Good day. And welcome to Kingsoft Cloud's Fourth Quarter and Fiscal Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation there will be a question-and-answer session. As a reminder, this call is being recorded.

I would like to turn the call over to Nicole Shan, IR Manager of Kingsoft Cloud. You may begin..

Thank you, Michelle. Hello, everyone, and thanks for joining us today. Kingsoft Cloud's fourth quarter and fiscal year 2021 earnings release was distributed earlier today and is available on our IR website at ir.ksyun.com, as well as on GlobeNewswire services. On the call today from Kingsoft Cloud, we have our CEO, Mr. Yulin Wang; and the CFO, Mr.

Henry He. Mr. Wang will review our business operations and the company highlights, followed by Mr. He, who will discuss the financials and the guidance. They will be available to answer your questions during the Q&A session that follows. There will be consecutive interpretations. Our interpretations are for your convenience and reference purpose only.

In case of any discrepancy, management's statement in the original language will prevail. Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of the Section 21-E of the Securities Exchange Act of 1934 as mandated and as defined in the U.S.

Private Securities Litigation Reform Act of 1995.

These forward-looking statements are based upon management's current expectations and the current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements.

Further information regarding these and other risks, uncertainties or factors are included in the company's filings with the U.S. SEC. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under applicable law.

Finally, please note that unless otherwise stated, all financial figures mentioned during this conference call are denominated in RMB. It's now my pleasure to introduce our CEO, Mr. Yulin Wang. Please go ahead..

Thank you, Nicole. And thank you all for joining our fourth quarter and fiscal year 2021 earnings call. In the fourth quarter, we generated RMB2.66 billion in total revenues, representing an increase of 38% year-over-year.

Our public cloud services revenues reached RMB1.53 billion, and our enterprise cloud services revenues reached RMB1.13 billion, up 111% year-over-year.

For the full year of 2021, our total revenues reached RMB9.06 billion, an increase of 38% year-over-year, among which our public cloud and enterprise cloud services revenues reached RMB6.16 billion and RMB2.90 billion, respectively. 2021 was a year full of challenges and opportunities.

The Internet sector faced the pressures from market headwinds, new regulation and the pandemic, especially in the second half of the year. Within public cloud services, traffic driven demand continued to grow, but at a slower pace as Internet companies began to take a more cautious approach to investing in new businesses.

On the customer front, we continued to execute on our premium customer strategy amidst the challenging environment, and we successfully maintained robust customer relationships. As of the end of 2021, the number of our premium customers increased to 593 from 322 in the year of 2020.

Nevertheless, to proactively embrace changes and better align ourselves with the evolving market environment, we conducted a strategic review of our business and carried out repositioning initiatives. High quality growth is at the heart of our priority and the foundation of sustainable, long-term development.

We intend to optimize resource allocation to our core cloud services, which enjoy healthy margins to achieve above industry core business growth. Currently, we have already started adjusting our CDN services.

Adapting to the slowdown in CDN demand, we are optimizing our underlying resources, downsizing CDN notes, improving team efficiency in an effort to balance scale and profitability and facilitate healthy and sustainable growth.

In addition, we gradually optimized resources allocation to our higher margin services, including computing, big data and database products and solutions as we continue to strengthen our technology competitiveness and improve customer stickiness.

Due to supply side temporary rigidity resulting from contract term restrictions, it will take some time to fully adjust the relevant resources. We aim to complete the process as soon as possible to maximize our financial results.

While the adjustments had a negative impact on our public cloud revenue and overall margin in Q4, we expect to see our adjusted gross margin and EBITDA margin improve in the first quarter of 2022 compared with Q4 of 2021.

Moreover, the adjustment is expected to provide a solid foundation for our medium and long-term growth, with a healthier revenue structure and higher profitability. We expect our quarterly adjusted EBITDA margin to turn positive in the fourth quarter of 2022.

With the successful track record and years of experience, we have established close relationships with a large, premium customer base. This positions us at the advantageous front line of tapping into our customer's deeper needs by exploiting and cross selling our rich offering portfolio.

During the quarter, we selectively expanded our high value added video services and explored business scenarios and projects with high computing power needs, which we can offer.

In digital space, we provided cloud-elastic computing and other computing products to our client, Kuaishou, a leading short video platform in China, and facilitated the establishment of its livestreaming source station in Beijing, featuring comprehensive capabilities, including, but not limited to, recording, data storage, transcoding and dispatching.

The station has helped Kuaishou improve the user experience of its livestreaming business. Turning to the intelligent mobility sector. Our customer, Shouqi car hailing, served as the exclusive taxi service provider for the Beijing Winter Olympic Games.

As a digitalization partner of Shouqi, we provided a full suite of cloud services to help it deliver a stable and smooth online mobility experience. We provided comprehensive consulting services and developed an integrated container service base, cloud-native architecture.

Our solution deployed several key technologies, including micro services engine, DevOps, function computing and covered five major areas, including software R&D processes, computing resources, architecture framework, data storage and processing as well as security.

On the gaming front, the cubic meter cloud gaming program, which we launched together with Xiaomi, Migu Interactive Entertainment and Weiling made its official debut on Xiaomi TV and Xiaomi phones. We're proud to provide professional full stack cloud gaming solutions and to serve a self-computing power provider.

Moving to the Enterprise Cloud business. Our revenues maintained fast growth, benefiting from the continued trend of digital transformation. Earlier this year, we announced the appointment of Mr. Shouhu Wang as our President in charge of Public Service business units, while he continues to be responsible for Camelot operations and management.

The appointment will accelerate the integration of Camelot into the company and promote the efficient growth of our enterprise cloud services. Shouhu joined Camelot in 2016 and is currently responsible for its overall operation and management. Before that, he worked as a Vice President at IBM Global Headquarter.

He has over 27 years of experience and expertise in corporate governance and management consulting. Further, on the integration with Camelot, we have made progress in terms of resources sharing of each others technology, products and customer base over the past few months.

As part of Kingsoft Cloud, Camelot has started the first cooperation with Kingsoft office software. The company and Camelot have been jointly engaging customers, ranging from the Internet, new retail to consumer sectors and jointly work on solutions deployment in places including Beijing, Gansu, Jiangsu and Hubei provinces.

We expect this year to be a year of accelerated integration of our resources, including technology, products, solutions, talent and customer base, thereby deepen our customer engagement and propel the rapid growth of our enterprise cloud business.

With the approval of top-down planning of national integrated data center class system, the construction of dong shu xi suan for transporting data from different regions to Western regions for storage and calculation is officially launched. As a leading cloud company with core technology capabilities, we are taking part in this project.

So far, we have built a data center and delivered as the first pilot project for the Xinyang cluster in Gansu computing hub, which is one of the 10 national clusters. At the same time, we're also deploying big data projects in computing hubs, including the Guangdong, Hong Kong, Macau Greater Bay Area and the Yangtze River Delta region.

In addition, as Beijing's public service cloud provider, we provided intensive cybersecurity support and services to the public service platform during the Beijing 2022 Winter Olympics.

We implemented various cybersecurity protection measures, including resource guarantee, automatic alarm service, on-site support service and cybersecurity guaranteed services. By doing so, we safeguarded the efficient and stable operations of over 300 public service systems for more than 20 departments and bureaus.

I will now pass the call over to our CFO, Henry, to go over our financials for the quarter..

Thank you, Yulin. And welcome, everyone, for joining the call. Before diving into the financial details, I would like to walk you through the following summary for the past quarter. Our total revenue reached RMB2.66 billion in Q4, representing a strong revenue growth of 38.3% year-over-year.

Our core cloud business, including computing, storage and enterprise cloud services, increased by 61.4% this quarter. The gross margin of this quarter declined sequentially due to the adverse impact from our CDN product.

Despite the challenging market environment, we were able to remain stable relationships with our premium customers, including leading Internet clients.

However, as the new technology budget from the Internet sector clients in general have been increasing at a slower pace than expected, starting from second half of last year, the demand to us has been softened and affected our public cloud revenue on the top line and also affected our resource efficiency connected to our bottom line.

Our CDN services had adverse impact on our gross profit in total. We are in a view that search impact is temporal, and it's being addressed by a few optimization initiatives already adopted. We expected to see our adjusted gross margin and adjusted EBITDA margin to improve in Q1 2022 compared with Q4 2021.

We will also take more active cost control measures, implement optimal resource allocation plans and improve our overall operational efficiency to achieve adjusted EBITDA breakeven in Q4 2022. As of December 31, 2021, we had cash and cash equivalents and short term investments amounting to RMB6.71 billion, providing us sufficiently for operations.

We will maintain our disciplined approach to CapEx and also expect to keep our full year CapEx plan in the range of RMB1 billion to RMB1.5 billion for 2022. Now I will go through our financials in more detail. In Q4, cost of revenue grew 44% year-over-year to RMB2.63 billion.

The major cost component was IDC costs, consisting of bandwidth and IDC costs. During the quarter, we continued to incur IDC cost we committed in earlier of 2021 despite a weaker than expected demand. Further, we disposed of some lower utilized IDC resources, causing certain one-time expenses.

As a result, IDC costs grew 20.2% year-over-year to RMB1.32 billion in Q4. Depreciation and amortization costs were RMB227.3 million. Staff costs were RMB361.8 million. The increase reflects the staff cost of delivering enterprise cloud projects by Camelot.

Other costs increased by 30.4% to RMB720.7 million, which was mainly due to the revenue growth and offset by the cost savings synergies from Camelot and improving deployment efficiency.

In terms of expenses, we have carried out integration with Camelot to maximize synergies, including organizational alignment and integration based on our business needs and the product research plan. It caused one-time of expenses for the quarter.

The impact is expected to gradually decrease starting from Q1 2022, and expenses as a percentage of total revenue is expected to be at a similar level with previous quarters. Total non-GAAP operating expenses were RMB538.4 million, increasing sequentially from RMB432.8 million in Q3.

Excluding share based compensation and D&A, adjusted R&D expenses were RMB244.4 million. As a percentage of total revenue, R&D expenses decreased slightly from 9.5% in Q3 to 9.2% this quarter. Adjusted, selling and marketing expenses were RMB124.8 million. As a percentage of total revenue, they increased from 4.2% in Q3 to 4.7% this quarter.

Adjusted G&A expenses were RMB169.2 million. As a percentage of total revenue, they increased from 4.2% in Q3 to 6.4% this quarter. As of December 31, 2021, we had sufficient cash and cash equivalents and short term deposits amount to RMB6.71 billion. During this quarter, the CapEx was RMB178 million and the full year CapEx was RMB735 million.

In addition, to provide our shareholders with greater liquidity and protection, we have already launched the preparation for a new primary listing in main board of Hong Kong Stock Exchange. We are one of very few Chinese ADRs with a simple one share, one vote, single-class share structure.

Before our spinoff on NASDAQ in 2020, we had been a subsidiary of Kingsoft Group for almost a decade, whereby Kingsoft Group itself in Hong Kong is a listed company with transparent track record of disclosures, including ours.

While ongoing exploration is subject to various factors from regulatory approvals and market conditions, we believe the above mentioned factors present us favorable conditions. Based on prevailing market practice and listing rules, assuming a successful due primary listing, the Hong Kong listing status will not be contingent on U.S. listing status.

And the case would be for secondary listing as defined in Hong Kong listing rules. We could eligible to be included as a constituent of Hang Seng Composite Index potentially. We may also be eligible to be added into China-Hong Kong Stock Connect in the future.

Through the process, we expect to grab opportunities to further cooperate with our strategic partners in large and more diversified shareholder base and improve liquidity for shareholders. In the meanwhile, we have always maintained close and multidimensional cooperation with our strategic shareholders, namely Kingsoft Group and Xiaomi.

Recently, to further strengthen our capital ties, we signed a strategic cooperation and anti dilution agreement with both parties.

According to the agreement, Kingsoft Group and Xiaomi will have the right to participate in our subsequent capital market financing transactions and increase their investment on a pro rata basis, subject to regulatory approval and market conditions.

Finally, in terms of data security and privacy, we have attained the enterprise, privacy and data governance certification from TRUSTe. Privacy protection has always been one of our key priorities.

We have been and will remain committed to managing data in compliance with laws and regulations, industry best practice and leading international standards to provide a stable and secure data environment for our stakeholders. The company is also preparing the 2021 ESG report, which is expected to be published in May.

We do understand our shareholders' focus on company revenue and profit outlook, especially during the volatile market environment. We would like to offer more details to help our shareholders to understand the company priorities and objectives.

First of all, we expect our total revenue to be between RMB2.05 billion and RMB2.15 billion for the first quarter of 2022, representing a year-over-year increase of 13% to 19%. We de-prioritized our investment into CDN product and improved mix of high quality cloud product offerings.

As a result, the revenue of CDN products could be declined by approximately 20% to 25% year-over-year in Q1 2021. We expect revenue from our core cloud services, including high quality computing services and enterprise cloud services to remain rapid and healthy growth, increasing by around 49% to 55% year-over-year in Q1 2022.

Second, we're also in the view that our profitability is expected to improve starting Q1 2022. The adjusted gross margin and adjusted EBITDA margin will be higher in the first quarter of 2022 compared with Q4. On a stable market condition assumptions, we expect our quarterly adjusted EBITDA margin to turn breakeven by Q4 2022.

We will continue to remain prudent on CapEx plan. We expect our full year CapEx for 2022 will be between RMB1 billion to RMB1.5 billion, which will be sufficient to support the sustainable growth of our high quality product offerings.

We would like also to point out that on a typical cloud economic model, generating revenues from existing demands only require relatively small size of maintenance CapEx.

The CapEx plan for 2022 will be prioritized to meet the new incremental demands of high quality products, of which the company has a good level of discretion to adjust on the different market conditions.

Finally, we are hearing voices from shareholders and the company is in a view that current market valuation significantly deviates from our long-term intrinsic value.

The company is currently actively exploring variable capital market options and tools, including, but not limited to adopting share repurchase programs to deliver long-term value to our shareholders.

All these forecasts and comments above are based on our current and preliminary views of the market and operational conditions, which are subject to change. Thank you..

Thank you. This concludes our prepared remarks. Thanks for your attention, and we are now happy to take your questions. Please ask your question in both Mandarin and English, if possible. Operator, please go ahead. Thank you..

Our first question comes from Brian Gong with Citi. Your line is open..

Good evening, management. Thanks for taking my question. I have two questions. First is that, how should we look at public cloud growth for the full year 2022 given the macro softness? Will your - our restructure to be done and how will we drive strong growth on computing and storage services? And the second question is on enterprise cloud.

Can management share growth outlook about this segment. What would be the organic growth look like? And what would be Camelot's growth rate? Thank you..

Brian, would you like to just briefly translate your question into Chinese for us?.

Sure, sure. I will translate myself. .

Allow me to briefly translate what the CEO answered. So in terms of public cloud, we think that our view is actually similar to a lot of the larger firms in the Internet space, which obviously were experiencing a slowdown in 2021 of the demand from the Internet space, which constitutes the majority of our public cloud business, customer space.

However, I think, on one hand, we're seeing the demand slowing down. But on the other hand, because of these customers in the Internet space are also doing cost cutting, which migrating and increasing the use of public cloud will actually benefit them from saving costs.

And therefore, the general observation and what we see is that new demand for public cloud service seems to be slowing down. However, the usage percentage, we actually do believe that there's a potential for that number to increase.

And so that - for that same reason, we do see that from 2022 to 2023 and 2024, on a medium term time frame, we do feel that we're relatively optimistic for the growth of public cloud service. The situation around CDN is a little bit different. Because basically, we see that the time spent on videos actually remained quite okay.

However, the issue is actually around the uncertainty and volatility of the business, which caused our efficiency and our profit margin to decrease. So therefore, that brought about the adjustment that we talked about in the prepared remarks and to get rid of some of the lower efficiency resources and CDN notes.

However, it is also worth pointing out that in the computing and storage side of the business, within the public cloud business, it is much less impacted and we're still seeing robust growth. As Henry commented just now, while the CDN business, we're adjusting downwards, the non-CDN business is still growing significantly and at a fast pace.

In terms of enterprise cloud, we do see - still see a very strong growth demand from the fourth quarter of 2021 throughout 2022. We think the issue is with the COVID situation, we do believe that the demand is there. There's tremendous demand for industry cloud, for enterprise cloud.

However, the issue is that the COVID situation increased the uncertainty of such projects. So what we, as an enterprise team, need to do is to comprehensively evaluate enterprise cloud projects in all this demand, huge demand in the market from the parameters of implementation cycles from project quality, et cetera.

And to balance out that business scale and profitability and brought back the growth of this business. And in terms of our integration with Camelot, we have actually made great inroads into integration with Camelot in the fourth quarter of last year.

So actually, we are jointly working on engaging with customers starting that time, which we also see great potential in improving and in growing the business. Thank you..

Thank you. That's very helpful..

Our next question comes from Liping Zhao with CICC. Your line is open..

Thanks for taking my questions. I have two questions here. So first is about the competition. As we can see that Ali, Tencent and Huawei are becoming more and more active in enterprise cloud.

So is the competition hitting us in the verticals like health care, financial industry and public service, et cetera? And will these impact the company's enterprise cloud margin in the coming quarters? And secondly is about public cloud, so what's management's key R&D focus in 2022? Thanks..

So in terms of competition that you mentioned for our enterprise cloud, industry cloud, as I mentioned now, the industry - the market demand is huge. To be quite honest, at the current stage, the key issue to be resolved is really to meet the demands of the customers rather than worrying about the competition in this explosively growing market.

Two other things. One is the COVID situation complicated the issues at hand, which impacts the deployment speed and increases the uncertainty of project delivery.

And secondly is because there are so many verticals and so many industries for digital transformation and for the adoption of industry and enterprise cloud, the explosive growth of such demand requires the cloud service providers to enhance their local services to meet the needs of such clients.

So that actually means that each cloud vendors' own capabilities is more important. Now shifting to our own competitive edges, there are several things I would like to highlight. One is that we have entered into the three verticals of our clients namely, public services, financial services and health care.

And we have had already quite significant accumulation of expertise and know how and have achieved one of the fastest growth rates in the Chinese market. So we have already accumulated customer and product and solution advantages in that regard.

And secondly, our integration with Camelot has been relatively steady, and therefore, that greatly enhanced our capability of servicing clients, of delivering and in particular, of cross region service capabilities, and that is particularly advantageous to us under the situation of COVID disruption.

In terms of R&D focus, we do think - our view is that the technology evolution of cloud services is not something like from zero to one. The continuity of the technology of our products are generally good. So it is a continuous process of providing more stable and more powerful solutions and products.

So we will continue to focus on 4 IaaS products, the upgrading the scale and performance and capability. And in particular, as some of the application moves on to the PaaS level, we are doing our research, R&D focused on big data analytics database and containers.

And another point I would like to mention is that it is becoming increasingly important to combine the technology in public cloud services with the needs of industry clients with the explosive growth of an industry cloud, which will have a significant impact in the delivery speed and the stability and the operation of those projects once they are adopted.

Thank you..

Okay. Thank you..

Our next question comes from Thomas Chong with Jefferies. Your line is open..

Thanks management for taking my questions. I have three questions. My first question is about the update of the regulatory environments. And second, it's about the growth rate in the first and the second half, given the macro headwinds and the COVID situation. And my third question is about our long-term margin assumption? Thank you..

So in terms of regulatory environment, I'd like to answer question from several perspectives. And the first is the compliance of ourselves. As a business, we maintained daily communication and frequent communication with our regulators, which we continue to maintain the highest regulatory and compliance standards to ourselves.

And secondly is the general regulatory policies to the Internet sectors. On that regard, we haven't seen more clear signals from the regulators. However, on the industry cloud or enterprise cloud side, we continue to see government policy support, including the dong shu xi suan, which is transporting data for western computation project.

The third level of this question is the general attitude from the government towards Chinese ADRs, which we're happy to see some of the stabilizing signals, which we're going to need to continue to monitor.

And in terms of growth and profitability looking forward, we do think at the - for the first half of 2022, it is likely to be still an adjustment period where companies, especially Internet companies will continue to adjust for the policy changes that happened in 2021.

However, we do believe that as the general environment, the policy guidance becomes clear, we're still confident with the innovation capability of the sector in general. And then which we believe will further drive recovery and growth of the industry and also our business in the second half of the year.

Now in terms of our sales, as we mentioned, the adjustment and repositioning of the business, we have made great inroads and progress in that regard. And we have almost completed the adjustment in order to improve our efficiencies and stability and also improving our financial performance.

We do think that the improvement of our financial performance stability is well on track in 2022 and confident of the EBITDA - gross adjusted EBITDA margin breaking even in the fourth quarter of 2022. And we do think that in the following year, we'll also prove it to be a year of improving margin profile. Thank you..

Our next question comes from Joel Ying with Nomura. Your line is open..

So I actually have two questions.

The first one is, what is the percentage of the CDN business as of total public cloud business in 2021, and what's your expectation for 2022? And second question is, how many employees do we have at this moment by end of 2021? And how much percentage is about for R&D staff? And how many we're going to recruit in 2022? Thank you..

Yes, sure. Thank you, Joel. This is Henry. So if you're really looking back for the past few years, you may already observed the trends that the CDN business has declined gradually as a percentage of our total revenue. So for the year 2021, our CDN revenue as a percentage of total revenue already declined below in the range of 30% to 40%.

And our intention to further reduce the revenue contribution from the CDN products carry out into the year of 2022. So I have actually two major objectives. First one is we want to cut it back even while we have remaining relatively stable relationships with our top clients in terms of dollar value.

But in terms of percentage, I think in 2022, the CDN business will contribute, hopefully less than 20% or 25% to 25% of the total revenue. That will give us a more diversified revenue streams and offer a relatively higher quality of the revenue contribution. So this is actually the first point.

But again, I think when we evaluate which client or which region or which nodes we adjust, we're looking deeper into our client relationships, and also, we're looking to the cross-selling opportunities into the computing and storage.

And we will not harm our relationships with the clients, as well as losing a lot of opportunities into cross-selling for other products.

So to the second question, as you probably already remember that last year, we completed acquisition of Camelot, which as Yulin mentioned, gave us a greater reach in a nationwide network for delivery, especially in a challenging COVID environment.

And we're also making some adjustments in the process of realizing our synergies in terms of the team integration. So there are a few information we can share. First of all, for the overlapping functions, we did some active adjustments and alignment and the team integrations that actually will give us more efficiency of the delivery capacity.

And in terms of the total R&D personnel, as we disclosed in our IPO perspective with actually very stable percentage in levels, over 60%, six, zero percent, of Kingsoft Cloud employees are on R&D-related functions.

And our total employee size, including the Camelot team, has increased significantly by end of last year if you compare with the number of 2020. And I think that will give us a great capacity to deliver our services from the original cloud native technology like us, but also give a client higher quality of services.

And also, we can provide a wider range of product and research in-house. So I think that gives us not only a capacity but also more flexibility to adjust more investment into the cloud area technology, especially moving to the PaaS and SaaS functions, including the containers, dockers, big data and database, as Yulin just mentioned. Thank you..

Thank you, Henry..

Our next question comes from Kyna Wong with Credit Suisse. Your line is open..

So let me translate myself. The first question is about the CapEx like breakdown. How much will be the self-built IDC given business restructuring implemented for 2022? And the second one is about one of the costs in lockup usage of bandwidth by that, actually a redundancy, cost of redundancy of underlying resources.

But we believe that it could be some like contract that you signed with the operator about the bandwidth. Where should we expect the end of the lockup period? And if we should consider that, the overall cost structure will improve in 2022 after you have a new contract review with the operator. Thanks..

So to answer your question, based on the nature of cloud computing business, there is always a lead time, which we need to consider and plan in order to prepare the resources for providing service. And in previous years, our budgeting and actual money spent on CapEx and money spent have been relatively accurate.

It is only - it is really only last year because of the overall market volatility that there is some adjustments. And as mentioned earlier, in answering other questions, the adjustment is mainly focuses on the CDN business, whereby, in fact, the demand is still there and huge.

However, from our perspective, it is because of the increased volatility that decreases our efficiency and profitability, and therefore, we are downsizing that business. However, that adjustment has largely completed in the fourth quarter and with some of the remainder to be completed in the first quarter this year.

So as Haijian pointed out, because the underlying risk for IDC does require a cycle for renegotiation, and that has primarily been completed as well. So we do expect to see margin improvement starting in the third quarter of this year. And in terms of CapEx, the self constructing - the self owned IDC CapEx has been ongoing as planned.

And you know, for every year, the fourth quarter has been relatively less than the other quarter due to seasonality in terms of CapEx. However, last year, it's a little bit less because of the adjustments that we conducted. So we were a little bit cautious in the pacing of that, however, we will catch up with that in this year. Thank you..

There are no further questions. I'd like to turn the call back over to Nicole Shan for any closing remarks..

Thank you, Michelle. And thanks, everyone, once again for joining us today. If you have any further questions, please feel free to contact us. We look forward to speaking with you again next quarter. Have a nice day. Thank you..

This does conclude the program. You may now disconnect..