Kingdee International Software Group Co., Ltd. · HKEX:268
Kingdee International Software — H1 2018 Earnings Presentation
58 slides from Kingdee International Software's earnings presentation, Aug 16, 2018
Slide 1: Kingdee International Software Group 2018 Interim Results Announcement
Kingdee International Software Group 2018 Interim Results Announcement Stock Code: HK 268 16 August, 2018 1
Slide 2: Business Highlights
Business Highlights Cloud Market Cloud Strategy CFO Report Appendix Update Update 2 2
Slide 3: Business Highlights
Business Highlights Cloud Market Cloud Strategy CFO Report Appendix Update Update 3 3
Slide 4: Business Growth Driven by Increased Cloud Mix
Business Growth Driven by Increased Cloud Mix +21.3% YoY +33.4% YoY +26.0% YoY Revenue Operating Profit Operating Cash Flow* 167 1,279 376 1,055 126 299 (RMB mn) (RMB mn) 1H2017 1H2018 (RMB mn) 1H2017 1H2018 1H2017 1H2018 * Excluding net cash outflow of the micro-credit business. If including net ca
Slide 5: 1H2018 Business Highlights
1H2018 Business Highlights Revenue +20% YoY Revenue +26% YoY 72% 28% Management Software Cloud Services Big Data Services Sustained Double-digit Established Market Leadership in Monetization Model Revenue Growth Enterprise SaaS Exploration 5
Slide 6: Growth of Cloud Services in 1H2018
Growth of Cloud Services in 1H2018 Cloud Services in 2017 Cloud Services in 1H2018 25% 28% Estimated 2H2018 Cloud Services Revenue up by 60%+ Cloud Services Mix in 2018 : 30%+ 6 6
Slide 7: Cloud Market Update
Business Highlights Cloud Market Cloud Strategy CFO Report Appendix Update Update 7 7
Slide 8: Market Leader in China's Enterprise SaaS Market
Market Leader in China’s Enterprise SaaS Market Kingdee 18% No.2 Kingdee 9% 44% Others Others 55% No.3 56% 7% No.4 No.5 7% 5% No. 1 in China’s SaaS ERM Market in 2017: 18% No. 1 in China’s SaaS Financial Management Applications Market: 44% Source: IDC Semiannual Public Cloud Services Tracker, 2017 H
Slide 9: China Public Cloud SaaS Market Forecast
China Public Cloud SaaS Market Forecast China Public Cloud SaaS Market 2017-2022 China ERM (OP VS. SaaS) Market Forecast 2018-2022 (US$mn) share and Forecast 5,000 100% 22% 4,000 29% 35% 80% 41% 46% 51% 3,000 5,817 60% 4,462 3,399 2,000 40% 78% 2,515 71% 65% 59% 54% 49% 1,824 1,000 20% 0 0% 2018 201
Slide 10: Kingdee Cloud Supports Government Policies in Corporate Cloud Migration
Kingdee Cloud Supports Government Policies in Corporate Cloud Migration Kingdee Cloud is shortlisted by the municipal governments as the recommended corporate cloud Jilin services provider Inner Mongolia K Hebei Liaoning In Hunan province, more than 50% Shanxi of enterprises in the first Qinghai K S
Slide 11: Cloud Strategy
Business Highlights Cloud Market Cloud Strategy CFO Report Appendix Update Update 11 11
Slide 12: Product to Platform
Product to Platform 金蝶云平台（Kingdee Cloud Platform） 12 12
Slide 13: Kingdee Cloud
Kingdee Cloud Innovative Model for Enterprise Management 13 13
Slide 14: Kingdee Cloud Galaxy
e °*. Kingdee Kingdee Cloud Galaxy
Slide 15: Kingdee Cloud Galaxy: We Made History
Kingdee Cloud Galaxy "The Only Chinese Enterprise Shortlisted in the Gartner 2018 Market Guide " We Made History!! 15
Slide 16: The Choice of Global Enterprises
The Choice of Global Enterprises 金砖新开发银行 16
Slide 17: Smart Sales Rate, O2O Rate, VIP Consumption Rate
48.3% 74% O2O Rate 46% VIP Consumption Rate Smart Sales Rate 17
Slide 18: Languages, Countries, Daily Active Usages
7 46 11,030 Languages Countries Daily Active Usages Chinese Overseas English Spanish Japanese … 18
Slide 19: Kingdee Cloud Galaxy: Most Comprehensive Cloud ERP Solution
Kingdee Cloud Galaxy The Most Comprehensive Cloud ERP Solution in the Market Government, Medical and Public 2.6% Service Chemical 3.0% Kingdee Exsiting Clients , 12% Conglomerate 3.7% Mechanical and Electrical 4.8% Clients Never Clients from Used ERP , Competitors, Building Materials 5.5% 68% 20% Re
Slide 20: Kingdee Cloud Cosmic
20 Kingdee Cloud Cosmic e °*. Kingdee
Slide 21: Cost Driven to Innovation Driven
Cost Driven to Innovation Driven BEFORE Cost Driven NOW Innovation Driven • Capital Cost • Strategy Innovation: Ecosystem • Management Cost • Management Innovation: Collaboration • Operating Cost • Operating Innovation：Platform oriented • Opportunity Cost • Product Innovation：Service oriented 21
Slide 22: Three Innovative Technologies
Three Innovative Technologies • Flexibility • Preset model • Automated bookkeeping • Distributed architecture • Modelling • Speech recognition • Micro-services • Customized Cloud services • Image recognition • Modularized services • Deep learning • Multi-tenants Cloud Native Original Dynamic Corpora
Slide 23: Case: Huawei Construction
Case：Huawei Construction Corporate IT Demands are Changing Huawei IT Revolution： Kingdee Cloud Cosmic： The IT development pushes enterprises Moving IT tools to the Cloud Support the next 5-10 years IT demand to upgrade their system Providing services by IT tools Shifting from EAS to Kingde
Slide 24: Kingdee Cloud Cosmic Platform
Kingdee Cloud Cosmic Platform Financial Process Finance Cloud Management for Everyone Cloud Expense Procurement Reporting Cloud Ecosystem Cloud Experience for Everyone Platform Cloud Channel Cloud 24
Slide 25: Our Target
25 Our Target e °*. Kingdee
Slide 26: Cloud Target to Reach 60% of Total Revenue by 2020
Cloud Target to Reach 60% of Total Revenue by 2020 Cloud revenue contribution 2017 2020 ¥ 2.3bn Total Revenue ¥ 3.5-4.5bn Total Revenue 40% 75% 25% 60% Management Software Cloud services 26
Slide 27: Cloud Services Revenue Trend
Cloud Services Revenue Trend 500 400 300 ------- indicates our estimated 2H2018 Cloud 200 services revenue up by 60% + yoy 2018 Cloud services 100 revenue up by 45% + yoy 0 1H15 2H15 1H16 2H16 1H17 2H17 1H18 2H18 (RMB mn) 27
Slide 28: Focused on Long-Term Revenue Growth
Focused on Long-Term Revenue Growth Revenue and scale remains top priority for Cloud Key metrics shifting to retention rate, cash flow Improving long-term cash flow & margins SaaS transition to weigh on margin expansion in short-run Target long-term Cloud operating margin 30%+ 28 28
Slide 29: Accelerating Innovation & Investments to Enhance Enterprise Cloud Ecosystem
Accelerating Innovation & Investments to Enhance Enterprise Cloud Ecosystem Launched the first AI financial assistant in China and set up R&D center in Seattle, US Strategic cooperation with Huawei in areas including cloud computing and AI Became the largest enterprise cloud services partner for Ama
Slide 30: CFO Report
Business Highlights Cloud Market Cloud Strategy CFO Report Appendix Update Update 30 30
Slide 31: Management Software Business Review
Management Software Business Review Management Software KIS K/3 EAS Implementation Maintenance +14% YoY +14% YoY +29% YoY +25% YoY +18% YoY KIS revenue +14% YoY as small enterprise market remained healthy EAS revenue +29% YoY as large enterprises continued to increase investments in software Impleme
Slide 32: Cloud Business Review
Cloud Business Review Cloud Services Kingdee Cloud Other Cloud Services +43% YoY -4% YoY Jingdou Accounting Finance Supply chain Manufacturing Online sales Guanyi E-commerce 32 32
Slide 33: Kingdee Cloud Highlights
Kingdee Cloud Highlights 43% >80% YoY Revenue Growth Retention Rate No. 1 Cloud ERP in China >7500 >110% Customers YoY Customer Growth 33 33
Slide 34: Jingdou Accounting Highlights
Jingdou Accounting Highlights 30% >70% YoY Revenue Growth Retention Rate No. 1 Accounting Cloud in China >160K >28% Paying Customers YoY Paying Customer Growth 34 34
Slide 35: Guanyi E-Commerce Highlights
Guanyi E-Commerce Highlights -17% >70% YoY Revenue Growth Retention Rate No. 1 E-Commerce Cloud in China >7000 >20% Customers YoY Customer Growth 35 35
Slide 36: Financial Highlights
Financial Highlights (RMB’000) 1H18 1H17 Change Revenue 1,279,103 1,054,658 21.3% Cost of Sales -253,230 -209,712 20.8% Gross Margin 80.2% 80.10% +0.1pts Total Operating Expenses -1,010,389 -846,698 19.3% Other Income & Gains 151,966 127,252 19.4% Operating Profit 167,450 125,500 33.4% Operating Mar
Slide 37: Operating Expense Breakdown
Operating Expense Breakdown S&M R&D G&A as a % of total revenue as a % of total revenue as a % of total revenue 50.5% 15.6% 11.4% +0.9PP -1.4PP -0.8 PP RMB 646mn RMB 200mn RMB 146mn 37 37
Slide 38: Operating Cash Flow & Free Cash Flow
Operating Cash Flow & Free Cash Flow* Cash generated from operations Free Cash Flow 590 429 398 408 308 323 268 234 204 158 29 36 -47 -7 1H2015 2H2015 1H2016 2H2016 1H2017 2H2017 1H2018 RMB’000,000 *Note: Free cash flow = Operating cash flow – l Purchases of property, plant and equipment l – l Purch
Slide 39: Appendix
Business Highlights Cloud Market Cloud Strategy CFO Report Appendix Update Update 39 39
Slide 40: Investment Highlights
Investment Highlights Market Leader in Enterprise Cloud Services in China Leader in SaaS ERP and SaaS financial software in China Significant leadership in both scope of services offered and product maturity vs. competitors Broad direct sales and distributor networks Launch of Kingdee Cloud Cosmic f
Slide 41: Total Revenue by Segments
Total Revenue by Segments % of Total % of Total (RMB’000) 1H18 1H17 Change Revenue Revenue Management Software 923,955 72.2% 771,836 73.2% 19.7% business - Sales of software license 500,055 39.1% 420,687 39.9% 18.9% - Implementation 205,483 16.1% 164,935 15.6% 24.6% - Maintenance 212,867 16.6% 181,1
Slide 42: Software License by Segments
Software License by Segments % of Total % of Total (RMB’000) 1H18 1H17 Change Revenue Revenue KIS 205,765 16.1% 181,131 17.2% 13.6% K/3 115,461 9.0% 101,282 9.6% 14.0% EAS 157,282 12.3% 122,145 11.6% 28.8% Others 21,547 1.7% 16,129 1.5% 33.6% Total software license 500,055 39.1% 420,687 39.9% 18.9%
Slide 43: Total Revenue by Sales Channel
Total Revenue by Sales Channel % of Total % of Total (RMB’000) 1H18 1H17 Change Revenue Revenue Management Software 923,955 72.2% 771,836 73.2% 19.7% business - Direct sales 148,483 11.6% 118,136 11.2% 25.7% - Indirect sales 351,572 27.5% 302,551 28.7% 16.2% - Services 418,350 32.7% 346,063 32.8% 20
Slide 44: Other Gains
Other Gains (RMB’000) 1H18 1H17 Change VAT refund 84,708 79,697 6.3% Government projects 16,035 11,256 42.5% Rental income - net 34,877 32,004 9.0% Others 16,346 4,295 280.6% Total 151,966 127,252 19.4% VAT % of Total Revenue 6.6% 7.6% 44 44
Slide 45: Selling & Marketing Expenses
Selling & Marketing Expenses (RMB’000) 1H18 1H17 Change Advertising and marketing 127,799 83,873 52.4% Sales promotion 53,820 56,231 -4.3% Salary of sales persons 297,501 244,860 21.5% Project cooperation fees 105,902 80,889 30.9% Traveling 21,508 19,160 12.3% Fixed costs 29,985 29,367 2.1% Others 9
Slide 46: R&D Expenses
R&D Expenses (RMB’000) 1H18 1H17 Change Salaries and staff welfare 170,358 158,265 7.6% Option & restricted stock expense 15,861 8,166 94.2% Fixed costs 10,652 10,196 4.5% Travelling costs 2,135 1,708 25.0% Others 717 629 14.0% Total 199,723 178,964 11.6% R&D % of Total Revenue 15.6% 17.0% -1.4pts 4
Slide 47: Administrative Expenses
Administrative Expenses (RMB’000) 1H18 1H17 Change Salaries and staff welfare – G&A 86,159 81,782 5.4% Option & restricted stock expense 30,008 18,175 65.1% Professional service fee 9,424 9,411 0.1% Traveling 1,921 1,684 14.1% Meeting expenses 1,198 1,158 3.5% Fixed costs 13,723 13,333 2.9% Others 3
Slide 48: Balance Sheet Overview
Balance Sheet Overview (RMB’000) 30 Jun. 2018 31 Dec. 2017 Change Trade and other receivables 317,951 319,557 -0.5% Cash and deposits 2,465,644 2,651,220 -7.0% Total assets 6,995,619 6,802,058 2.8% Current assets 3,457,520 3,533,582 -2.2% Borrowings 223,963 1,348,529 -83.4% Trade and other payables
Slide 49: Historical Revenue Trend
Historical Revenue Trend 40% 2,400 2,000 20% Revenue 1,600 Growth Rate 0% 1,200 800 -20% 2013 2014 2015 2016 2017 *Note: 2015,2016 and 2017 revenue presented on continuing operations basis. Other years presented on reported basis 49 49
Slide 50: Value of Cloud to Kingdee
Value of Cloud to Kingdee 50 50
Slide 51: Increasing Customer Life-Time Value
Increasing Customer Life-Time Value Traditional ERP Kingdee Cloud Revenue One-time Recurring Service Fee Renewal Rate 20-30% 80%+ Frequency of Customer Contact One-time Constant Upsell Opportunities for Value Added Services Medium High Customer Payment Cycle Based on delivery Prepaid Discounts Offer
Slide 52: Lower Cost Structure
Lower Cost Structure Traditional ERP Kingdee Cloud Maintenance On-site consultant Online/Phone Upgrades On-site consultant Online Costs to Support Legacy Products High Low Customer Acquisition Cost for Upsells High Low Sales Network Operating Leverage Low High 52 52
Slide 53: SaaS Economics
O ap °*. Kingdee SaaS Economics
Slide 54: SaaS Lifetime Unit Economics
SaaS Lifetime Unit Economics Customer Acquisition Cost, Average Cost of Service, and Attrition drive long-term economic value Unit Lifetime Value Drivers Customer Life: Expected paying life of a customer. Defined as a function of attrition Cumulative Profit Lifetime Value( LTV) Customer Cumulative v
Slide 55: Growth and Operating Margin are linked
Growth and Operating Margin are linked EXAMPLE:FOR ABC Corp XYZ Corp ILLUSTRATION ONLY Growth Priority Margin Priority Beginning Revenue 100 100 Less Attrition (10) (10) Attrition: 10% Plus New Business 90 10 = Ending Revenue 180 100 Less CAC (68) (8) Customer Acquisition Cost : 0.75 Less ACS (126)
Slide 56: SaaS Long-term Economics
SaaS Long-term Economics High S&M expenses (CAC FLAT) Revenue Growth rate Margin Leverage from CAC Margin Pressure from CAC Lower ACS creates Low incremental leverage Time T1 T2 T3 56 56
Slide 57: Thanks
感謝 ありがとう ขอบคุณ Thanks 谢谢 terima kasih 57
Slide 58: Contact Us
Contact Us • Summer Gan Director Investor Relations & Securities Dept. 86 (21) 61625518 summer_gan@kingdee.com • Yoriko Huang Assistant Manager Investor Relations & Securities Dept. 86 (755) 8607 2591 yanni_huang@kingdee.com 58
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