484.9 million (US$66.7 million), compared with RMB550.0 million in the same period of 2023. The decrease was mainly due to the decrease of credit loss, resulting from our improved business quality.

 

·	Research and development expenses were RMB435.9 million (US$60.0 million), increased from RMB409.3 million in the same period of 2023, which was mainly due to the share-based compensation.

 

Operating loss was RMB551.7 million (US$75.9 million), compared with operating loss of RMB961.0 million in the same period of 2023.

 

Net loss was RMB717.3 million (US$98.7 million), significantly decreased compared with net loss of RMB1,107.1 million in the same period of 2023. The improvement was mainly due to decrease in operating loss, as well as the fluctuation of foreign exchange.

 

Non-GAAP net loss was RMB518.4 million (US$71.3 million), significantly decreased compared with net loss of RMB727.4 million in the same period of 2023.

 

Non-GAAP EBITDA turned profit and arrived at RMB93.8 million (US$12.9 million), compared with RMB-191.9 million in the same period of 2023. Non-GAAP EBITDA margin was 2.6% in the first half of 2024, compared with -5.2% in the same period of 2023. Excluding loss or gain on disposal of property and equipment, normalized Non-GAAP EBITDA was RMB70.0 million (US$9.6 million), improved from RMB-170.3 million in the same period of 2023. Normalized Non-GAAP EBITDA margin was 1.9%, compared with -4.6% in the same period of 2023.

 

Basic and diluted net loss per share was RMB0.20 (US$0.03), compared with RMB0.31 in the same period of 2023.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Our sources of liquidity primarily consist of net proceeds from the sale and issuance of our shares, including the net proceeds we received from our US IPO and follow-on offering in 2020, and proceeds from financing facilities such as bank loans and related party loans, which have historically been sufficient to meet our working capital and capital expenditure requirements. Our cash and cash equivalents consist of cash on hand and time deposits placed with banks that have original maturities of less than three months and are unrestricted as to withdrawal or use, subject to any restrictions imposed by applicable laws and regulations, including restrictions on foreign exchange and the ability to transfer cash between entities, across borders and to U.S. investors.

 

 

As of June 30, 2024, substantially all of our cash and cash equivalents were located in the Mainland China and Hong Kong. In the long term, we intend to finance our future working capital requirements and capital expenditures from cash generated from operating activities and funds raised from financing activities.

 

As of June 30, 2024, our cash and cash equivalents amounted to RMB1,837.8 million (US$252.9 million), representing a decrease of 18.5% from RMB2,255.3 million of December 31, 2023.

 

FOREIGN EXCHANGE EXPOSURE

 

We transact a majority of our business in RMB, and have transactional currency exposures. Certain of our bank balances, other receivables, and accruals and other payables are dominated in foreign currencies and are exposed to foreign currency risk. We currently do not have a foreign currency hedging policy. However, our management monitors foreign exchange exposure and will consider appropriate hedging measures in the future should the need arise.

 

GEARING RATIO

 

Gearing ratio is calculated by dividing the sum of bank loans, loans from related parties and lease liabilities by total equity and multiplied by 100%. As of June 30, 2024, the gearing ratio of the Group was 66.0% (as of December 31, 2023: 36.2%).

 

MATERIAL INVESTMENTS

 

As of June 30, 2024, the Group did not hold any significant investments (including any investment in an investee company with a value of 5% or more of the Group’s total assets as of June 30, 2024). As of June 30, 2024, the Group did not have any future plans for material investments and capital assets.

 

 

CONTINGENT LIABILITIES

 

As of June 30, 2024, the Group did not have any material contingent liabilities.

 

MATERIAL ACQUISITION AND DISPOSALS

 

The Group did not conduct any material acquisitions and disposals of subsidiaries, consolidated affiliated entities, associates, and joint ventures during the Reporting Period.

 

EMPLOYEES AND REMUNERATION POLICIES

 

The Company had 11,311 employees as of June 30, 2024, most of whom were located in China, and the rest were located overseas. The following table sets forth a breakdown of our employees by function:

 

Function		Number of Employees				Percentage
Research and development			1,186				10.5	%
Sales and marketing			345				3.1	%
General and administrative			648				5.7	%
Solution development and services			9,132				80.7	%
Total			11,311				100.0	%

 

Our success depends on our ability to attract, retain and motivate qualified personnel, and we believe that our high-quality talent pool is one of the core strengths of our Company. We adopt high standards and strict procedures in our recruitment, including campus recruitment, online recruitment, internal recommendation and recruitment through executive search, to satisfy our demands for different types of talents.

 

We provide regular and specialized trainings tailored to the needs of our employees in different departments. Our employees can also improve their skills through our development of solutions for our customers and mutual learning among colleagues. New employees will receive pre-job training and general training.

 

We offer competitive compensations for our employees. Besides, we regularly evaluate the performance of our employees and reward those who perform well with higher compensations or promotion.

 

As required by PRC laws and regulations, we participate in various employee social security schemes organized by municipal and provincial governments, including pension, maternity insurance, unemployment insurance, work-related injury insurance, health insurance and housing provident fund. We are required under PRC laws and regulations to make contributions to employee social security schemes at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time.

 

 

CORPORATE GOVERNANCE

 

The Board is committed to achieving high corporate governance standards. The Board believes that high corporate governance standards are essential in providing a framework for the Company to safeguard the interests of shareholders of the Company and to enhance corporate value and accountability.

 

Compliance with the Corporate Governance Code

 

During the Reporting Period, we have fully complied with all the code provisions of the Corporate Governance Code set forth in Appendix C1 to the Rules Governing the Listing of Securities (the “Hong Kong Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”).

 

Compliance with the Model Code

 

The Company has adopted an Insider Dealing Policy (the “Insider Dealing Policy”) with terms no less exacting than that of the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix C3 to the Hong Kong Listing Rules (the “Model Code”), as its own securities dealing code to regulate all dealings by Directors, officers and employees of the Company.

 

Specific enquiry has been made of all the Directors and the relevant employees and they have confirmed that they have complied with the Insider Dealing Policy and the Model Code during the Reporting Period.

 

Purchase, Sale or Redemption of the Company’s Listed Securities

 

During the Reporting Period, neither the Company nor any of its subsidiaries has purchased, sold, or redeemed any of the Company’s listed securities (including sale of treasury shares (as defined under the Hong Kong Listing Rules)).

 

As of June 30, 2024, there were no treasury shares (as defined under the Hong Kong Listing Rules) held by the Company.

 

Material Litigation

 

The Company was not involved in any material litigation or arbitration during the Reporting Period which may have a material adverse effect on the Group’s operation. The Directors are also not aware of any such material litigation or claims that were pending or threatened against the Group during the Reporting Period.

 

AUDIT COMMITTEE

 

The Audit Committee comprises three independent non-executive Directors, being Mr. Yu Mingto, Mr. Wang Hang and Ms. Qu Jingyuan, with Mr. Yu Mingto (being one of the independent non-executive Directors with the appropriate professional qualifications) as the chairman of the Audit Committee.

 

The Audit Committee has reviewed the unaudited condensed consolidated financial statements for the six months ended June 30, 2024. The Audit Committee has agreed on the accounting policies and practices adopted by the Company and discussed matters with respect to financial reporting matters with senior management members of the Company.

 

 

SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD

 

On August 20, 2024, Beijing Kingsoft Cloud Network Technology Co., Ltd. and CMB Financial Leasing Co., Ltd. entered into the finance lease framework agreement, pursuant to which CMB Financial Leasing Co., Ltd. (as lessor) agreed to provide finance lease service to Beijing Kingsoft Cloud Network Technology Co., (and/or its subsidiaries) (as lessee(s)) by way of sale and leaseback with the aggregate amount of finance lease principal not exceeding RMB300 million during the term of the finance lease framework agreement. For details, please refer to the announcement of the Company dated August 20, 2024.

 

Save as disclosed in this announcement, no important events affecting the Group occurred since June 30, 2024 and up to the date of this announcement.

 

INTERIM DIVIDEND

 

The Board did not recommend the distribution of an interim dividend for the six months ended June 30, 2024.

 

SAFE HARBOR STATEMENT

 

This interim results 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. Statements that are not historical facts, including statements about the Company’s beliefs, and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In some cases, forward-looking statements can be identified by words or phrases such as “may”, “will”, “expect”, “anticipate”, “target”, “aim”, “estimate”, “intend”, “plan”, “believe”, “potential”, “continue”, “is/are likely to” or other similar expressions. Further information regarding these and other risks, uncertainties or factors is included in the Company’s filings with the United States Securities and Exchange Commission. The forward-looking statements included in this preliminary results announcement are only made as of the date hereof, and the Company disclaims any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

 

FINANCIAL INFORMATION

 

The Board announces the unaudited condensed consolidated financial statements for the six months ended June 30, 2024, with the comparative figures for the corresponding period in 2023 as follows:

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of shares and per share data)

 

		For the six months ended June 30,
		Notes		2023			2024			2024
				RMB			RMB			US$
Revenues:
Public cloud services		3		2,313,183			2,421,912			333,266
Enterprise cloud services		3		1,385,152			1,245,400			171,373
Others		3		1,468			152			21
Total revenues				3,699,803			3,667,464			504,660
Cost of revenues				(3,299,012	)		(3,055,864	)		(420,501	)
Gross profit				400,791			611,600			84,159
Operating expenses:
Selling and marketing expenses				(217,306	)		(242,460	)		(33,364	)
General and administrative expenses				(550,042	)		(484,944	)		(66,731	)
Research and development expenses				(409,290	)		(435,922	)		(59,985	)
Impairment of long-lived assets				(185,135	)		–			–
Total operating expenses				(1,361,773	)		(1,163,326	)		(160,080	)
Operating loss				(960,982	)		(551,726	)		(75,921	)
Interest income				39,636			18,315			2,520
Interest expense				(58,234	)		(110,480	)		(15,203	)
Foreign exchange loss				(151,422	)		(49,736	)		(6,843	)
Other loss, net		3		(19,787	)		(16,036	)		(2,207	)
Other income (expense), net		3		50,067			(16,151	)		(2,222	)
Loss before income taxes				(1,100,722	)		(725,814	)		(99,876	)
Income tax (expense) benefit		5		(6,371	)		8,480			1,167
Net loss				(1,107,093	)		(717,334	)		(98,709	)
Less: net loss attributable to non-controlling interests				(760	)		(4,748	)		(653	)
Net loss attributable to Kingsoft Cloud Holdings Limited				(1,106,333	)		(712,586	)		(98,056	)

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of shares and per share data)

 

		For the six months ended June 30,
		Notes		2023			2024			2024
				RMB			RMB			US$
Net loss per share:
Basic and diluted		6		(0.31	)		(0.20	)		(0.03	)
Shares used in the net loss per share computation:
Basic and diluted		6		3,547,111,168			3,632,583,338			3,632,583,338
Other comprehensive income, net of tax of nil:
Foreign currency translation adjustments				208,781			20,174			2,776
Comprehensive loss				(898,312	)		(697,160	)		(95,933	)
Less: Comprehensive loss attributable to Non-controlling interests				(775	)		(4,817	)		(663	)
Comprehensive loss attributable to Kingsoft Cloud Holdings Limited shareholders				(897,537	)		(692,343	)		(95,270	)

 

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of shares and per share data)

 

				Dec 31,			Jun 30,			Jun 30,
				2023			2024			2024
				RMB			RMB			US$
ASSETS
Current assets:
Cash and cash equivalents				2,255,287			1,837,757			252,884
Restricted cash				234,194			258,647			35,591
Accounts receivable, net		4		1,529,915			1,680,965			231,308
Prepayments and other assets				1,812,692			2,150,626			295,935
Amounts due from related parties				266,036			373,059			51,335
Total current assets				6,098,124			6,301,054			867,053
Non-current assets:
Property and equipment, net				2,186,145			3,882,522			534,253
Intangible assets, net				834,478			748,537			103,002
Goodwill				4,605,724			4,605,724			633,769
Prepayments and other assets				870,781			518,929			71,407
Equity investments				259,930			247,176			34,013
Amounts due from related parties				56,264			12,264			1,688
Operating lease right-of-use assets				158,832			144,754			19,919
Total non-current assets				8,972,154			10,159,906			1,398,051
Total assets				15,070,278			16,460,960			2,265,104
LIABILITIES, NON-CONTROLLING INTEREST, AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		8		1,805,083			1,980,088			272,469
Accrued expenses and other liabilities				2,838,085			2,938,720			404,381
Short-term bank loans				1,110,896			1,385,769			190,688
Income tax payable				63,961			59,185			8,144
Amounts due to related parties				931,906			1,070,842			147,353
Current operating lease liabilities				78,659			47,827			6,581
Total current liabilities				6,828,590			7,482,431			1,029,616

 

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of shares and per share data)

 

		Dec 31, 2023				Jun 30, 2024				Jun 30, 2024
		RMB				RMB				US$
Non-current liabilities:
Long-term bank loans			100,000				197,352				27,157
Amounts due to related parties			40,069				1,052,160				144,782
Deferred tax liabilities			142,565				108,503				14,931
Other liabilities			634,803				848,825				116,802
Non-current operating lease liabilities			78,347				69,903				9,619
Total non-current liabilities			995,784				2,276,743				313,291
Total liabilities			7,824,374				9,759,174				1,342,907
Shareholders’ equity:
Ordinary shares			25,443				25,688				3,535
Treasury shares			(208,385	)			(208,385	)			(28,675	)
Additional paid-in capital			18,811,028				18,969,913				2,610,347
Statutory reserves funds			21,765				21,765				2,995
Accumulated deficit			(12,315,041	)			(13,027,627	)			(1,792,661	)
Accumulated other comprehensive income			555,342				575,585				79,203
Total Kingsoft Cloud Holdings Limited shareholders’ equity			6,890,152				6,356,939				874,744
Non-controlling interests			355,752				344,847				47,453
Total equity			7,245,904				6,701,786				922,197
Total liabilities, non-controlling interests and shareholders’ equity			15,070,278				16,460,960				2,265,104

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of shares and per share data)

 

		For the six months ended June 30,
		2023				2024				2024
		RMB				RMB				US$
Net cash used in operating activities			(206,157	)			(170,167	)			(23,415	)
Net cash generated from (used in) investing activities			576,486				(1,823,846	)			(250,970	)
Net cash (used in) generated from financing activities			(118,773	)			1,636,046				225,127
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			37,805				(35,110	)			(4,831	)
Net increase (decrease) in cash, cash equivalents, and restricted cash			289,361				(393,077	)			(54,089	)
Cash, cash equivalents, and restricted cash at beginning of period			3,533,726				2,489,481				342,564
Cash, cash equivalents, and restricted cash at end of period			3,823,087				2,096,404				288,475

 

 

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of shares and per share data)

 

1.

CORPORATE INFORMATION

 

Kingsoft Cloud Holdings Limited (the “Company”) is an exempted company with limited liability incorporated in the Cayman Islands on January 3, 2012. The Company and its subsidiaries (including the Company’s subsidiaries, its variable interest entities (the “VIEs”), and subsidiaries of its VIEs) are hereinafter collectively referred to as the “Group”. The Group is principally engaged in the provision of cloud services. The Company does not conduct any substantive operations on its own but instead conducts its primary business operations through its subsidiaries, VIEs, and subsidiaries of its VIEs, which are located in the mainland China, Hong Kong, Japan and the United States (the “U.S.”).

 

The Company completed its IPO and follow-on offering on Nasdaq in May and September 2020, respectively and completed its listing by way of introduction on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) in December 2022.

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(a)

Basis of presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information. These financial statements also comply with the applicable disclosure requirements of the Hong Kong Companies Ordinance. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Certain information and note disclosure normally included in the annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.

 

The unaudited condensed consolidated financial statements and related notes are presented in RMB and all values are rounded to the nearest thousand (RMB’000’) except when otherwise indicated.

 

(b)

Going concern consideration

 

The Group’s unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP on a going concern basis. The going concern basis assumes that assets are realized and liabilities are extinguished in the ordinary course of business at amounts disclosed in the consolidated financial statements.

 

As of June 30, 2024, the Group had an accumulated deficit and net current liabilities of RMB13,027,627 (US$1,792,661) and RMB1,181,377 (US$162,563), respectively. The Group has primarily funded the operations through revenue generated from contracts with customers, equity financing, and proceeds from financing facilities such as bank loans and related party loans.

 

In view of such circumstance, management has given careful consideration to the liquidity of the Group and its available sources of financing in assessing whether the Group will have sufficient financial resources to continue as a going concern. As of June 30, 2024, the Group had cash, cash equivalents, and restricted cash of RMB2,096,404 (US$288,475). In addition, the Group had existing credit facilities available from Xiaomi Group and banks.

 

Based on above, management believes that the going concern basis of preparation is supported. Therefore, the unaudited condensed consolidated financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Group be unable to continue as a going concern.

 

 

(c)

Principles of consolidation

 

The condensed consolidated financial statements of the Group include the financial statements of the Company, its subsidiaries, the VIEs, and subsidiaries of the VIEs for which the Company is the primary beneficiary. All significant intercompany balances and transactions have been eliminated upon consolidation.

 

(d)

Use of estimates

 

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the balance sheet date and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions reflected in the Group’s unaudited condensed consolidated financial statements include, but are not limited to, allowance for credit losses for accounts receivable, contract assets and amounts due from related parties, measurement of operating and finance lease right-of-use assets and lease liabilities, impairment of long-lived assets, impairment of goodwill, useful lives of long-lived assets, realization of deferred tax assets, uncertain tax positions, share-based compensation expense, the fair value of equity investments and standalone selling prices of performance obligation of revenue contracts. Management bases the estimates on historical experience and various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could materially differ from those estimates.

 

(e)

Convenience translation

 

Amounts in U.S. dollars are presented for the convenience of the reader and are translated at the noon buying rate of RMB7.2672 per US$1.00 on June 30, 2024 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

 

(f)

Segment reporting

 

In accordance with ASC 280-10, Segment Reporting: Overall (“ASC 280”), the Group’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer who reviews the consolidated results of operations when making decisions about allocating resources and assessing performance of the Group as a whole and hence, the Group has only one operating segment. The Group does not distinguish between markets or segments for purposes of internal reporting. A majority of the Group’s revenues were generated from the mainland China and a majority of the long-lived assets of the Group are located in the mainland China, and therefore, no geographical segments are presented.

 

 

3.

REVENUES, OTHER GAIN (LOSS), NET AND OTHER INCOME, NET

 

The following table presents the Group’s revenues from contracts with customers disaggregated by material revenue category:

  

		For the six months ended June 30,
		2023				2024				2024
		RMB				RMB				US$
Public cloud services recognized over time			2,313,183				2,421,912				333,266
Enterprise cloud services:
Recognized at a point in time			371,724				224,510				30,894
Recognized over time			1,013,428				1,020,890				140,479
			1,385,152				1,245,400				171,373
Others:
Recognized over time			1,468				152				21
			3,699,803				3,667,464				504,660

 

The following table presents the Group’s other loss, net:

 

		For the six months ended June 30,
		2023				2024				2024
		RMB				RMB				US$
Gross unrealized loss (including impairment) on equity investments held			(5,063	)			(16,026	)			(2,206	)
Share of losses from equity method investments			(291	)			(10	)			(1	)
Changes in fair value of purchase consideration in a business acquisition			(14,433	)			–				–
			(19,787	)			(16,036	)			(2,207	)

 

The following table presents the Group’s other income (expense), net:

 

		For the six months ended June 30,
		2023				2024				2024
		RMB				RMB				US$
Government grants			69,240				4,735				652
Income from ADS Reimbursement			5,351				3,658				503
Value added tax transferred out			(16,894	)			(19,588	)			(2,695	)
Others			(7,630	)			(4,956	)			(682	)
			50,067				(16,151	)			(2,222	)

 

 

4.

ACCOUNTS RECEIVABLE, NET

 

		As at
		December 31, 2023				June 30, 2024				June 30, 2024
		RMB				RMB (unaudited)				US$ (unaudited)
Accounts receivable			1,554,658				1,736,006				238,882
Allowance for credit losses			(24,743	)			(55,041	)			(7,574	)
Accounts receivable, net			1,529,915				1,680,965				231,308

 

An ageing analysis of the trade receivables as at the end of the Reporting Period, based on the past due date and net of provisions, is as follows:

 

		As at
		December 31, 2023				June 30, 2024				June 30, 2024
		RMB				RMB (unaudited)				US$ (unaudited)
Not yet due			887,613				1,135,903				156,305
Within 3 months			186,175				260,398				35,832
Between 4 months and 6 months			126,223				125,250				17,235
Between 7 months and 1 years			188,533				80,704				11,105
More than 1 year			141,371				78,710				10,831
Accounts receivable, net			1,529,915				1,680,965				231,308

 

5.

TAXATION

 

(a)

Enterprise income tax

 

Cayman Islands

 

Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains.

 

Hong Kong

 

The subsidiaries incorporated in Hong Kong are subject to income tax at the rate of 16.5% on the estimated assessable profits arising in Hong Kong. For the periods presented, the Group did not make any provisions for Hong Kong profit tax as the Group did not generate any assessable profits arising in Hong Kong at the end of each reporting period. Under the Hong Kong tax law, the subsidiaries in Hong Kong are exempted from income tax on their foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.

 

Mainland China

 

The Group’s mainland China entities are subject to the statutory income tax rate of 25%, in accordance with the Enterprise Income Tax law (the “EIT Law”), which was effective since January 1, 2008. Certain subsidiaries of the Group being qualified as a High New Technology Enterprise (“HNTE”) are entitled to the preferential income tax rate of 15%. Dividends, interests, rent or royalties payable by the Group’s mainland China entities to non-resident enterprises, and proceeds from any such non-resident enterprise investor’s disposition of assets (after deducting the net value of such assets) shall be subject to 10% EIT, namely withholding tax, unless the respective non-resident enterprise’s jurisdiction of incorporation has a tax treaty or arrangements with China that provides for a reduced withholding tax rate or an exemption from withholding tax.

 

 

Loss before income taxes consists of:

 

		For the six months ended June 30,
		2023				2024				2024
		RMB				RMB				US$
Mainland China			(1,096,591	)			(658,911	)			(90,669	)
Non-mainland China			(4,131	)			(66,903	)			(9,207	)
			(1,100,722	)			(725,814	)			(99,876	)

 

The current and deferred components of income tax expense appearing in the unaudited condensed consolidated statements of comprehensive loss (gain) are as follows:

 

		For the six months ended June 30,
		2023				2024				2024
		RMB				RMB				US$
Current income tax expense			26,340				25,584				3,520
Deferred income tax benefit			(19,969	)			(34,064	)			(4,687	)
Income tax expense (benefit)			6,371				(8,480	)			(1,167	)

 

6.

LOSS PER SHARE

 

Basic and diluted loss per share during the periods are calculated as follows:

 

		For the six months ended June 30,
		2023				2024
		RMB				RMB
Numerator:
Net loss attributable to ordinary shareholders – basic and diluted			(1,106,333	)			(712,586	)
Denominator:
Weighted average number of ordinary shares outstanding – basic and diluted			3,547,111,168				3,632,583,338
Basic and diluted loss per share			(0.31	)			(0.20	)

 

For the six months ended June 30, 2024 and 2023, the effects of all options and awarded shares were excluded from the computation of diluted loss per share for the periods as their effects would be anti-dilutive.

 

7.

DIVIDENDS

 

No dividend was declared by the Company during the six months ended June 30, 2024 and 2023.

 

 

8.

ACCOUNTS PAYABLE

 

An ageing analysis of the accounts payable as at the end of the Reporting Period, based on the invoice date, is as follows:

 

		As at
		December 31, 2023				June 30, 2024				June 30, 2024
		RMB				RMB				US$
						(unaudited)				(unaudited)
Within 3 months			554,386				684,507				94,191
Between 4 months and 1 year			533,377				396,525				54,564
More than 1 year			717,320				899,056				123,714
			1,805,083				1,980,088				272,469

 

PUBLICATION OF THE INTERIM RESULTS ANNOUNCEMENT AND INTERIM REPORT

 

This interim results announcement is published on the websites of the Hong Kong Stock Exchange ( www.hkexnews.hk) and the Company ( ir.ksyun.com). The interim report for the six months ended June 30, 2024 will be made available for review on the same websites in due course and be dispatched to the Company’s shareholders, if necessary.

 

	By order of the Board
	Kingsoft Cloud Holdings Limited Mr. Zou Tao
	Executive Director, Vice Chairman of the Board and acting Chief Executive Officer

 

Hong Kong, August 20, 2024

 

As at the date of this announcement, the board of directors of the Company comprises Mr. Lei Jun as Chairman and non-executive director, Mr. Zou Tao as Vice Chairman and executive director, Mr. He Haijian as executive director and Mr. Feng Honghua as non-executive director, and Mr. Yu Mingto, Mr. Wang Hang and Ms. Qu Jingyuan as independent non-executive directors.

 

 

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