59 slides from Kingdee International Software's earnings presentation, Aug 17, 2017
Slide 1: Kingdee International 2017 Interim Results Announcement
Kingdee International 2017 Interim Results Announcement Stock Code: HK 268 17 August, 2017 P1
Slide 2: Agenda
Business Cloud Market Cloud Strategy CFO Report Appendix Highlights Update Update P2
Slide 3: Business Highlights
Business Cloud Market Cloud Strategy CFO Report Appendix Highlights Update Update P3
Slide 4: Sustainable and Profitable Growth
Sustainable and Profitable Growth +20% YoY +22% YoY +15% YoY Continuing Operations Revenue Operating Profit Net Operating Cash Flow (Reported Revenue +15% YoY) 126 1,055 103 234 204 913 1H16 1H17 (RMB mn) 1H16 1H17 (RMB mn) 1H16 1H17 (RMB mn) Reported revenue includes discontinued operations that co
Slide 5: Revenue Growth Continues to Accelerate
Revenue Growth Continues to Accelerate* (RMB’000,000) 30% 1,000 800 10% 600 400 -10% 1H2013 1H2014 1H2015 1H2016 1H2017 Revenue Growth Rate *Note: 1H2016 and 1H2017 revenue presented on continuing operations basis. Other years presented on reported basis. The difference is due to the disposal of cer
Slide 6: 2017 Interim Business Highlights
2017 Interim Business Highlights* Revenue +10% YoY Revenue +60% YoY 73% 27% Management Cloud Services Big Data Services Software Continued double digit Established market Business Model revenue growth leadership in SaaS ERP Exploration *Note: Revenue presented on continuing operations basis. On repo
Slide 7: Growth of Cloud Services in 1H17
Growth of Cloud Services in 1H17* Cloud Services in 1H16 Cloud Services in 1H17 20% 27% +60%YoY *Note: Cloud revenue presented on continuing operations basis. On reported basis, Cloud Services was +45% YoY and made up 21% and 27% of revenue in 1H16 and 1H17, respectively. The difference is due to th
Slide 8: Cloud Market Update
Business Cloud Market Cloud Strategy CFO Report Appendix Highlights Update Update P8
Slide 9: Market Leadership in Enterprise SaaS ERP
Market Leadership in Enterprise SaaS ERP Billion US$ SaaS Market: US vs China China Public Cloud Market 12.0 70.0 61.0 10.0 60.0 54.4 1.6 50.0 47.6 8.0 1.5 41.2 Kingdee 2016 1.3 40.0 34.8 6.0 Cloud Services Revenue 29.1 1.2 30.0 23.4 4.0 ¥ 341mn 1.0 0.9 0.8 7.2 20.0 0.6 0.7 5.0 2.0 0.5 0.6 3.5 10.0
Slide 10: Most Important IT Categories for Companies in China
Most Important IT Categories for Companies in China Companies Listing Item as Top 3 Priority Cloud Hub 50% 45% 41% 40% 30% 22% 19% 20% 16% 10% 0% BI/Analytics Cloud Enterprise Resource Infrastructure and Data Mobility and Mobility Services/Solution Planning Center Applications Market leader in 3 of
Slide 11: Small & Micro-sized Enterprises Market
Small & Micro-sized Enterprises Market Cloud is driving opportunities for new business models Increased Consumption Driving New Retail Business Models Intelligent Bookkeeping and Increased Adoption of Decision Analytics Driving Management Software to Demand for AI Services Jingdou Cloud Improve Effi
Slide 12: Medium & Large-sized Enterprises Market
Medium & Large-sized Enterprises Market Businesses are built around IT systems Innovations in Operations Digital Transition Sharing of financial, human and Companies offering new digital operational resources; O2O retail; products and services while smart manufacturing digitalizing internal operatio
Slide 13: Leading Global Peers in SaaS Transition
Leading Global Peers in SaaS Transition 2016 Cloud Revenue Contribution 25% 20% 15% 10% 5% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2016 Cloud revenue growth P13
Slide 14: Cloud Strategy Update
Business Cloud Market Cloud Strategy CFO Report Appendix Highlights Update Update P14
Slide 15: Kingdee Cloud, Ignite the Potential of Enterprises
Kingdee Cloud ERP is now Kingdee Cloud, Ignite the Potential of Enterprises Finance Cloud Human Resources Mobile Office Supply Chain Omni-channel Manufacturing Cloud Cloud Cloud Marketing Cloud Cloud P15
Slide 16: Kingdee Cloud Market Positioning
Kingdee Cloud Market Positioning Growth Fast enterprises deployment which require and quick flexibility and resolution to scalability problems Enterprises Real-time with growth management driven by of multi-site operations innovation Need Solution Ability to Fast- support rapid expanding expansion o
Slide 17: Expanding Kingdee's Addressable Market
Expanding Kingdee’s Addressable Market Kingdee Cloud Market Performance • New customers predominately from new economy sectors Client • Previous clients of Jingdou Cloud or KIS or competitors Base • Previous Kingdee customers who have new management or operational requirements Chemical 3% Financial
Slide 18: Kingdee Cloud Customer Case Study: OfO
Kingdee Cloud Customer Case Study: OfO Finance Supply Chain One-stop financial solution >100 Cities: Complete for 100+ global offices value chain control from material procurement to Connected with mobile assembly of bicycles to office for improved market deployment efficiency P18
Slide 19: Value of Kingdee Cloud for Customers
Value of Kingdee Cloud for Customers P19
Slide 20: Advantages of Kingdee Cloud
Advantages of Kingdee Cloud Complex organizational Minimal upfront Data stored on Amazon Web Response within management investment. Services (AWS) centers 10 mins. Accounting standards Annual fee only domestically in China. … reconciliation … AWS has received more than 30 Omni-channel sales manageme
Slide 21: New SaaS Payment Model
New SaaS Payment Model Traditional ERP Kingdee Cloud Management Management Software Software Database Database Servers Servers Service Fees Service Fees …… …… P21
Slide 22: Average Cost Savings
Average Cost Savings 70% Based on total cost savings over 5-years P22
Slide 23: Value of Cloud to Kingdee
Value of Cloud to Kingdee P23
Slide 24: Increasing Customer Life-Time Value
Increasing Customer Life-Time Value Traditional ERP Kingdee Cloud Revenue One-time Recurring Service Fee Renewal Rate 20-30% 90%+ 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 25: 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 P25
Slide 26: Understanding Short and Long-term Impact
Understanding Short and Long-term Impact Short-term margin pressure Higher long-term customer value and margins Cumulative Profit Customer Time Customer Life Acquisition Cost Breakeven P26
Slide 27: Growth Translates to Profit
Growth Translates to Profit Profit (RMB’000,000) Future M&A Opportunities Acquired 200+ 2016 2017 2018 2019 2020 0 Time (-50 to -100) (-88) (-100 to -150) Slow Growth Moderate Growth Fast Growth P27
Slide 28: Targeting 6-8x Cloud Revenue Growth from 2016-2020
Targeting 6-8x Cloud Revenue Growth from 2016-2020 Cloud revenue contribution 2020 2016 2016-2020 Cloud services revenue CAGR ¥ 1.86bn 58-68% ¥ 3.5-4.5bn 82% 18% 60% 40% Management Software Cloud services Management Software Cloud services P28
Slide 29: Focused on Long-Term Revenue Growth
Focused on Long-Term Revenue Growth Revenue growth remains top priority for SaaS Key metrics shifting to cash flow, retention rate Improving long-term cash flow & margins SaaS transition to weigh on margin expansion in short-run Target long-term Cloud operating margin 30%+ P29
Slide 30: CFO Report
Business Cloud Market Cloud Strategy CFO Report Appendix Highlights Update Update P30
Slide 31: Management Software Business Review
Management Software Business Review* Management Software KIS K/3 EAS Implementation Maintenance +16% YoY -5% YoY +13% YoY +6% YoY +19% YoY Continued Strength from Large and Small Enterprises KIS revenue +16% YoY as small enterprise market remained robust EAS revenue +13% YoY as upgrade demand from l
Slide 32: Cloud Business Review
Cloud Business Review* Cloud Services Other Cloud Kingdee Cloud Services +70% YoY +46% YoY Jingdou Accounting Finance Supply chain Manufacturing Online sales Guanyi E-commerce *Note: Cloud revenue presented on continuing operations basis. On reported basis, Other Cloud Services revenue was -14% YoY
Slide 33: Kingdee Cloud Highlights
Kingdee Cloud Highlights >70% >90% YoY Revenue Retention Rate Growth No. 1 Cloud ERP in China >3500 >80% Customers YoY Customer Growth P33
Slide 34: Jingdou Accounting Highlights
Jingdou Accounting Highlights >55% >70% YoY Revenue Retention Rate Growth No. 1 Accounting Cloud in China >125K >50% Paying Customers YoY Paying Customer Growth P34
Slide 35: Guanyi E-Commerce Highlights
Guanyi E-Commerce Highlights >45% >70% YoY Revenue Retention Rate Growth No. 1 E-Commerce Cloud in China >5800 >25% Customers YoY Customer Growth P35
Slide 36: Financial Highlights
Financial Highlights (RMB’000) 1H2017 1H2016 Change Revenue 1,054,658 913,204 15.5% Cost of Sales -209,712 -188,687 11.1% Gross Margin 80.1% 79.3% +0.8pts Total Operating Expenses -846,698 -754,375 12.2% Other Income & Gains 127,252 132,470 -3.9% Operating Profit 125,500 102,612 22.3% Operating Marg
Slide 37: Continuing Operations vs. Reported Revenue Reconciliation
Continuing Operations vs. Reported Revenue Reconciliation 106 1,055 28 9 913 (36) 26 (5) 14 1H2016 Discontinued KIS K/3 EAS Implementation Maintenance Cloud 1H2017 operation Services (RMB’000,000) Reported revenue up 15.5% YoY. Continuing operations basis revenue up 20.3% YoY P37
Slide 38: 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% 17% 14% -2.0PP + 0.9PP -1.2 PP RMB 523mn RMB 179mn RMB 144mn P38
Slide 39: Operating Cash Flow & Free Cash Flow
Operating Cash Flow & Free Cash Flow* 394 398 408 355 308 323 260 249 234 204 151 158 21 25 29 -7 1H2013 2H2013 1H2014 2H2014 1H2015 2H2015 1H2016 2H2016 1H2017 -102 -89 Cash generated from operations Free Cash Flow *Note: Free cash flow = Operating cash flow – l Purchases of property, plant and equ
Slide 40: Financial Summary
Financial Summary Cloud Momentum Continues to Sustain Cloud revenue grew 60% YoY in 1H17 and made up 27% of total revenue Kingdee Cloud revenue made up 17% of total revenue, up 70% YoY Cloud loss margins continue to shrink as business gains scale Management Software Continues to See Double-Digit YoY
Slide 41: Appendix
Business Cloud Market Cloud Strategy CFO Report Appendix Highlights Update Update P41
Slide 42: Investment Highlights
Investment Highlights A Leader in enterprise resource planning (ERP) and enterprise Cloud service in China Market leader with over 6.6 million ERP and Cloud customers in China Help companies of all sizes manage their businesses for more than 20 years A growing ecosystem of over 2,000 partners in Chi
Slide 43: Total Revenue by Segments (Reported)
Total Revenue by Segments (Reported) % of Total % of Total (RMB’000) 1H2017 1H2016 Change Revenue Revenue Management Software 771,836 73.2% 718,294 78.7% 7.5% business - Sales of software license 420,687 39.9% 392,223 43.0% 7.3% - Implementation 170,622 16.2% 162,933 17.8% 4.7% - Maintenance 175,441
Slide 44: Total Revenue by Segments (Continuing Operations Basis)
Total Revenue by Segments (Continuing Operations Basis) % of Total % of Total (RMB’000) 1H2017 1H2016 Change Revenue Revenue Management Software 771,836 73.2% 700,149 79.9% 10.2% business - Sales of software license 420,687 39.9% 379,419 43.3% 10.9% - Implementation 170,622 16.2% 160,639 18.3% 6.2%
Slide 45: Software License by Segments (Reported)
Software License by Segments (Reported) % of Total % of Total (RMB’000) 1H2017 1H2016 Change Revenue Revenue KIS 181,131 17.2% 155,568 17.0% 16.4% K/3 101,282 9.6% 106,486 11.7% -4.9% EAS 122,145 11.6% 107,992 11.8% 13.1% Others 16,129 1.5% 22,177 2.4% -27.3% Total software license 420,687 39.9% 392
Slide 46: Software License by Segments (Continuing Operations Basis)
Software License by Segments (Continuing Operations Basis) % of Total % of Total (RMB’000) 1H2017 1H2016 Change Revenue Revenue KIS 181,131 17.2% 155,568 17.7% 16.4% K/3 101,282 9.6% 106,486 12.1% -4.9% EAS 122,145 11.6% 107,992 12.3% 13.1% Others 16,129 1.5% 9,373 1.1% 72.1% Total software license
Slide 47: Total Revenue by Sales Channel (Reported)
Total Revenue by Sales Channel (Reported) % of Total % of Total (RMB’000) 1H2017 1H2016 Change Revenue Revenue Management Software 771,836 73.2% 718,294 78.7% 7.5% business - Direct sales 118,136 11.2% 106,816 11.7% 10.6% - Indirect sales 302,551 28.7% 285,407 31.3% 6.0% - Services 346,063 32.8% 316
Slide 48: Total Revenue by Sales Channel (Continuing Operations Basis)
Total Revenue by Sales Channel (Continuing Operations Basis) % of Total % of Total (RMB’000) 1H2017 1H2016 Change Revenue Revenue Management Software 771,836 73.2% 700,149 79.9% 10.2% business - Direct sales 118,136 11.2% 94,012 10.7% 25.7% - Indirect sales 302,551 28.7% 285,407 32.6% 6.0% - Service
Slide 49: Other Gains
Other Gains (RMB’000) 1H2017 1H2016 Change VAT refund 79,697 77,077 3.4% Government projects 11,256 10,473 7.5% Rental income - net 32,004 34,769 -8.0% Others 4,295 10,151 -57.7% Total 127,252 132,470 -3.9% VAT % of Total Revenue 7.6% 8.4% P49
Slide 50: Selling & Marketing Expenses
Selling & Marketing Expenses (RMB’000) 1H2017 1H2016 Change Advertising and marketing 83,873 75,625 10.9% Sales promotion 56,231 50,388 11.6% Salary of sales persons 244,860 216,479 13.1% Project cooperation fees 80,889 73,241 10.4% Traveling 19,160 15,287 25.3% Fixed costs 29,367 27,556 6.6% Others
Slide 51: R&D Expenses
R&D Expenses (RMB’000) 1H2017 1H2016 Change Salaries and staff welfare 158,265 126,665 24.9% Option & restricted stock expense 8,166 9,617 -15.1% Fix costs 10,196 8,323 22.5% Travelling costs 1,708 1,560 9.5% Others 629 583 7.9% Total 178,964 146,748 22.0% R&D % of Total Revenue 17.0% 16.1% +0.9pts
Slide 52: Administrative Expenses
Administrative Expenses (RMB’000) 1H2017 1H2016 Change Salaries and staff welfare – G&A 81,782 68,924 18.7% Option & restricted stock expense 18,175 22,440 -19.0% Professional service fee 9,411 6,154 52.9% Traveling 1,684 1,422 18.4% Meeting expenses 1,158 384 201.6% Provision for doubtful debts 15,
Slide 53: Balance Sheet Overview
Balance Sheet Overview (RMB’000) 30 Jun. 2017 31 Dec. 2016 Change Trade and other receivables 356,344 315,241 13.0% Cash at bank and in hand 1,962,785 2,087,145 -6.0% Total assets 5,904,067 5,977,314 -1.2% Current assets 2,875,038 2,956,719 -2.8% Borrowings 1,448,569 1,496,271 -3.2% Trade and other
Slide 54: SaaS Economics
SaaS Economics P54
Slide 55: 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 56: 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 57: 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 incremental leverage Low Time T1 T2 T3 P57
Slide 58: Thanks
感謝 ありがとう ขอบคุณ Thanks 谢谢 terima kasih P58
Slide 59: Contact Us
Contact Us •Steve Zhang General Manager Investor Relations & Securities Dept. 86 (755) 8659 5896 szhang@kingdee.com •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 2