Kingdee International Software : Announcements and Notices - Interim Results Announcement for ...

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KINGDEE INTERNATIONAL SOFTWARE GROUP COMPANY LIMITED

金蝶國際軟件集團有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock code: 268)

INTERIM RESULTS ANNOUNCEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2019

The board (the "Board") of directors (the "Directors") of Kingdee International Software Group Company Limited ("Kingdee" or the "Company") hereby announces the unaudited condensed consolidated interim results of the Company and its subsidiaries (the "Group") for the six months ended 30 June 2019 are as follows:

Financial highlights for the six months ended 30 June 2019

• Revenue increased by approximately 16.1% over the same period in 2018 to approximately RMB1,485,156,000
• Profit attributable to owners of the Company for the period decreased by approximately 35.4% over the same period in 2018 to approximately RMB109,640,000
• Basic earnings per share for profit attributable to owners of the Company during the period decreased by RMB2.14 cents over that of the same period in 2018 to approximately RMB3.40 cents

KINGDEE INTERNATIONAL SOFTWARE GROUP COMPANY LIMITED

Business Review and Outlook

1. Financial Performance

• The Group recorded total revenue of RMB1,485,156,000 (1H2018: RMB1,279,103,000) for the first half of 2019, up 16.1% from the same period of last year. While it continued to increase investments in the Cloud services business, revenue from this business continued to climb and grew by 54.9% year-on-year in the first half of 2019. Meanwhile, revenue from ERP business slightly increased by 1.2% year-on-year.
• The profit attributable to owners of the Company decreased by approximately 35.4% from the period of 2018 to approximately RMB109,640,000 (1H2018: RMB169,777,000).
• Basic earnings per share attributable to owners of the Company for the reporting period decreased by approximately 38.6% year-on-year to approximately RMB3.40 cents (1H2018: RMB5.54 cents).

2. Summary of the Company's Strategies

1. The Group leveraged its thorough understanding of Chinese enterprises' management and deep insight into the latest trends in their digital transformation to promote the development of Kingdee Cloud service ecosystem.
2. Strategic initiatives including：

• Fully implementing the development strategy of "Getting direct access to customers". Starting with the establishment of Robert Xu's official account, Kingdee will propel reforms in the company's service system, actively serve customers, and improve product quality, user experience and customer satisfaction.
• Constructing a model customer in the digital transformation industry and reconstructing the industry value chain. Truly settle problems for customers and re-establishing relationships with them.
• Constructing Kingdee's digital transformation methodology to enhance the overall service level of the industry. Summarize and refine industry best practices to promote the development of China's management model.
• Accelerating the upgrade of Kingdee Cloud Cosmic platform and actively expanding ISV industry ecological partnership of the PaaS platform and IaaS strategic partnership.
• Innovating and investing in new technologies and new businesses and building Kingdee ecosystem.

3. Summary of the Company's Businesses

As a company strong at technological innovation and rooted in the Chinese enterprise service market, Kingdee has ranked first in the application software market for fast-growing enterprises for 14 consecutive years. It has also commanded the largest share of the enterprise-grade SaaS ERM application software market share for three consecutive years, and it was included in the Gartner's report on global PaaS Cloud services. The Group provided Enterprise Resource Planning business ("ERP Business") and Cloud services to more than 6.8 million companies, government agencies and other organizations around the world.

The Group's revenue for the reporting period grew by 16.1% year-on-year while the revenue from ERP business grew by 1.2% year-on-year. Meanwhile, the revenue from Cloud services segment increased by 54.9% year-on-year and accounted for 37% of the Group's total revenue. The transformation of Kingdee

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KINGDEE INTERNATIONAL SOFTWARE GROUP COMPANY LIMITED

Cloud has been promoted steadily. Analysis of the Group's operating profit is set out in Management Discussion and Analysis.

ERP business

During the reporting period, revenue from ERP business slightly increased by 1.2% year-on-year from RMB923,955,000 to RMB934,913,000 in the first half of 2019.

1. EAS segment focused on technology upgrades to help model customers improve their management capability

During the reporting period, the revenue from EAS management software license for large enterprises reached RMB160 million. While vigorously developing smart finance services, Kingdee EAS further developed financial AI technology to help enterprise customers continuously improve the automation of their financial work.

As Kingdee EAS's "Cloud + Terminal" dual-model solution has been highly recognized in the large-enterprise market, it successfully signed contracts with various model enterprises in different industries, including JA Solar, Tianjin Rockcheck Steel, Amoy Transit Rail, Shenzhen Fengchao Technology and Hong Kong Television Broadcasts Limited (TVB). At the same time, Kingdee's financial solutions in the Asia Pacific region have successively signed contracts with local Chinese financial institutions in Hong Kong, such as Regan Securities, Greater Bay Area Homeland Investment, Haitong International and CMB International to expand the system application module.

1. K/3 segment continued to help enterprises implement digital transformation to enhance and upgrade their management

Kingdee K/3 WISE system focused on three business areas: smart finance and taxation, smart supply chain and smart factory, and offered persistent support to enterprises by helping them transform and upgrade from traditional management to digital management.

1. KIS facilitated small and medium-sized industrial and trading enterprises to implement digital transformation, helping them realize one-stop management

Kingdee launched KIS flagship 7.0, professional KIS software 16.0. At present, nearly 1,000 customers have been online. The system ran safely and stably, and it obtained good comments from customers. The system helped small and medium-sized industrial and trading enterprises achieve one-stop management in finance, supply chain and production.

(4) Other Businesses

According to the Chinese IT users satisfaction survey, Kingdee Apusic remained the most preferred middleware brand in the reporting period. In particular, it further consolidated its share in the proprietary product and safe and reliable product sectors. As a key proprietary core software developer, Kingdee Apusic actively adapted to domestic upstream and downstream software and has become important members of

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KINGDEE INTERNATIONAL SOFTWARE GROUP COMPANY LIMITED

different industrial alliances such as Phytium CPU & Kylin OS scheme, Information Technology Application and Innovation Working Committee.

Cloud Business

During the reporting period, revenue from the Cloud Business continued to climb and grew by 54.9% year-on-year from RMB355,148,000 to RMB550,243,000 in the first half of 2019.

1. Kingdee Cloud Cosmic expanded ecology and promoted business upgrades with Industrial Internet

During the reporting period, Kingdee Cloud Cosmic generated revenue of more than RMB15 million in the first half of the year. As China's first enterprise-grade Cloud service platform based on cloud native architecture, Kingdee Cloud Cosmic adopted micro-service architecture, uniquely created KDDM Cloud dynamic domain model, supported Cloud personalized customization, and integrated technologies such as social, artificial intelligence, big data, and block chain to provide platform service for enterprise applications. Through independent research, development and innovation, Kingdee Cloud Cosmic has realized enterprise-grade distributed database middleware and distributed computing engine, which can support large data volume and large concurrency. At the same time, it realized enterprise-grade AI platform, including voice interaction, natural language understanding, invoice identification and other technologies that can support the intelligent transformation of enterprises. Kingdee Cloud Cosmic also provided digital platforms for enterprises, including technology platform, business platform, and data platform, helping the digital transformation of enterprises.

During the reporting period, Kingdee Cloud Cosmic applied for over 20 patented technologies, which accumulated more than 60 patented technologies.

During the reporting period, Kingdee Cloud Cosmic had signed contracts with 43 customers. 28 new customers were signed, including Xiamen C&D, Hesteel Group, Xiwang Group, Shenghua Group, Xiamen ITG Group, Sichuan Provincial Investment Group and other large enterprises.

During the reporting period, Kingdee Cloud Cosmic teamed up with various platform ecosystem partners, with the number of SaaS applications reached over 50 inside and outside. In the future, Kingdee Cloud Cosmic will continue to invest a lot of resources to attract more platform ecosystem partners through various means like developer competition in order to build a strong partner ecosystem.

1. Kingdee Cloud Galaxy business maintained robust growth, helping companies rapidly expand

Kingdee Cloud Galaxy, the Group's stellar Cloud product, maintained robust growth, with its revenue increased by over 50.5% year-on-year to RMB384 million. The customer's dollar retention rate remained at over 90%. The new V7.3 version of Kingdee Cloud Galaxy, Kingdee Cloud Galaxy MES Cloud, Omni-channel WeChat applet and expense reimbursement on mobile terminals services were launched to help enterprises achieve connectivity, empowerment, cost reduction and efficiency enhancement, promote cloud connectivity, gain value advantage, and reconstruct industrial value chains.

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KINGDEE INTERNATIONAL SOFTWARE GROUP COMPANY LIMITED

Up to now, the number of certified customers of Kingdee Cloud Galaxy exceeded 11,000, and the number of certified users were more than 660,000. Kingdee Cloud Galaxy has a large number of industry model customers such as Huawei, Samsung, Haier, LG, Bliss Cake, Oppein Home, Yunnan Baiyao and Swire Foods. During the reporting period, Kingdee Cloud Galaxy signed up various new customers, including famous enterprises such as Hikvision, Fotile, Netease and Mi Home. As for enterprise Cloud adoption business, Kingdee Cloud Galaxy became one of the government's recommended Cloud service providers for 25 cities in 17 provinces. Moreover, it was picked as a strategic partner of the Ministry of Industry and Information Technology and received the ITSS certification. Northeast Pharmaceutical, Kingdee Cloud Galaxy's customer, was selected as a smart manufacturing model unit by the Ministry of Industry and Information Technology. Five customers including Fangkuai Boiler Co., Ltd. and Zuming Bean Products Co., Ltd. were selected as the benchmarking enterprises by the Ministry of Industry and Information Technology.

At the same time, Kingdee Cloud Galaxy is the only SaaS partner of Amazon AWS certification in 2019, and has ecological cooperation alliances such as Huawei Cloud, Alibaba Cloud, Tencent Cloud, JD Cloud and Unicom Cloud. During the reporting period, the Group continued to promote the development of Cloud business channels. The number of its public Cloud partners reached 375 in the first half of the year, representing an increase of 32% year-on-year.

(3) Kingdee Jingdou Cloud saw strong revenue growth and launched WeChat applet store

In the first half of 2019, Jingdou Cloud achieved revenue growth of 95.7% year-on-year. Paying customers grew by more than 65%, bringing the total number of customers to over 9,500, and the dollar retention rate remained above 80%. Focusing on new retail services, Jingdou Cloud further enriched its product matrix, providing 3 major business services (applet store + smart store + 2B order), 2 management services (smart finance and taxation + purchase, sale and inventory) and 1 solution (new retail solution) to micro and small enterprises, and helping them to build intelligent, mobile and integrated management system. During the reporting period, the launch of Jingdou Cloud applet store has been widely applauded in the market. Up to now, more than 1200 micro and small enterprises have carried out online marketing through Jingdou Cloud applet store. Meanwhile, Jingdou Cloud further deepened its strategic cooperation with Alibaba, China Mobile and China UnionPay, thereby helping more micro and small enterprises implement digital transformation.

1. Kingdee Guanyi Cloud posted double-digit revenue growth; helping retail enterprises expand business through multi-channels

During the reporting period, the revenue of Kingdee Guanyi Cloud grew by 25.4% year-on-year with more than 4,500 paying customers and the dollar retention rate of over 80%, as the Group made persistent efforts to drive the rapid expansion of its channels. In the first half of the year, there were 24 platforms newly connected with Guanyi Cloud, making the total number of its connected platforms increase to more than 110. It helped retail enterprises to operate and expand their business through multi-channels. Besides, significant breakthroughs were made in the integration between Guanyi Cloud and other Kingdee products. For instance, the B2C E-commerce management application based on Kingdee Cloud Galaxy BOS platform was launched, which enables Omni-channel centralized management of business, online and offline stocktaking, the integration of entire business process ranging from order processing to financial bookkeeping as well as the centralized management of business and financial affairs. Meanwhile, the Group made relentless R&D efforts

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