Kingsoft Announces 2018 First Quarter Results

During the period under review, the revenue of Kingsoft increased 4% year-over-year to RMB1,263.7 million. Revenue from the online games, cloud services, and office software and services and others represented 50%, 33% and 17%, respectively, of total revenue. Gross profit was RMB615.6 million. Profit attributable to owners of the parent recorded RMB118.4 million.

Mr. Jun LEI, Chairman of Kingsoft, commented, "The first quarter marks a good start to 2018. All of our businesses are well on their way to achieve the strategic goals of the Company. Kingsoft Cloud strengthened its leading position in video cloud sector. The performance of WPS Office remained robust and the content value-added services saw a good momentum by providing a smarter resources-sharing platform for our users. As for the online games business, we managed to continue to expand the brand influence of our flagship game, JX Online III, and also released the first promotion video for one of our key mobile games of the year, YSYY."

Mr. Tao ZOU, Chief Executive Officer of Kingsoft, added, "In the first quarter, our total revenue increased 4% year-over-year to RMB1,263.7 million, indicating a steady start to the year. Kingsoft Cloud recorded a year-over-year growth of 56% and office software and services and others grew 66% year-over-year in the first quarter. Our operating profit would be under pressure in the first half of the year as we expect our online games business to pick up its growth momentum in the second half of the year.

BUSINESS REVIEW Online GamesFor the first quarter of 2018, the revenue of the online games business recorded RMB632.4 million. Due to the explosion in popularity of the Players' Unknown Battleground ("PUBG") genre, some of the users of the Company's flagship PC game JX Online III were temporarily occupied in the first quarter, which led to year-over-year and quarter-over-quarter decrease in revenue. Nevertheless, Kingsoft managed to continue to expand its brand influence and hosted the third JX Online III expert player competition on 16 March 2018. The number of participants and viewers reached a new record high this year, which helped strengthen the engagement of the core players. In addition, the Company is also working on the development of a TV series and a special episode of animation for JX Online III to maximize its IP value and influence.

With the increasingly fierce competition in the mobile game market, Kingsoft saw the opportunity in the new game genres and meticulously developed a 3D costume-changing mobile game, YSYY. The first promotion video of the game was released during the 2018 Tencent NEO-Culture Creativity Eco-Conference and received great commentaries across the market. It laid the solid foundation for the Company's new game genres development. Kingsoft is looking forward to the official launch of the game and expect it to be the new driving force of the online game business.

Cloud ServicesKingsoft Cloud maintained a solid growth in the quarter, and the development trend of each business segment is in line with the Company's strategic planning. For the first quarter of 2018, the revenue of the cloud services business increased 56% year-over-year to RMB418.9 million. Video cloud business saw continuous improvement with high-quality services provided for the customers. Through the promotion of High-resolution Content Delivery Network ("CDN"), Kingsoft Cloud managed to strengthen its leading position in the CDN sector and is striving to establish a diversified business structure over time. Game cloud achieved remarkable results in attracting and retaining strategic clientele and it continued to make the products and services more stable and user-friendly. Kingsoft Cloud also kept on expanding its businesses in public cloud and private cloud sectors and made breakthroughs in finance, smart city, healthcare, and manufacturing services. Looking forward, Kingsoft Cloud will continue to provide customers with quality, tailor-made services and solutions, enhance the business penetration across the market and seek new breakthroughs.

Office Software and Services and OthersIn the first quarter of 2018, the revenue of Office Software and Services and Others increased 66% year-over-year to RMB212.4 million. WPS Office continued to maintain strong growth for the first quarter of 2018. With continuous efforts in cloud office services, both consumer and enterprise cloud businesses sustained decent growth. WPS Government Office Cloud made its debut in the quarter as an office solution targeting government and public institutions. Meanwhile, content value-added services have enjoyed good growth momentum, providing users and designers with a smarter platform to share resources. Kingsoft's flagship products, WPS Office and Kingsoft PowerWord, were both ranked among 'Top 10 Best Customer Experience APP' in the 'Top 100 APP/Accounts in WeChat, Weibo and mobile OS' in 2017. WPS Office's content ecosystem strategy was announced in the 'Content Players +' convention in Zhuhai. More than a hundred content creators participated in the event. The content platform, Docer, was officially upgraded to a strategic content brand at the convention. With the leading office technology and a proven business development model, WPS Office will continue to build an easier office style for global users."

Mr. Jun LEI concluded, "We are glad to see the sound overall performance in our businesses in the first quarter. Kingsoft Cloud and WPS Office sustained stable growth in the first three months, with market expanded to more segments and clientele increased in different areas. Though the online games business would experience a little setback in the first half of the year, we expect the performance will catch up in the second half of the year after the debut of our new mobile games, YSYY and JX Online mobile games. We expect to bring more satisfactory results for both our customers and the market with our unceasing effort in product innovation and service optimization."

About Kingsoft Corporation LimitedKingsoft is a leading software and Internet services company based in China listed on the stock exchange of Hong Kong. It has three subsidiaries including Seasun, Kingsoft Cloud and Kingsoft Office. Following the implementation of its "mobile internet transformation" strategy, Kingsoft has completed the comprehensive transformation of its overall business and management models and formed a strategic platform with interactive entertainment and office software as the pillars and cloud computing as the new growth driver and source. The Company has over 5,000 staff around the world. It has set up R&D centers and offices in Beijing, Zhuhai, Chengdu, Dalian, Guangzhou and Hong Kong and enjoys a large market share in various countries and regions both home and abroad. For more information, please visit http://www.kingsoft.com^[1].

Kingsoft Investor Relations:Francie Lu Tel: (86) 10 6292 7777 Email: [email protected]^[2]

For further queries, please contact Hill+Knowlton Strategies Asia:Sophie Liu Tel: (852) 2894 6318 Email: [email protected]^[3]

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References

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