Kingdee International Software Group Company Limited (0268.HK) Earnings Call Transcript & Summary

Good morning. Welcome to Kingdee International Software Group Company Limited 2023 Annual Results announcement. First of all, please allow me to introduce the management. They are the Chairman of the Board and CEO, Mr. Robert Xu; President of the Kingdee Software, Mr. Jason Zhang; Executive Director, CFO, Mr. Bo Lin. And now we would like to have the CFO, Mr. Bo Lin, to introduce the Kingdee's 2023 annual performance and development strategy. Welcome.

Dear investors and shareholders, good morning. Welcome to Kingdee's International Software campus, and this is the first time for us to use this new building. Welcome. And now I would like to give you an introduction about the annual performance of 2023 of Kingdee. So I will briefly give you introduction about 4 parts, the first are financial reviews and Kingdee Cloud business update and Chinese enterprise SaaS market outlook and also appendix. So first of all, when we look at the overview of our business last year. So we could see that we've transformed our business model in the last year that we grew it quite good and with very high-quality growth. So the group revenue increased by 16.7% and the subscription ARR reached 33.1% growth. And so here, we could see the operating cash flow that increased by 74.5%. And in terms of the net loss attributable to shareholders, and there was still a loss, but here, we could see that the loss still decreased for 46.1% and so -- that's because we have transformed our business model. And so now we have to contract all the liabilities. But worth mentioning that is about our cash reserves that we have CNY 5.7 billion in cash reserves. That means we have very limited and low loans that -- with the bank, so we have sufficient cash reserves which give us a very good foundation for the future development. And so now we focus on the platform plus finance and HR and taxation and ecosystem. So we are committed to become the most trustworthy enterprise service platform. So that we would like to help our enterprises to achieve the EBC. And in last year that we've won a lot of awards. And for example, that we've won the our #1 ESG rating in China software in The Sustainability Yearbook 2023. We also received a lot of recognitions from our clients. So I just named a few here. And worth mentioning that is we provide services over half of Chinese top 500 companies and top 500 companies that in China. And we also make some our summarization and conclusion that we serve over 43% of the specialized new companies. So many people ask us that why that the fee continuation and also gain, which is really different from the macro economic development because for our Galaxy products, we provide our services to the middle-size specialized and new companies. So they have very good potential. And how about our business performance and over the last 3 years that we are able to have the CAGR 19.2%. And there was another line I would like to mention and so for -- in terms of profit, we could see that our cost continues to increase because it's kind of cost driven. Actually -- and we can see -- and that we can see in 2023 that the revenue grew by 17%. At the very same time, our headcount growth maintained at 2.6%. So after said that, we've already gone through the massive investment transformation, and so we are going to enter into a new period of harvest. So the cost will continue to slow down in the coming few years. And so here, we can see about the financial summaries. At the top line was CNY 5.6 billion, and we have a very good operating cash flow. And in terms of the net profit, I have to mention that we -- in terms of the gross margins that would increase by 2.6%. So this is our business model. So in the future that we will have higher subscription income and we will have more control about our expenses, and that means in the future, we will have higher profits. And so here, we could see when we look at the operating expense, we could see it dropped to 4.5%. And in recent years, we focused on about growth of the cloud services. And so here, we could see the business of the cloud services increased by 21.3%. And so here, we could see we also have some onetime income. And for example, we have the Stellar and also Galaxy. And we also have the Cosmic GPT+X. So we provide some services and deployment for some large-sized enterprises. And so that's the one-time fee. And so here, we can see that's why there was a 1% of the absolute revenue growth. And in terms of the ARR, it's one of our key performance. So we could see we have the subscription priority and AI priority. And so here, we could see for ARR increased by 33.1%, and also SaaS is a very good racetrack. It's difficult, but I would say it's a very good racetrack. So there is term to describe this ARR, that is it has a long way to go and have so many difficulties, but we could see the renewal rate is quite good. It's popped up and so that means in the future, when we get more subscription and then our gross margins will continue to grow. And how about operating expenses. And so here we could see, we have to lower down the operating expenses. And just like I mentioned that we have the headcount grew by 2.6%. And now our business is expanding. So the headcount will continue to grow. And in terms of the operating expenses, we could see that the most of -- the majority of that is still the sales and marketing. And for the administration and also general administrative that actually decreased by 1.8%. And in terms of R&D, also had a 1.2% drop. So we will continue to streamline our expenses. And so here, we could see why, in terms of R&D, that is not grow as fast as our revenue. So because when we have the account transformation that the multi-platforms actually were making investment in R&D. And if we're in the future that we will not reduce the money make into R&D, but we will ensure a higher conversion rate of R&D. And so that's the financial review. And now I would like to give you an introduction about our Kingdee Cloud products. And the first one is Kingdee Cloud Cosmic and Constellation. So here, we could see contracts signed last year, CNY 1.4 billion, and new customers, 647. ARR grew by 48.7%. And so the NDR reached to 105.3%. And so for Cloud Cosmic that we have signed significant clients such as the Sino chemical and also Chinese building materials, et cetera. These are big clients. And today, we are here in this building. You can also see some of our product demos. So you are welcome to try out to have a personal experience about our AI product. And so Kingdee is paying great attention to the AI foundation model. So logistically speaking, and that we are now improving the efficiency and the experience of AI. We will continue to deepen our product and to iterate our products. And so here in this slide, I'll give you a brief introduction about our AI products. And so here, we can see that Cosmic GPT, we define it as the best AI model for enterprise management. So this Cosmic GPT is able to satisfy the different needs of different clients in different industries. This is one of the application scenario of Cosmic GPT+X. So you can personally experience this product. I just show you some snapshots. So in the past that what kind of the IT setting and with AI model, what can we do? And so in the past, we just -- we can just type about key words. But now the AI model -- foundation model is able to understand the intention and to generate some answers and is able to understand some of the key risk factors that amount contracts. And so it's so important. And in the past, it's only able to match templates, but now with AI, it's able to have a faster response of generative content and is able to enhance the prediction and also provide expert opinions. So here, just some of the application scenarios. So we will continue to deepen our services. And for example, here in this case, the Cosmic GPT application is able to have intelligent Q&A. And for example, now we have many of you that need to use Excel and to develop some of the graph, but not everyone is able to have very good data analysis. But in the future, the Cosmic GPT application, and we are now able to provide conversational data analysis. And so here, for example, with this conversational data analysis, you can just directly ask questions to the system and to get the results very quick. And so now I would like to give introduction about Kingdee Cloud Galaxy and so we continue to enhance our leading market position. And so the income of this Galaxy is quite high, so here we could see, it's able to maintain to CNY 1.952 billion with a growth rate of 16.2%. And so the NDR was 97.2%. And so here, we could see that we have a lot of the new customers, 39,000 new clients. We also have some new clients such as REPT Battery, et cetera. And so these are just some of our clients that to show you our market competitiveness. And this is a very important graph for us. Why Kingdee is able to exist in the SaaS business model? And so when we look at about this Galaxy, we could see the revenue continues to grow. And when we look at this one, that the profit margin is at 22%. So including that we have the Galaxy enterprise and Galaxy standards, we also have Galaxy flagship. So that means, with the Galaxy flagship, we are able to increase by 30%. So we are now restructuring the business of Galaxy and therefore, the profit margin of Galaxy was now 22%. And we believe that in the future, all of our products is able to have more than 20% profit revenue. How about the global market? So Kingdee Cloud Galaxy actually has already helped over 1,000 companies to go in global. And even though the revenue account about -- to our total revenue was not very high yet. It's about 1% to 2%. But still, we are working on about the targeted markets. So we will have more compliance and localization and more revenues that's generated in those companies such as Vietnam, Singapore and other Southeast Asia countries. And so here, the Cloud Stellar and Cloud Jingdou also continue to grow very fast. So when we look at about the revenue, we continue to manage to make this Stellar and Jingdou penetrating into more enterprises. So here, we can see the current revenue of the Stellar and Jingdou that is 1.08% with the growth percent of 25.4%. And so here, we could see that for the NDR that Jingdou was 86.9% and Stellar was 90.8%. And next, I would like to give an outlook about China enterprise SaaS. And so here some of the data that originally from IDC and Gartner. So here for PaaS market that by 2030, we believe that there would be CNY 23 billion. Of course, this number actually are less focused on about our targeted market. It's estimated by 2030, according to Gartner, that the SaaS market that is able to reach CNY 47.5 billion. And we will be focused on -- about the finance management, including the accounts closing, consolidate and report. And so the market share is there, CNY 47.5 billion. And these are the products. Then how do about the SaaS market? So by 2030, that the market size for the SaaS human capital would be CNY 44 billion. So the core HR that will be upgraded to automated. And so that means we are able to automatically upgrade the talent development and management market penetration. And so in May, we also designed some management practice for Huawei, and these kind of the solutions actually satisfy the majority of the needs of those international companies. And this is our partner ecosystem that Kingdee is continued to build that win-win and co-creation ecosystem. So we work with very important partners in terms of the AI voice recognition and SaaS, and so here are some of the customer satisfaction figures. So we will continue to improve our customer satisfaction. And so here to see, we've received many letters of customers' appreciation, and the satisfaction rate that actually reached 94%. And in terms of service compliance decreased by 45%. So we still believe we are making progress. At the very same time, we will continue to improve that. And every year that we provide success for our clients to transform to digital business model. And so we also consult with our partners so that we could continue to improve our business flow. Then how about our future? The 3-year target for 2024 and 2026, our strategy, that is the subscription priority and AI priority. So we believe that group revenue will still maintain 15% to 20% CAGR. And in terms of the subscription ARR, that we will have 30% CAGR. And so many of you that asked me, how do we define our profit or revenue? So based on our current business, we believe that we are able to have 50% of the operating cash flow and so we are able to maintain such growth in terms of revenue. And there was a little bit change of the profit because for our internal KPI, we would like to make a balance. But in terms of the information disclosed to the public that we will make it quite a balanced -- we believe by the next -- in the next 2 years, we are able to make the balance. So that's all for my report. Thank you.

Thank you very much for the presentation from the management. And now it's the Q&A section. [Operator Instructions].

First of all, congratulations for Kingdee on such a good result in 2023. And the analyst that from the Tianfeng Securities Research Institute asked 2 questions. And the first one that is about the Galaxy. The Galaxy client base actually are very good business that in China. So my question is how would you penetrate -- how would you enhance the market penetration of the Galaxy product?

Thank you very much for your question. Yes, Galaxy is one of our fees product in terms of cloud services. We have Galaxy enterprise, Galaxy standard, 2 versions. And in the last 2 years, that we also launched a new version of Galaxy, which is Galaxy flagship. And especially in recent years, Chinese government that -- is encouraging the development of the specialized and new enterprise. And so these are the [ best batch ] of the high-quality customers. And so here, we could see for the specialized and new companies, we are able to secure 43% of the market share. And so we also would like to work with our key partners that to cover the majority of the specialized and new companies. And this is actually a market segment that Kingdee has been doing very well. And so we will still focus on the specialized and new companies. At the very same time, we will also have -- we will also extend our network to help more Chinese companies to go in global. And so we will focus on about 10 cities around the Yangtze River and also Pearl River Delta and Beijing. So these 10 cities actually that accounted 80% of the Chinese company is going global. So that would be our focus.

And my second question is about AI and in the past few years that AI has always been the key topic for investment. And we also mentioned -- we also noticed that the foundation models developed in China such as the many -- the foundation model that in China like Kimi. So my question is, in the coming 3 years and your AI application in terms of finance and also the customer penetration and also model exploration do you a specific KPI?

It's a very good question. Kingdee that is working on the AI in such a background. And so our coming 3 years strategy is quite obvious that is the subscription first and AI first. So the mission of Kingdee is that to ensure every user is able to have a super intelligent AI assistant. This is our long-term target. AI priority or AI first actually means that based on our Kingdee's professional model that we are able to have those AI functions. So on the base of those open sourced, the foundation model that we are able to develop -- we are having our own professional foundation model, such as finance models and HR foundation models. So each one of our AI function is must be the AI native. And how do we satisfy the needs of our clients? So first of all, we will satisfy our clients' need by AI rather than the traditional development. And based on that, we also would apply -- advertise our resources, investments and talent and the talent recruitment in terms of AI. So that is the specific content of our AI priority strategy. And in the past, ERP. ERP actually is a very good integration of the information process. And in the future, we believe that ERP will further improve with audio feature and also the video feature because now with the AI development, for example, recently The Turing Test has already showcased that AI, the reasoning capacities will be twice or 3x of that of the human brain. And in the future, I will beat that figure, will be 1,000 times or even 10,000 times. So Kingdee, as a professional software management service provider, that we would like to ensure every professional will have a super intelligent AI management system. And last year, we've launched the financial foundation model of Kingdee. And in the future, we will launch a series of the specific and professional applications based on the various scenarios. So in the past 10 years, we've been -- we've been keeping investment. So we come up with the cloud service. And so here, you can see that in cloud-service market, Kingdee is ranking the #1 in the market. And so we succeed in the cloud service. And how about in the future? That in the future, we will focus on the AI management assistance. So that is our target. So Kingdee is solid and excited. And we are looking forward to the AI future. We have sufficient imaginary, and we have powerful creativity. We are confident we are able to incorporate the data and application scenarios we accumulated in the past decade to combined with AI, to create bigger value for our clients to improve efficiency, reduce the cost, especially to help our clients to restructuring their experience and to restructuring the process of decision-making. And in this way, we are able to enable every employee in our clients' company that have a super intelligent management system. And in the past 40 years since the reform and opening up, the Chinese development has benefited us a lot. And in the future that we need to give a full play to the dividends of the high efficient management and to increase the labor productivity. And so with AI, I think that efficiency improvement target will be achieved. So it's quite inspiring. And so this year, I'm really excited to have the AI business build for Kingdee.

Next, lady in the front line, please?

I'm the chief analyst from the China Securities Construction Investment. Thank you very much for the opportunity. And so in terms of AI that since last year that Kingdee has already incorporated AI applications with your various Kingdee products. So I wonder what your clients' feedback? And now we also see many the AI foundation model company also provide some of the smart tech and fintech products. So what is the competitive advantage of Kingdee's AI products?

Yes, currently, we've already launched some of the application scenarios for AI. We received very good feedback from our clients. One is Hisense. And so then when -- Hisense and when Hisense is recruiting talent from the global scope, and that Hisense used our AI HR platform. And then our AI product is able to -- automatically to screen the recruitment the JD and also to match the right talent. And at the very same time that the individuals can also match their own capabilities through our AI product. And so that from the employ's side and also employee side is able to improve the talent matchmaking efficiency. And we also have a specific application scenario of the contracts, especially in the construction industry that it always has a large volume of contracts. Every copy of contract may be thousands of pages. So it's time consuming for the human to read out all of those contracts. And now in the past that AI can only just focus on some of the segments or the characters. And now with the solution of the Kingdee, it's able to recognize some of the high-risk factors that's in a contract. So that's quite important and beneficial. And another application scenario that is in the finance sector. And so just like Mr. Xu mentioned, our target is to ensure everyone will have a super intelligent AI assistance that should improve the efficiency and save the time. So now we have the data analysis and also the inquiry of the financial systems, we have the AI applications. So we also will launch more application scenarios for different scenarios to enrich our product metrics. And actually, we are very close to our clients. So we will develop more and more specific application scenarios. And secondly, we have our advantage in terms of the data accumulation. And just like to mention that we are able to have a strong computing power and which will make us better than the other like by dual Microsoft. And another explanation that is we have our requirements for R&D that is to use AI to empower our variety of products. So we continue to innovate our products. We will use the AI -- primitive AI that to enhance our best performance. And so we will continue to make investment in AI. And one very important advantage for Kingdee that is in terms of the enterprises management software that Kingdee is capable to have the largest size of the public cloud clients. So that's a very important base for the future AI. And so if your AI that is not round on the open cloud service, that will be not as competitive as Kingdee.

And my next question then is actually Kingdee actually won one of the billing and of the Sino chemicals. So in this bidding, specifically, what is the major features that Sino chemicals that are positive about our Cosmic GPT? And so this bidding also ensure that Kingdee's product is able to launch and practiced.

Yes, in true that Sino petrol or Sino chemical, is one of very important [indiscernible] enterprises and -- so this time. And now we've actually used the Cosmic GPT that should help it to put together a smart office solution. So that means the Cosmic platform is providing solutions for the Sino petrol, not only from the financial scenarios, but also the entire business management flow. And so I think this bidding has already improved our capabilities and the maturity of the Kingdee Cosmic platform. Thank you.

And I also would like to add on that because we have a lot of investors that join us online, and so the online investors cannot see our AI demo. And so we have investors. You here join us on site, you could see many of those scenarios. We not only work with the Baidu, also Microsoft and also some new emerging platforms such as Kimi. Next question?

Thank you for the opportunity. I'm from Guangfa Securities. I have 2 questions. First question is about Galaxy because Kingdee Galaxy that increased significantly in terms of number of clients and it also grew very fast. So I -- my question is -- and that it means that it will create more pressure in terms of app. And on top of that, we could see in terms of the contract business. Were there any changes in terms of Galaxy?

Thank you. The Kingdee Galaxy, it has a large size. And so we hope that the Galaxy will continue to make competitive advantages. So I believe that the revenues that generate from Galaxy will continue to account a higher share of our total revenue. So you can see that the growth rate of Galaxy is still quite high.

And another one is about the Cosmic GPT -- Cosmic. And Cosmic government applications such as the small manufacturing supply chain. And so could you give us the evaluation about the maturity of the Cosmic in terms of smart manufacturing supply chain in the coming 3 years.

Now Cosmic actually is for the complicated and large-scale enterprises market. And therefore, it reflects the Cosmic to have very in-depth understanding and accumulation of the specific requirements in this industry. So for the Cosmic product that is able to focus on some specific clients, so this year, our practice that is we focus on about our benchmark clients, and that should make our product capabilities and our personnel capabilities that more mature. So with this breakthrough, we will continue to extend our Cosmic applications. And for example, that actually last year, for example, in the wait time and level, you could see in our reports. It is one of very important Chinese agriculture machinery and equipment company. It's very complicated, the machinery industry. And so in the past, it used some index applications and which actually are products of our foreign peers. However, and as -- at the end of 2022, that this client, the agriculture machinery company requested Kingdee to replace those index applications because it's focused on about the situation. And therefore, we started this project for nearly 8 months, both Kingdee side and our client side that make huge investment. And we believe it's a very meaningful project. And so in the past years that we've consolidated all of those very key business process pain points. And so we can see -- and in the past, the monthly settlement was almost around 80 hours, means 3 days. How about Kingdee? The Kingdee is able to make it into only 8 hours. So that means that there's 10x improvement. And this project also showcase that Chinese software Kingdee is one of the best around the world. So we will continue to work on some of these clients. Okay. Next question.

Thank you very much. I'm from the Nomura Securities and thank you so much, and congratulations for the results in last year and a very positive outlook in the coming 3 years. And so my question is about our coming 3 years growth. So how do you see the macro economy in China for the small and medium sized and also large-scale enterprises? So what's the specific impact of the macro economy will be -- will have on Kingdee? And especially, we could see there are also some potential opportunities. For example, that probably the AI business that will it be slowed down? Or will it be accelerated?

Thank you for your question. And so I believe that the macro environment is sometimes quite difficult to grasp, but I think our advantage is quite obvious. First of all, we have able to build a very high-quality client basis. So -- and for Kingdee's products actually is more horizontal applications. So we will not be impacted by some macro environment. For example, because our product could actually generate more revenues and also to save more cost. And therefore, it's one of the necessities that must be required by many of our companies. Because I'm in charge of the finance in the company, so I would like to share with you more examples as we could see that in the coming -- in the past 2 years, the generals and also administrative fees that job continuously for 2 years. And for example, that we have online e-invoice, the electronic invoice, actually saved us nearly $1.2 million expense in terms of the express delivery cost. So that amount -- that's a big amount, right? That means just nearly half a year, we are able to save 600,000, right? So only one very small step could save us a lot. For example now in Kingdee, all of our employees that could take about the money reimbursement within 20 minutes. So this is one very specific application scenario. So the reason I shared with you this case is that even in such a native macro business environment that using AI or using IT is able to help enterprises to reduce the cost. So that's a very reasonable investment. So in the coming 3 years, development driven, and we also have consensus in the management team. So we also consider about the macro environment. So we will pay more attention to our development risen or steps. And for example, that we still focus on the high-quality growth. So our revenue CAGR target has still 15% to 20%. And so we can see our headcount that continues to grow. So we just would like to -- that in the finance management, I have the pressure. But I also -- I'm very ensured that with our technology, we are able to lower the cost. So we are able to have more operating cash flow and to make it to breakeven in the coming 2 years.

And my next question is about AI relevant question. And since last year, Kingdee that have some benchmark clients of the Cosmic GPT. So may I know that the Kingdee has a clear structure of fees? And so how about the consideration of the returns of the investment. And just like you mentioned that we will have the headcount personnel will grow by 5%. Is it because of the AI headcount increase?

Well, we actually -- I think, in terms of AI, we focus on about the online traffic, but now we could see those -- some of the foundation models also has expensive ratings and rates. So for our foundation models that we will focus on about the vertical model. And in the future, the rate matrix or the fee matrix of AI that will be charged by traffic. And on top of that, the Kingdee's strategy is AI priority and subscription priority. And so one of the huge part of our investment this year that is AI capabilities, of course, about the talent. So we will continue to improve our computing power. And we will focus on our investment in the next racetrack, for example, the enterprises management software. So back to your question, yes, we will ensure there is enough and sufficient talent for our AI business growth. Ladies and gentlemen, please? And thank you very much for the question.

And then so first upon from Morgan Stanley. And so congratulation to the results. And so here, we could see for the OPM Galaxy had already reached 22% OPM. So my question that is in terms of the profit margin, what is the profit margin for the small and medium-sized or small and micro enterprises? And how about the cost profit margins? My second question. Last year, the gross profit and gross margin increased a lot. And so there is a one key words that quite popular in United States, which is cloud optimization. That the cloud optimization is able to lower the cost, especially reduce administrative and general cost. So how about the -- is there any ways to lower the administrative fee and improve the gross margin?

Okay. So clear cut answer that is yes that we will have clear and obvious increase of the gross margin increase because we could -- and then -- and we able to see that the cloud service platform continues to drop its cost. For example, the Ali Cloud, it has disclosed its cost that will be lower to 20%. So we are thinking about to have another round of negotiations with Ali Cloud to lower the cost. So yes, indeed, we are able to increase the gross margin. And so we could -- with the technology advancement and also the better commercial cooperation, we are able to make better gross profit. And so for each product, we have different types of the gross profit. So for the small and micro-sized enterprises and the gross margin was not as high as the cost mix. But I believe that with the development of small and micro business. The gross margin will continue to grow. And since last year -- and that we actually select some of the projects on purpose. So we actually gave up some inferential clients, but we believe that we will -- we focus on some of the benchmark projects. But in the coming years, we will cover more clients so that we are able to increase the gross margin for Cosmic as well.

And so thank you very much from analyst from CICC. And in the past 2 years that Kingdee has improved a lot in terms of the cash flow and the profitability. And in the coming 3 years, the strategy is a subscription priority. So how do you see about the targets of the large-sized enterprises? And for example, that the new -- the value of the new contracts and the payment collection. And so on top of that, I also would like to know about the delivery capacity of the Kingdee's product?

So I will focus on about the gross profit. So based on my understanding and based on my observation that when the Kingdee that stepped into a new stage, the gross profit must be increased continuously. So we -- my question is quite simple -- my answer is quite simple. We do not need to just to make a huge progress. We just need to ensure that the stable, high-quality growth of the subscription and the stable, high-quality services, and that will create more gross profit, right? So as long as there is a growth of clients and subscription, we will have higher profit. And of course in -- if we have some key projects in terms of partners, that will improve our scale? Yes. And for this year, we focus on our large client cooperations and to improve our delivery capacity. And so last year about the outsourced. Outsource delivery that actually reached around CNY 580 million. So CNY 580 million actually were completed by our partners. And so Kingdee will continue more with those big 4 accounting firms. So we will continue to work with the KPMG and also -- and so we also would like to have some cooperation with the Chinese software and also the -- Chinese software, et cetera. And so we will continue to have more contact with our partners. And we also would like to work with enterprises that should enhance our delivery capacities in terms of the big enterprise markets. For example, the [ Revo ]. Now we have a very good cooperation that in terms of the agriculture machinery, so we work with hand in hand together. And for example, in life science, we work with the [indiscernible] together. So we will continue to focus on our work in terms of subscription increase. And in terms of the large enterprises market, we will continue to work with the top partners and consultation agencies as well.

And so I'm from the Citic Securities [indiscernible]. So I have 2 questions. The first one that is the large clients. And as might -- based on my observation that Kingdee has some selection in terms of the clients, so what is your criteria in selecting the clients? And so how do you ensure the profitability that in large clients? And my second question is about the cooperation relations that with Huawei. What is the progress and outlook?

And yes, this year, we have 2 targets for the large enterprise clients. The first one that is to ensure about the market scale. Another one that is to secure the market position. So Kingdee is paying great attention to our clients' feedback. We value our brand names. So we -- in selecting our clients that we will ensure all of our partners that are committed to transforming digitally. So with the digital target, we are able -- if we are able to have nearly 90% of the Kingdee products to cover the business flow, then we will select that client. And we also would make evaluation rather that a potential client that is the top player in ADAS industry and whether it has a profound understanding in terms of enterprises and business management. And so this is how we select our clients. And we also have some strict process to evaluate the potential clients. And so we will see that, that potential client is capable or is it in line with our delivery capacities. And -- but still, I believe those large-sized enterprises and companies is a very key market because now the entire nation, China is encouraging the digital capacity construction, especially in the state-owned enterprises. So we will speed up in terms of the large clients. And especially in the past few years, we've already accumulated a lot of the experience and also great deliveries with our clients, we are able -- we are very confident about our products and also our employees professionalism. So we will make that performance better. And in terms of Huawei cooperation, that Huawei is a very important partner for Kingdee. And so Huawei's entire human resources system is using Kingdee's solutions. And so now -- so I think, first of all, we need to satisfy the demands and the needs of Huawei itself. So we also would consider that various enterprises will have their differentiated requirements. So in the past 3 decades that we've encountered round and round of challenges and round and round of competition. We will continue to develop. So I think for Kingdee, it's the same, we will continue to improve our capabilities, and we will also to work with a high level and high-quality partners, then we could grow together and improve together. Okay. Thank you. Final question. Wendy, please.

Thank you very much. I'm Wendy. I am an analyst in UBS. I have questions. How about the returns on the shareholders? So what's the preparation in this regard? And another question is about going global. And just like previously that you've mentioned that you will have business deployed in Middle East. So in 2024 or in the coming 3 years, what's your plan in going global?

Well, going global is quite a heated topic. And we can also see our clients also are accelerating their business in the global landscape. And so in this year, we will accelerate the business of going global. And so just like I said, we will have a very important deployed and market promotion in 10 cities in Yangtze River and also the Pearl River Delta. And in Southeast Asia, we will focus on the Singapore and Vietnam. And we will -- that would be the first station for us to going global in Singapore and Vietnam. And so we will deploy our marketing and delivery team over there. And in the next step, we will consider to build up the team in Thailand, Malaysia, and Indonesia. So those countries will have our marketing and sales team. And following, we will consider our business. That means in the following 3 to 7 years, we probably will develop our teams in Europe, Middle East and North America. And so that would be the first 3 years. And I'll focus on the Southeast Asia. And then the second or third year's plan that we will make us as the first software company in Asia. And then the -- another third year, that would be the world's first class company. And I also would like to share with you about the returns on the shareholders. So actually, Kingdee is quite clear. We have a definition of our rich reformation model. So we've already shipped into the new period of harvest. And so we could see -- in terms of operating cash flow, it's quite good. So we will continue to make improvement in cash flow. And so now we could see we also focus on about shareholders' value and returns to shareholders. And so in the first January and February, and so that's quite obvious. And that we actually nearly 400 million that have been actually [ canceled ]. So that would be around 1.1% of our shareholders' returns. So we will continue to consider about the shareholders' return.

So now we would like to have the CEO, Mr. Xu to share key outlook in terms of Kingdee.

Three points to make. I often mention 3 lines. Economic is not actually in a downward direction. It's actually finding a new growth point. There is a market change instead of a market loss. And another line that is great companies are always in the midst of 3 changes. And so in such a Chinese economy, we can see that every enterprise is now transforming in long term and in the short term. So that means the era of change and the era of innovation also present new opportunities for Kingdee. So that's the first point I would like to make. And the second point that is AI is the fourth industrial revolution. And for Kingdee, it's in IT industry. And we've witnessed the changes in over years and every new technology that actually is facing fundamental changes within 10 years. Before 2000, that's the era of PC. And then came by the era of Internet and then era of AI. Kingdee has accumulated 30 years' experience in terms of the business management. And the third is about the data and the scenarios. We hope in the next 3 years, we are able to help every enterprise to have a super intelligent AI assistant. This is our target for the coming 3 years, and that target will give us more opportunities in terms of innovation. So well, thanks again for all of the investors. Thank you for your support and trust for Kingdee. Over the 30 years development that Kingdee has achieved a favorable market position. And in the next decade, in 2030, Kingdee is strive to become the world's first software company in Asia and in the world. Thank you very much.

Thank you very much. And so thank our management team and also thank all of our investors. That will be the end for today's meeting. Thank you.