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

Investors and analysts to join us for the Kingdee International 2024 Annual Results Announcement. First of all, please allow me to introduce the management team with us here today. They are Chairman of the Board and CEO, Mr. Robert Xu; President, Mr. Jason Zhang; Executive Director and CFO, Mr. Lin Bo; Vice President and General Manager of R&D Center, Mr. Liu Zhongwen; General Manager of the IR, Mr. Wu Chao. Ladies and gentlemen, now let's welcome Executive Director and CFO, Mr. Lin Chao (Sic) [Bo], to present us on the 2024 annual performance and development strategy, please.

Good morning, distinguished investors and analysts. It is my great honor to be here to walk you through our 2024 annual results. First of all, I will walk you through the financial review, Kingdee Cloud business update and outlook along with the financial appendix. Let's take a look at the financials. The revenue grew by 10.2%, reaching RMB 6.26 billion. ARR grew by 20%, achieving RMB 3.43 billion. Net loss attributable to the shareholders being narrowed by 32.5%, where some of the investors, you may just check our financial statement. You can see that deducting the nonrecurring items, we are very close to breaking even. By the end of 2024, our operating cash flow was RMB 935 million, even meeting the guidelines provided to the investors. Our previous commitment was RMB 900 million, grew by 43.1% on a Y-o-Y basis. Last year, as been shared with many investors, we are going to be active for the share buybacks. Last year, for the buybacks and the shares that has been canceled or completed. And altogether, it was 110 million shares in total. And the completed ones are 78% accounted for 3% of the total share outstanding at the beginning of 2024. So by the end of 2024, our cash and equivalents was RMB 4.65 billion, we are still very confident on our overall financials. For the past few years, you can see our revenue, no matter how the external environment may look like, our revenue continued to go up. For the past 8 years, our compound annual growth rate was 60.4%. Let me just share with you -- I have already shared with many of the investors, our ARR growth and the subscription ARR growth can lay a very solid foundation for our high-quality growth in the year of 2025. So what is the future of the Cloud service business? And it can help to generate overall returns to our cloud transformation. For example, you can see our contract liability is already reaching a very high level. That is the potential secured revenue we can register. So in other words, in 2025, those are the incremental revenue that we're going to have. The green bar represents the accounts receivable. We still keep it at a very low level, only RMB 140 million. When you do the financial analysis, you can actually compare our performance with our peers. So generally speaking, for Kingdee, we are a company having a very low accounts receivables. And also the contract liabilities continue to go up and account receivables always kept at a very low level. On this slide, we are actually showcasing the profit improvement for our cloud service business. This is a slide we present to you every year at our result announcement. You can see the upper dot showcase the profitability in H2 and the lower dot represent the profitability in H1. So in H2 of 2023, the profit used to be 3%, where in 2024, this number stood at 6%. We do believe in 2025, we're going to continue to improve our profitability. Well, the profitability fluctuation are due to the timing of the revenue confirmation. So that's the reason there is a gap regarding the profitability in H1 and H2 of the year. But at the same time, the Cloud subscription business also continued to grow our cash flow to the historical high number. This is a flow chart showing you our cash flow changes for the past few years. In 2021, when we started our business transformation strategy, we have already stopped the traditional licensing model in our channel. By then, we do have a low operating cash flow. And now this number has already been rebounced to more than RMB 900 million. And in next year, we hope this number could be more than RMB 1 billion. Let me also share with you the operating exchanges rate. You can also see that our operational efficiency continued to be improved. including the marketing expenses and administrative expenses. But let me just share with you, all of you are the stakeholders and also the investors of the company, but why our administrative costs continue to go down and why it was growing 9.9% with around RMB 50 million being registered. You know that even if we don't change the total headcount that much, but we do introduce some guidance, and we also optimized the team further. We do have the compensation for the optimized team. So all those incremental growth are due to the human resources adjustment of the company. Well, regarding the R&D, as we continue to go for the Cosmic platform structuring, we have already made a very nice progress. As I have already shared with many of the investors, our R&D ratio, when we reach certain business size, it will not go up further. We're going to continue to well control the investment on R&D. You can see because the traditional licensing channel has already been stopped. And we're going to continue to invest in AI. And I do believe the R&D investment growth will be maintained at a very stable level. Our R&D investment grew by 0.4% on a Y-o-Y basis. Our GP margin is already 65%, the same as operating margin, but all the administrative expenses has been going down. These are all in line with our development strategy. Now let's go for the second part, that is the Kingdee Cloud business update. I surely noticed from many of the investors, you pay much attention to our AI business and our cloud business. I have our R&D personnel in charge of this business to be here to present and share their ideas with you. Regarding the large enterprises business, especially the Cosmic business and the Constellation business, last year, a notable feature was we have more value contracted more than RMB 10 million. It was growing by 100%. The total contracted value reached RMB 2.1 billion last year. We newly engaged 652 customers due to -- we are less impacted by the macro environment, they are growing by 30%. Last year, I told many of you, some of the receivables are not yet been collected. So by the end of last year, actually, we continue to strengthen the high-quality customer operation regarding the large-scale companies. where in 2024, for some large-scale companies, we also leverage VRC to acquire further recognitions from the customers. This is another slide in showcasing you our performance. So you see that for customers who contracted us since 2020, they bring great business contribution to us, especially the large-scale enterprises customer is just like the home type and the effect will continue to be zoomed with continuous revenue resources. For example, in 2020, for customer contracted us, at that time, the total contract value was RMB 420 million, but now the value has already reached RMB 1.53 billion, which has been grown by 3.6 folds. So large enterprises market is truly challenging, but it is a market we are going to commit it for operation, but we're going to be selective on the project and the clients to work with. But why our customer can continue to make a great contribution? Because our product, we're going to respond to the customers' ever-changing needs. Especially, we leverage artificial intelligence to improve the efficiency, help the customer to build their global compliance operation and be agile to the market needs. We'll always be able to provide timely support to our clients with many innovative products and features. This is a slide showcasing you the specific performance. For example -- management having the separate accounting per car. Well, for Tongwei, Tongwei is a comprehensive company. It is also the largest PV company worldwide, where at the same time, it is also a very large feed company. it actually have a very different vertical business. So with this 5 -- the dual-layer ERP for Tongwei company, taking care of their needs as a company engaging business from multiple verticals. All those technical expertise can help us to cover more customer base in the near future. Where for Galaxy product, currently, we already have 44,000 customers. When we just launched Galaxy product and investors told me when we reach customer base 40,000, we should have a good profitability performance. This is right. Well, for Galaxy and for this year, we have a very high market share for the small yet specialized enterprises, we call the [indiscernible] China. So I ask our IR team to list some of them on our slide. I take a look at this slide. Majority of the humanoid robot companies or AI companies are our customers. For example, we do have the more threads, AI innovation or super clouds, where in robotic industry, for example, like Unitree and UBTECH, those are also our customers. This also showcase why our Galaxy product continue to have a great growth momentum. Our Galaxy product also cover some of the first-in-class [indiscernible] companies. while at the same time, in intelligent driving domain, in advanced manufacturing, in life science and in robotics industry, we do have many well-performed customer base. Let me also share with you the Galaxy product that is leveraging AI to empower the management of transportation to support enterprises for high-quality international expansion, while at the same time, our Galaxy has already have the live SaaS. Many of the companies they used to have the privatization, we just charge according to the solution, but our live SaaS can also provide the online upgrading just like the app we have on our smartphone. It is not easy for us to provide such solution for enterprises clients. We have the same platform, same version management, which will help to continue to reduce R&D maintenance cost in the near future. It is also good for us to continue to flourish our industrial ecosystem. I have already shared with you, those are the well-performed companies we have. For example, for Unitree, we do provide per order profit process control. And we also provide KINGSEMI by cutting 30% of redundant materials through standardized management and reduced design change time to 0. For [ Hitron, ] they connected 138 process in 60 days, doubling accounting efficiency. This is actually our standard product for the small and macro enterprises. So altogether, now we have 75,000 enterprises for the Stellar business, where for Jingdou, its customer was 360,000 with NDR of more than 88%. In AI industry, we do have some micro and small enterprises. We do provide them the AI support. AI feature is not only a great attention of our investors, but also for our customers. Many of our customers pay much attention to the development and also hope that AI feature could be integrated into their workflow. This is how Stellar provides value to the small and micro enterprises clients. For example, we leverage the Kingdee Stellar, whose account efficiency could be improved by 50% and whose inventory and the delivery efficiency could be improved by 30%, also help with the repurchasement -- we will use our product to help the customer to quantify the value creation by using our product. Looking to the future, let me see here now, artificial intelligence, especially DeepSeek continue to gain great momentum, especially right after DeepSeek, the AI-related anxiety has been further mitigated. Now people have equal access to artificial intelligence. I do believe we have every opportunity, and we are going to catch up with this great momentum. Well, for Kingdee, we already laid some solid investment in AI. Some research institutes also give reports for AI, especially according to IDC, they believe by 2027, the artificial intelligence total expenses may reach USD 500 billion, where for Gartner, they said in 2027, around 80% of the Chinese company is going to use the multimodal in-depth artificial intelligence. I do believe the trend is going to be accelerated in the near future. Chinese companies are very proactive in adopting new technologies. Let me just share with you a case. I know that for our Galaxy product, we have the BOSS Assistant. And for some clients, the quota was around RMB 10,000 per assistant. Some enterprises, they need 10 or 20 such assistants. For Galaxy in the past, the price per pack was used to be a very high level. But for both assistant, once the products be available, we're going to bring the customer with 20% incremental revenue growth, even if this new product still be tested by our customer, but we're very positive on its future growth trend. AI is going to be every workflow in our clients' business. In 2030, we hope we can become a leading enterprises management company. In the past, we emphasized on Cosmic and Constellation platform consolidation. And now we have already built it into an AI platform. So the customer, they can leverage our platform, just like Agent platform to use our Smart Agent. We do believe the AI agent will help to grow our cloud SaaS business. By having such a strong growth trajectory, it's also going to present incremental growth opportunities like BOSS Assistant. We believe in the next 5 to 10 years, we hope we could become a leading enterprises management AI company in the near future. Why should we mention so? Kingdee be the first mover for the cloud transformation business in China. We have deposited many of data. So you can see we can leverage the multimodal and multiple solutions, we can build a scenario-based application. All this data will also bring us more data, and we have every possibility of growing our enterprises management AI-empowered solution flywheel to position us as a leader in the industry. Let me also share with you our investment in AI. Indeed, in 2022, we have already have the EBC company digital employees. This is actually a very smart agent that can respond to any of the inquiries within just one company. And in 2023, in August, we launched the Cosmic GPT platform in financial and accounting industry. And in February of this year, we'll also be accessed to DeepSeek. In our show door, you can actually take a look at the demonstration of using the DeepSeek empowered solution, and we further integrated with DeepSeek, Daubao as well as other advanced model. We leverage our Cosmic AI platform as a great bridge connecting those advanced large language model continue to empower the smart supervisions and targeted recruitment and also dynamic data capture from the supply chain, helping the enterprises to provide an AI agent to cover the full value chain from the data insights to execution and decision making. Let's now take a look at the video, please. [Presentation]

Thank you. Thanks Mr. Lin for your presentation. Now we're going to start the Q&A session. Let's give the floor to our investors from the offline channel. We will surely leave some opportunities for the online investors, please.

Congratulations on the company of achieving a resilient yet very stable business performance with the challenging macro environment. I have two questions. The first question is regarding AI. I heard that you have diversified AI product. So I'd like to ask you, what would be your philosophy for AI product, especially what would be your innovation compared with international players? How can you specifically take care of the Chinese customer needs? I also would like to ask you one more question. After you talk to the clients, what are those most popular ones among them? What are the products who is going to have a quick cash out? My second question is also related to artificial intelligence. Traditionally speaking, we have the SaaS subscription model. In the near future, there might be some AI traffic consumption. So what would be your charging model in the near future? Is it still the subscription or token-based charging policy? Thank you.

Let me help to respond to your question. First of all, thank you for the questions. First of all, you talked about AI product innovation. You specifically asked what's the innovation difference in China compared with international players? How can we take care of the Chinese enterprises needs? Let me see in the age of SaaS, you see that compared with companies like Salesforce, we may have the late mover in SaaS age. But for AI innovation, I think all the players are at the same starting line, especially when DeepSeek is being available in China and the Chinese AI application innovation being further accelerated. For Chinese companies, especially Chinese tech companies, they are very passionate and adaptive to new technologies, especially for the past 2 years, after the Internet is being further developed, people are very adaptive to new technology. As long as we launch new AI application, it's going to be very ease to promote in China compared with the rest of the world. So what kind of AI products we're going to launch in the market? Mr. Lin has already introduced in the presentation. We will produce the AI platform. We call it Cosmic platform. On Cosmic platform, we're going to roll out sub-service, enterprises management, HR, financial accounting, operations and decision-making innovation features. We're going to leverage large language model as Deepseek and other large language models to continue to speed up the process. Mr. Lin has already shared with you, our R&D team is also doing some internal transformation. We are continue to recruiting the top-notch AI talents to join Kingdee to continue to advance our AI-related R&D. So what are those applications who could have a quick realization? There are indeed many. We are very close to our customer. We have a lot of data. We always keep an eye on the market. Let me just give you an example. Mr. Lin mentioned, we do have the small and midsized senior management both assistant, which is very popular. We have some subscription from the customer indeed. It's still in the infancy stage, but going to have a very good performance in the near future, where in financial industry, we have the multimodal auditing of the finance, which can actually help to further reduce the labor cost for the auditing process, the same as contract management. The second question was regarding the pricing model. Now we still take the SaaS-based subscription model. In the near future, as we get into AI age with the tokens being consumed on the large language model, we may consider token as a possible option for our pricing strategy, but it's still in the exploration stage because everyone has been exploring the right model to charge over the AI-empowered solution. We are very likely to have the new solutions being presented to the market soon.

I'm Mr. Lin, I have a few additional comments. For China, the enterprises have more applications compared with international peers. We also have a refined management. So that's the reason Chinese company are going to take the lead for more AI application. Regarding AI pricing, AI can help to continue to support the renewals and product stickiness. Where many of our applications are being run on the general large language model. So for sure, many token will be consumed in the process. We're going to work with the large language model companies to charge the clients with 2 consumption fees, just like the traditional AI platforms. Now as we have the agent, agent can help to replace certain positions. For example, in our company, we may have a dedicated position to search for the resumes and doing the initial screenings of the HR. But now by having one agent, it can help to do the initial screening of the resumes and the preliminary interview. It can all be done by artificial intelligence. If 1 agent can replace 1 to 2 labor, then we can also charge the service fees according to the replacement. So we're just testing how likely the future pricing strategy might be. On one side, AI would be complementary to our existing SaaS business and AI can also help the enterprises to reduce cost, improve efficiency. Second question, Mr. Tam, please.

Congratulate on the company for such a wonderful performance. So I have the following questions. The first question is regarding the Galaxy business. I see last year, the overall growth being somewhat affected. What is the key reason? Is it because your product structure has been changed? Or is it because the SME IT expenditure has been somewhat impacted. For the Galaxy product, the flagship version or the enterprises version, what will be the projected growth? Do you have any profit outlook on the Galaxy product? The second question, which is also a follow-up question on artificial intelligence. So besides adopting AI product promotion, do we also use AI technology internally to reduce cost and improve efficiency?

Let me just try to answer your question. First of all, for Galaxy product or mid- and small-sized company are very sensitive to the market change. For the past 3 years due to COVID-19, many of the companies being greatly challenged. When there's any external environment changes, the companies will adopt certain cost reduction. Surely, it will impact the market performance. But the central government also promoting SMEs for digital transformation and [indiscernible] upgrading. You can see the Ministry of Industry and Information Technology continue to promote digital transformation for SMEs in more than 100 cities in China. So for the past 2 years, as the momentum continued to be stabilized, for SMEs, they are now seeing ever-increasing transformation. We are also switching from the old to new product. So when Kingdee flagship Galaxy products being rolled out, it's actually in the marketing stage. It is a live SaaS product. It can make sure it's adoptable for private cloud and the public cloud. It can always make sure the user is using the latest version, which can help to further reduce R&D to our company and for the users, their total usage cost would be further reduced. Where at the same time, for Kingdee, we may have further room to improve our management, especially for Galaxy product. As we continue to improve our performance, I should believe in 2025 and 2026, we're going to have a much better growth. At the same time, for the Galaxy was going to have a very strong product growth. I do believe it's going to continue to contribute to the Kingdee entire profit growth. Well, you also asked about the product development. We'd like to build Kingdee as a flagship product. We provide AI transformation to the client. Kingdee is indeed an AI natured company. Starting from 2025, we leverage AI for our digital transformation. First of all, on R&D, we have already introduced the intelligent R&D assistant, leveraging AI to help our R&D team to generate the codes, improving work efficiency and also help to reduce the R&D cost for testing. Well, regarding the business operation, we ask our process and IT team of making sure we use 2 years to empower our internal management system by using AI, including our customer-facing service employees, frontline employees to marketing, to delivery, we're going to leverage AI to empower the whole process. So according to our target in 2025 and 2026, we're going to do in-house AI transformation. After 2 years, Kingdee need to be a flagship model in China software industry in adopting AI. Thank you. Tina, please.

I'm Tina from Citibank. So I have two questions. The first question is a follow-up question regarding profitability on the Galaxy product because on each of your performance release, you mentioned OPM accounted for more than 20% of the profit. But now it seems you have the product transition. Can I kindly ask whether any cost has already been made in H2 of 2024? Do you see any changes due to the micros in H2 of 2024, so that the OPM profitability somewhat has been impacted. Can you be more elaborative on that? My second question has been shared with you in 2024, the company also confirmed the 2025, 3-year CAGR. So can you help to update us how the target is being executed? And what would be the guidelines for 2025? Is it still double-digit profit growth and ready to breakeven?

Thanks for your question. For the Galaxy product, the GP margin continued to go up the same as operational performance. So for Galaxy, the operating profit has continued to go up 20%. There might be some public cost allocation. 20% is indeed something we could achieve. let's just review what has been mentioned. In 2025, as I said, the company is going to be quite cautious in the market. But we are transforming our business. All of our business lines registered stable and very steady growth. The same from the CPI of the customer. Once the economy continue to be recovered, our growth would be accelerated. Even if the macro economy has been challenging, we're still going to register stable growth. So there are some opportunity for us to go for high growth opportunity. But as far as I believe, for the past 2 years, there are so many external changes, especially something out of control, for example, tariff. We, to some extent, have been concerned on that. So we hope investors can truly understand us. When we provide you the guidance, we pretend to be conservative due to the uncertainties in the market. But let me just tell you, in 2025, we're going to have a positive profit and our operating cash flow will continue to grow. [indiscernible] please.

I have two questions to the team. The first question regarding your financial statements. last year, your total financial loss attributable to the parent company was RMB 140 million, while at the same time, you can see that your investment business financial loss was RMB 48 million. Is it also included the company invested in, for example, Doudian, once being IPO-ed, they have some financial loss. My second question was regarding AI strategy. You see that many peers has already released AI agent, especially on Galaxy product line, we have the BOSS Assistant. And I also noticed in Stellar, you have thousands of the clients already in the AI product test trial. So can I kindly ask you what would be the AI application progress on the large, small and mid-sized companies? What would be the time frame, especially about the R&D and development of your key AI-empowered solution. Thank you.

Let me just respond to your first question. The RMB 40 million financial loss already include the Doudian investment. But generally speaking, we have some good and nice returns from other investments. For the property market, the valuation loss was around RMB 50 million. So altogether, the loss would be around RMB 100 million by combining the 2 items together. You know that for the company, we used to have some very low cost when acquiring those resources, especially in the fraud. So we may consider of dispose certain assets to avoid further affecting our profitability that's going to help to make the financial performance be stable. I just bring it up, but it's not been decided yet. AI -- our company is all in AI. We attach great importance to AI. All in AI doesn't mean you're going to skip up opportunities. But let me just tell you, we have to continue our investment. We have to leverage AI to restructure the policies. So for all business lines, we're going to place AI as the best investment options. Of course, we do have the Cosmic platform. We hope that all the small, medium and large companies can all build their own application agent empowered by AI on our platform. I'm not sure whether I responded to your question clear enough.

For your large and mid and small business lines, how you're going to see the time frame of the product launch? I was talking about the Constellation, Galaxy, Stellar and their corresponding AI agent application.

Sorry, it's very hard for me to answer the question.

Let me try to answer the question. Thank you. Thanks for your question. First of all, for Cosmic, we have a very strong Cosmic agent development platform. On that platform, Constellation, Galaxy and Stellar will all continue to develop and roll out AI agent. Our 3 business lines are working together. So for the large and medium-sized clients, we hope we can develop an agent to take care of the large and midsized clients to, take care of their needs because in the near future, the AI agent need to be self-adaptive. It will be adapted to the customers in different industry. So we hope we can do it continuously. Where at the same time, for the small yet micro business, we're going to leverage the existing Stellar. For example, like the BOSS as well as the intelligent supply chain. So what we have now, you ask me who's going to take the lead. We are going to continue to roll out such policy. There is a very confirmed market signal continue to show up. We are working on that.

Okay. Let me make one more comment. large enterprises, small and medium-sized enterprises have different needs over AI. For product, SMEs may be more adaptive to the standardized product. We surely noticed that for product retrofitting, well, for SOEs and large enterprises, they need the co-building. They need more complicated solutions for their application. They also need the private data. With DeepSeek available, many SOE also started to build their local language model. So we're going to make sure our model and our AI platform can be accessed and connected to their model. There is some co-development needed. It still takes time. Thank you.

Thanks for Mr. Lin and Jason. Now let's give the opportunity to the investors online, please. Can we ask someone from the offline channel to raise a question first?

I'm Boris Van from Bernstein. I have two questions to you. First of all, did you see that AI help you to upgrade your product or Galaxy customer acquisition would be further improved due to the AI adoption? Secondly, I see your GP margins improved greatly. I surely believe it's also because you are working with your partner very well. So is it possible for you to share with us as you're working with your business partner, what will be the progress in the near future?

Can you repeat the first question?

First of all, for customer acquisition, did you see because of the AI, the customer acquisitions being further improved? Do you believe...

Okay. This is a question regarding the market. Let me just respond to your question regarding business execution. For Kingdee, many of our standardized product as an ecosystem is our past strategy. For 2025, we're going to leverage standardized product and be executed by our partners. The company have a very clear business strategy that is the packaging -- the contracted partners. For some, the value, which lowers a certain threshold, those execution will be done by our partners. After 2 years business deployment, we have the general product delivery partners and industrial-specific solution delivery partners. We are being selective on the partners we're working with. And we also continue to improve our delivery structure. For large and mid -- large company and small SMEs, they have different needs on product delivery. For large enterprises, we have the professional centralized management. where for SMEs, many of the deliveries been made by our partners. For Kingdee, we hope that we can continue to grow our products, improve our efficiency to empower our partners for ever-improving delivery capacity because ultimately, we hope the customer would be happy with our product delivery. Starting from last year, we already started to work with professional vendors. For example, we are working with CRP [indiscernible] and [indiscernible] and Xinhua as well as we're working with E&Y and KPMG of delivering big projects to Guangdong Energy and the China Merchants Group. So we are working with our partners to continue to improve our product. Ecosystem would be a very important delivery strategy we have in the near future. We also need to make sure our partners being truly capable for the delivery. And then we're going to decide the business need to be delivered by the capable partners because ultimately, we need to make sure we have high customer satisfaction, good product quality and most of all the reputation. We don't want to throw everything to our partners. Otherwise, we are irresponsible for the customers and the partners.

The first question, let me help to answer the first question. That is regarding AI customer acquisition and how it impact the customer acquisition for Kingdee. Starting from March or the end of February, we organized many marketing events. We see the great passion from our customers. For example, on 27th of February, we organized the first marketing event in Guangzhou. We have the customer visit the venue. The numbers were far exceeding our expectation. We have hundreds of people who don't have the seat, but still standing within the venue to listen to the presentation. At the very beginning of March, we have another marketing event in Beijing, also be fully crowded. In this week, in Shenzhen, Shanghai, in our marketing event, we also foresee we're going to accommodate a large number of the audience, always more than 1,000 people per session. So we do see great passion to AI. We are still very positive on this.

Okay. Let's also give the opportunity to the online investors. Let's welcome John Xiao from CICC to raise a question, please.

Hello management team. My name is [ John Xiao Dom ] from CICC.

Sorry, did you unmute yourself?

Can all of you hear me?

We can't hear you.

Can all of you hear me now? Can you share with us the Cosmic and Constellation business growth in 2025 and 2026, including the ARR and the growth rate, when you're going to have the standardized product for Cosmic and Constellation? My second question, how many clients are having a subscription value of more than millions of dollars? Thank you very much.

Thanks for your question. As you may notice, for Kingdee, we see great pressure for the past 2 years for the large enterprises business. We made heavy investment, especially for Cosmic and Constellation. It truly depends on the complexity of the central state-owned enterprises. Starting from 2019 to now, it's already 6 years. We accumulated a large number of the model customers and the capacity improvement. Mr. Lin was showcasing you Huawei and Weichai, Revo as well as Tongwei, we deliver our solution to those customers. We continue to improve our product power and the delivery capacity. The most challenging period has already been experienced, but we continue to invest in this market. As AI is coming, the clients may need a very different intelligent and data-driven strategy. We also have an in-depth understanding of the market. We have to well define the boundaries of the product. This is also the fundamental need we have for the enterprises market. Within our key capacities, Kingdee will try our best to make the product right, where for other products, we may leverage our industrial partners, developer partners to deliver the solution. We hope in the next 3 years, just my own assumption, we hope in the next 3 years, we will be able to break even in the large enterprises market, because the large enterprises market is still in the investment stage compared with other product lines. This is my personal statement to this question. You also asked about ARR. We don't have it in our guidelines, but the ARR, the initial expectation was to grow by 20%. Okay. Any further question from the online investor? Tina please?

A quick question. just now Mr. Lin mentioned, there are some cases in the past. So for the AI tool or the AI product, it can help to grow your ARR by 10% to 20%. Is it going to be seen very recently? Well, at the same time, for your existing customer, how likely the improvement will happen? Are we going to take a look at the revenue contribution or the base of the customer?

Thank you. When we do any budget, we have to consider the number of the customers and the output of average customer. AI is already there, but we didn't quantify the AI into our assumption model because it's still full of uncertainty. But let me just tell you in this way, no matter for the number of the customers or the content of the customer, those are all things we are going to work harder in the near future. Okay? We are very -- we are hitting the end of today's meeting. So let's welcome Robert Xu to give the closing remarks.

Thank you. Thanks for all the investors. Thanks for your long-term support to Kingdee. Three sentences from me. The first one, Kingdee has been successfully completed the cloud transformation. Our next target is to go for artificial intelligence transformation. Cloud business transformation help us to lay a very stable and continuous and sustainable business model, where in the near future, the quality of the operation, the revenue, the profit, the cash flow of the company in the next few years, we're going to showcase a high-quality growth. especially the efficiency and productivity per employee will greatly and significantly improved in the next 2 to 3 years. We hope in the next 2 to 3 years, we will become a company with the revenue per capita more than RMB 1 million. But at the same time, I also need to see for our business transformation, we hope we could develop ourselves from a Chinese leader into a global leading company. We always hold ourselves to the world-class standards. We believe our product, our execution, our service and our marketing team need to perform against the world-class standard. Therefore, the company's operations would be improved greatly. My second sentence our company is at the optimal development stage in our history. 2024 was a turning point. 2025, we are committed for breaking even. By leveraging our business model, I do believe the quality of our operation will be further improved in the next few years. But at the same time, we will also leverage our industrial leadership to continue to go for merchant acquisition. My final statement, if you'd like to invest in a tech company, then please choose the company with the AI features. If you come to invest in AI segment, then please make sure you invest and handpick the most valued company for enterprises management AI solution, and I believe Kingdee would be your best option. So all the investors, I hope you can continue to support and trust Kingdee for its sustainable growth. Where at the same time, Kingdee will live up to your expectation to provide you a stable and good return on investment. Thank you very much.

Okay. Thanks for Robert Xu. Ladies and gentlemen, here come to the end of our performance release announcement. Thank you very much.