Revenue growth in the third quarter was repaired, cash flow performance was outstanding, and contract debt growth increased

The company disclosed its three-quarter report for '24. In the third quarter, the company achieved revenue of 1.214 billion yuan, +10.53%; net profit to mother of 0.318 billion yuan, +8.33% year-on-year; sales expenses ratio, management expense ratio, and R&D expenses ratio were 20.14%/7.85%/37.41%, respectively. Compared with the same period in 2023, the change was -1.53pct/-4.13pct/+4.74pct. The net cash flow from the company's operating activities was 0.451 billion yuan, year-on-year + At 31.20%, contract debt increased to 1.99 billion yuan at the end of the third quarter, and other non-current assets increased to 0.712 billion yuan. We believe that the high growth in B-side SaaS orders has led to a relatively rapid growth on the contract debt side. Taken together, we believe that the company's Q3 revenue growth rate has improved compared to the Q2 growth rate, and the cash flow performance is impressive, indicating that the order growth rate is gradually recovering.

C-terminal activity is growing steadily, and WPS AI launches new features to boost stickiness and payment rates

In the third quarter, the company's domestic personal office service subscription business revenue was 0.762 billion yuan, +17.24%; during this period, the company WPSAI 2.0 added AI writing assistants, AI reading assistants, AI data assistants, and AI design assistants, which strongly promoted user stickiness and payment conversion. By the end of the third quarter, the company's main products were 0.618 billion monthly active devices, up 4.92% year on year; of these, the PC version was 0.277 billion, up 6.95% year on year; the mobile version was 0.338 billion, up 3.36% year on year.

B-side orders performed well, and SaaS and Xinchuang drove the company's performance to an inflection point

In the third quarter, the company's domestic institutional subscription business revenue was 0.248 billion yuan, up 0.02% year on year. The main reason behind the flat revenue growth rate was that the company relied on more complete WPS 365 to develop large-scale private enterprises and local state-owned enterprises in the public cloud market, continuously increasing the share of related revenue and promoting further upgrading of the revenue model. In addition, the company's domestic institutional authorized business revenue was 0.143 billion yuan, +8.97% over the same period last year. The main reason was that the company continued to closely track policy changes and customer needs, and fully lay out the sinking market and related orders in the field of party, government, and credit innovation The increase will drive domestic institutional licensing business to achieve growth. We believe that the growth of public cloud SaaS and Xinchuang in the B-side subscription business is expected to drive the company's performance inflection point and gradually upward profit forecast: considering the impact of the three-quarter report and Xinchuang policy, we adjusted the profit forecast and maintained 24-26 revenue of 5.22/6.475/8.095 billion yuan, and adjusted the net profit to mother for 24-26 from 1.616/2.291/3.066 billion yuan to 1.516/1.969/2.574 billion yuan. Considering changes in the Xinchuang industry, the company is a leading domestic office software company, and AI products are being rapidly iterated to maintain a “buy” rating.

Risk warning: the risk of new product development falling short of expectations, the risk of downstream demand falling short of expectations, and the risk of the competitive landscape deteriorating