Cheetah Mobile Inc.

09/13/2024 | Press release | Distributed by Public on 09/13/2024 04:24

Cheetah Mobile Announces Second Quarter 2024 Unaudited Consolidated Financial Results Form 6 K

Cheetah Mobile Announces Second Quarter 2024 Unaudited Consolidated Financial Results

BEIJING, September 13, 2024 - Cheetah Mobile Inc. (NYSE: CMCM) ("Cheetah Mobile" or the "Company"), a China-based IT company, today announced its unaudited consolidated financial results for the second quarter ended June 30, 2024.

Management Commentary

Mr. Sheng Fu, Cheetah Mobile's Chairman and Chief Executive Officer, remarked, "In Q2, Cheetah Mobile achieved solid revenue growth of 12.3% year-over-year, with AI and others contributing around 40% of total revenue. Our service robotics business, both domestically and internationally, continues to drive growth. Customers choose us for our superior product experience, after-sales services, and strong AI capabilities, including far field speech recognition. With a team that brings extensive experience from the PC and mobile eras, we are investing in developing the best products to capture opportunities in the service robotics and LLMs markets. We remain focused on expanding our robotics use cases, advancing product innovation with LLMs, and growing our global presence. Rather than pursuing short-term gains, we are committed to achieving high-quality, long-term growth. We are confident in our ability to capture long-term opportunities ahead."

Mr. Thomas Ren, Chief Financial Officer of Cheetah Mobile, stated, "In this quarter, we were able to reduce our operating loss compared to the previous quarter by strategically focusing on AI and service robots. Our operating margin, excluding share-based compensation expense for our legacy internet business, increased by 6.9 percentage points year over year and 4.5 percentage points quarter over quarter. Although Cheetah Mobile is still incurring losses, we generated more than RMB218 million in cash from operating activities in the second quarter, showcasing strong capabilities in cash generation and management. Moving forward, we are committed to continuing to enhance our operational efficiency and cash generation capabilities."

Second Quarter 2024 Financial Highlight

Total revenues accelerated to a year-over-year growth of 12.3%, reaching RMB187.4 million (US$25.8 million) in the second quarter of 2024, driven by an increase in the delivery of the Company's service robots in both domestic and international markets.

•
Revenues from internet business remained relatively flat year over year at RMB113.7 million (US$15.7 million) in the second quarter of 2024. In the second quarter of 2024, revenues generated from the internet business accounted for 60.7% of total revenues, compared to 69.1% in the same period last year.
•
Revenues from AI and others increased by 42.8% year over year to RMB73.7 million (US$10.1 million) in the second quarter of 2024. The growth was primarily driven by an increase in the delivery of the Company's service robots, following the acquisition of a controlling stake in Beijing OrionStar. In the second quarter of 2024, revenues generated from AI and others accounted for 39.3% of total revenues, compared to 30.9% in the same period last year.

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Operating loss was RMB77.5 million (US$10.7 million) in the second quarter of 2024, compared to RMB65.6 million in the same period of last year. Non-GAAP operating loss was RMB62.5 million (US$8.6 million) in the second quarter of 2024, compared to RMB48.3 million in the same period of last year.

The increase in operating losses on a year-over-year basis was due to the Company's investments in AI, which have helped it enhance the product experience of its service robots. As previously mentioned in the past earnings releases, Cheetah Mobile's year-over-year costs and expenses increased, particularly associated with headcount and hardware.

•
Cost of revenues increased by 15.2% year over year to RMB65.9 million (US$9.1 million) in the second quarter of 2024, primarily resulting from the rise in the hardware-related costs for the Company's service robots. Non-GAAP cost of revenues increased by 14.8% year over year to RMB65.5 million (US$9.0 million) in the second quarter of 2024.
•
Research and development expenses increased by 14.5% year over year to RMB54.3 million (US$7.5 million) in the second quarter of 2024, primarily due to 1) amortization of intangible assets resulting from the acquisition of a controlling stake in Beijing OrionStar, 2) higher R&D personnel-related expenses following the acquisition of Beijing OrionStar. Non-GAAP research and development expenses increased by 3.3% year over year to RMB48.0 million (US$6.6 million) in the second quarter of 2024.
•
Selling and marketing expenses increased by 17.3% year over year to RMB73.4 million (US$10.1 million) in the second quarter of 2024, primarily due to 1) increased marketing and promotion expenses related to our user acquisition for certain products of our internet business; and 2) increased personnel-related expenses as the Company increased its sales personnel following the acquisition of a controlling stake in Beijing OrionStar. Non-GAAP selling and marketing expenses increased by 16.7% year over year to RMB72.8 million (US$10.0 million) in the second quarter of 2024.
•
General and administrative expenses increased by 8.0% year over year to RMB71.6 million (US$9.9 million) in the second quarter of 2024, primarily due to increased personnel-related expenses as the Company increased the number of its G&A personnel following the acquisition of a controlling stake in Beijing OrionStar. Non-GAAP general and administrative expenses increased by 26.9% year over year to RMB63.8 million (US$8.8 million) in the second quarter of 2024.

In terms of sequential performance, the Company was able to reduce its operating loss from RMB80.6 million in the first quarter of 2024 to RMB77.5 million in this quarter, and its non-GAAP operating loss from RMB66.4 million in the first quarter of 2024 to RMB62.5 million in this quarter. Notably, operating margin, excluding share-based compensation expense for the internet business, was 12.4% in the second quarter of 2024, an improvement from 7.9% in the first quarter of 2024 and 5.5% in the same period of last year.

As of June 30, 2024, the Company had cash and cash equivalents and short-term investments of RMB1,973.0 million (US$271.5 million).

As of June 30, 2024, the Company has long-term investments of RMB866.9 million (US$119.3 million).

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Conference Call Information

The Company will hold a conference call on September 13th, 2024, at 7:00 a.m. Eastern Time (or 7:00 p.m. Beijing Time) to discuss its financial results. Listeners may access the call by dialing the following numbers:

Main Line:

International: 1-412-317-6061

United States Toll Free: 1-888-317-6003

Mainland China Toll Free: 4001-206115

Hong Kong Toll Free: 800-963976

Conference ID: 3980144

English Translation:

International: 1-412-317-6061

United States Toll Free: 1-888-317-6003

Mainland China Toll Free: 4001-206115

Hong Kong Toll Free: 800-963976

Conference ID: 7908950

A live and archived webcast of the conference call will also be available at the Company's investor relations website at http://ir.cmcm.com.

Exchange Rate

This press release contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars in this press release were made at a rate of RMB7.2672 to US$1.00, the exchange rate in effect as of June 28, 2024, as set forth in the H.10 statistical release of the Federal Reserve Board. Such translations should not be construed as representations that RMB amounts could be converted into U.S. dollars at that rate or any other rate, or to be the amounts that would have been reported under accounting principles generally accepted in the United States of America ("U.S. GAAP").

About Cheetah Mobile Inc.

Cheetah Mobile is a China-based IT company with a commitment to AI innovation. It has attracted hundreds of millions of users through an array of internet products and services on PCs and mobile devices. At the same time, it actively engages in the independent research and development of AI technologies, including LLM technologies. Cheetah Mobile provides advertising services to advertisers worldwide, value-added services including the sale of premium membership to its users, multi-cloud management platform to companies globally, as well as service robots to international clients. Cheetah Mobile is also committed to leveraging its cutting-edge AI technologies, including LLM technologies, to empower its products and make the world smarter. It has been listed on the New York Stock Exchange since May 2014.

Safe Harbor Statement

This press release contains forward-looking statements. These statements, including management quotes and business outlook, constitute forward-looking statements under the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends,"

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"plans," "believes," "estimates" and similar statements. Such statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in the forward-looking statements, including but are not limited to the following: Cheetah Mobile's growth strategies; Cheetah Mobile's ability to retain and increase its user base and expand its product and service offerings; Cheetah Mobile's ability to monetize its platform; Cheetah Mobile's future business development, financial condition and results of operations; competition with companies in a number of industries including internet companies that provide online marketing services and internet value-added services; expected changes in Cheetah Mobile's revenues and certain cost or expense items; and general economic and business condition globally and in China. Further information regarding these and other risks is included in Cheetah Mobile's filings with the U.S. Securities and Exchange Commission. Cheetah Mobile does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

Use of Non-GAAP Financial Measures

This release contains non-GAAP financial measures, including but not limited to:

•
Non-GAAP cost of revenues excludes share-based compensation expenses;
•
Non-GAAP gross profit excludes share-based compensation expenses;
•
Non-GAAP gross margin excludes share-based compensation expenses;
•
Total non-GAAP operating expenses exclude share-based compensation expenses and amortization of intangible assets resulting from business acquisitions;
•
Non-GAAP research and development expenses exclude share-based compensation expenses and amortization of intangible assets resulting from business acquisitions;
•
Non-GAAP selling and marketing expenses exclude share-based compensation expenses and amortization of intangible assets resulting from business acquisitions;
•
Non-GAAP general and administrative expenses exclude share-based compensation expenses;
•
Non-GAAP operating profit/loss excludes share-based compensation expenses and amortization of intangible assets resulting from business acquisitions;
•
Non-GAAP net income/loss attributable to Cheetah Mobile shareholders excludes share-based compensation expenses and amortization of intangible assets resulting from business acquisitions;
•
Non-GAAP diluted earnings/losses per ADS excludes share-based compensation expenses and amortization of intangible assets resulting from business acquisitions;

and

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•
Non-GAAP adjusted EBITDA represents net income/loss attributable to Cheetah Mobile shareholders excluding share-based compensation, interest income, depreciation and amortization, net income attributable to noncontrolling interests, other income, net and income tax expenses.

The Company reviews these non-GAAP financial measures together with GAAP financial measures to obtain a better understanding of its operating performance. It uses the non-GAAP financial measures for planning, forecasting and measuring results against the forecast. The Company believes that non-GAAP financial measures are useful supplemental information for investors and analysts to assess its operating performance without the effect of share-based compensation expenses and amortization of intangible assets resulting from business acquisitions, which have been and will continue to be significant recurring expenses in its business. However, the use of non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of using non-GAAP financial measures is that they do not include all items that impact the Company's net income for the period. In addition, because non-GAAP financial measures are not measured in the same manner by all companies, they may not be comparable to other similarly titled measures used by other companies. In light of the foregoing limitations, you should not consider non-GAAP financial measure in isolation from or as an alternative to the financial measure prepared in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the tables captioned "Cheetah Mobile Inc. Reconciliation of GAAP and Non-GAAP Results".

Investor Relations Contact

Helen Jing Zhu

Cheetah Mobile Inc.

Tel: +86 10 6292 7779

Email: [email protected]

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CHEETAH MOBILE INC.

Condensed Consolidated Balance Sheets

(Unaudited, amounts in thousands of Renminbi ("RMB") and US dollars ("US$"))

As of

December 31, 2023

June 30, 2024

RMB

RMB

USD

ASSETS

Current assets:

Cash and cash equivalents

2,020,191

1,972,676

271,449

Short-term investments

1,023

331

46

Accounts receivable, net

401,064

445,091

61,247

Prepayments and other current assets, net

973,127

1,334,395

183,619

Due from related parties, net

71,505

110,234

15,169

Total current assets

3,466,910

3,862,727

531,530

Non-current assets:

Property and equipment, net

53,884

54,962

7,563

Operating lease right-of-use assets

30,451

31,337

4,312

Intangible assets, net

218,559

204,476

28,137

Goodwill

576,989

576,989

79,396

Long-term investments

937,460

866,860

119,284

Due from related parties, net

-

25,287

3,480

Deferred tax assets

188,503

194,226

26,726

Other non-current assets

160,428

80,819

11,121

Total non-current assets

2,166,274

2,034,956

280,019

Total assets

5,633,184

5,897,683

811,549

LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS' EQUITY

Current liabilities:

Bank loans

5,000

-

-

Accounts payable

170,185

159,787

21,987

Accrued expenses and other current liabilities

2,437,210

2,811,054

386,814

Due to related parties

84,147

83,311

11,464

Income tax payable

31,603

33,351

4,589

Total current liabilities

2,728,145

3,087,503

424,854

Non-current liabilities:

Deferred tax liabilities

54,540

51,870

7,138

Other non-current liabilities

189,943

182,178

25,069

Total non-current liabilities

244,483

234,048

32,207

Total liabilities

2,972,628

3,321,551

457,061

Mezzanine equity:

Redeemable noncontrolling interests

105,978

185,676

25,550

Shareholders' equity:

Ordinary shares

244

246

34

Additional paid-in capital

2,711,875

2,716,472

373,799

Accumulated deficit

(613,102

)

(816,978

)

(112,420

)

Accumulated other comprehensive income

356,854

381,288

52,467

Total Cheetah Mobile shareholders' equity

2,455,871

2,281,028

313,880

Noncontrolling interests

98,707

109,428

15,058

Total shareholders' equity

2,554,578

2,390,456

328,938

Total liabilities, mezzanine equity and shareholders' equity

5,633,184

5,897,683

811,549

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CHEETAH MOBILE INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited, amounts in thousands of Renminbi ("RMB") and US dollars ("US$"), except for number of shares and per share(or ADS) data)

For The Three Months Ended

For The Six Months Ended

June 30, 2023

June 30, 2024

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2024

RMB

RMB

USD

RMB

RMB

USD

Revenues

166,951

187,417

25,790

337,385

377,705

51,974

Internet business

115,336

113,729

15,650

235,645

222,749

30,651

AI and others

51,615

73,688

10,140

101,740

154,956

21,323

Cost of revenues (a)

(57,186)

(65,895)

(9,067)

(113,349)

(135,651)

(18,666)

Gross profit

109,765

121,522

16,723

224,036

242,054

33,308

Operating income and expenses:

Research and development (a)

(47,426)

(54,285)

(7,470)

(92,854)

(111,616)

(15,359)

Selling and marketing (a)

(62,561)

(73,396)

(10,100)

(130,827)

(148,532)

(20,439)

General and administrative (a)

(66,333)

(71,610)

(9,854)

(110,459)

(140,755)

(19,369)

Other operating income, net

944

228

31

2,215

736

101

Total operating income and expenses

(175,376)

(199,063)

(27,393)

(331,925)

(400,167)

(55,066)

Operating loss

(65,611)

(77,541)

(10,670)

(107,889)

(158,113)

(21,758)

Other income/(expenses):

Interest income, net

14,896

9,773

1,345

27,238

25,089

3,452

Foreign exchange losses

(48,684)

(7,564)

(1,041)

(34,221)

(10,841)

(1,492)

Other expense, net

(152,351)

(51,612)

(7,102)

(154,152)

(59,207)

(8,147)

Loss before taxes

(251,750)

(126,944)

(17,468)

(269,024)

(203,072)

(27,945)

Income tax (expenses)/ benefits

(3,583)

6,391

879

(3,761)

6,193

852

Net loss

(255,333)

(120,553)

(16,589)

(272,785)

(196,879)

(27,093)

Less: net income attributable to noncontrolling interests

3,461

3,288

452

4,608

6,997

963

Net loss attributable to Cheetah Mobile shareholders

(258,794)

(123,841)

(17,041)

(277,393)

(203,876)

(28,056)

Net loss per share

Basic

(0.1772)

(0.0841)

(0.0116)

(0.1925)

(0.1390)

(0.0191)

Diluted

(0.1774)

(0.0841)

(0.0116)

(0.1933)

(0.1391)

(0.0191)

Net loss per ADS

Basic

(8.8615)

(4.2042)

(0.5785)

(9.6239)

(6.9488)

(0.9562)

Diluted

(8.8693)

(4.2067)

(0.5789)

(9.6665)

(6.9542)

(0.9569)

Weighted average number of shares outstanding

Basic

1,454,090,428

1,495,962,672

1,495,962,672

1,452,066,835

1,495,088,007

1,495,088,007

Diluted

1,454,090,428

1,495,962,672

1,495,962,672

1,452,066,835

1,495,088,007

1,495,088,007

Weighted average number of ADSs outstanding

Basic

29,081,809

29,919,253

29,919,253

29,041,337

29,901,760

29,901,760

Diluted

29,081,809

29,919,253

29,919,253

29,041,337

29,901,760

29,901,760

Other comprehensive income/(loss) , net of tax of nil

Foreign currency translation adjustments

148,160

8,383

1,154

108,142

29,414

4,048

Unrealized losses on available-for-sale securities, net

(43,494)

(9,206)

(1,267)

(43,494)

(7,434)

(1,023)

Other comprehensive income/(loss)

104,666

(823)

(113)

64,648

21,980

3,025

Total comprehensive loss

(150,667)

(121,376)

(16,702)

(208,137)

(174,899)

(24,068)

Less: Total comprehensive income attributable to noncontrolling interests

2,964

2,118

291

3,877

4,544

625

Total comprehensive loss attributable to Cheetah Mobile shareholders

(153,631)

(123,494)

(16,993)

(212,014)

(179,443)

(24,693)

For The Three Months Ended

For The Six Months Ended

June 30, 2023

June 30, 2024

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2024

(a) Share-based compensation expenses

RMB

RMB

USD

RMB

RMB

USD

Cost of revenues

107

357

49

226

449

62

Research and development

958

116

16

870

408

56

Selling and marketing

195

154

21

391

110

15

General and administrative

16,091

7,831

1,078

16,643

15,076

2,075

Total

17,351

8,458

1,164

18,130

16,043

2,208

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CHEETAH MOBILE INC.

Reconciliation of GAAP and Non-GAAP Results

(Unaudited, amounts in thousands of Renminbi ("RMB") and US dollars ("US$"), except for per share data )

For The Three Months Ended June 30, 2024

For The Six Months Ended June 30, 2024

GAAP

Share-based

Amortization of

Non-GAAP

GAAP

Share-based

Amortization of

Non-GAAP

Result

Compensation

intangible assets*

Result

Result

Compensation

intangible assets*

Result

RMB

RMB

RMB

RMB

USD

RMB

RMB

RMB

RMB

USD

Revenues

187,417

-

-

187,417

25,790

377,705

-

-

377,705

51,974

Cost of revenues

(65,895)

357

-

(65,538)

(9,018)

(135,651)

449

-

(135,202)

(18,604)

Gross profit

121,522

357

-

121,879

16,772

242,054

449

-

242,503

33,370

Research and development

(54,285)

116

6,156

(48,013)

(6,607)

(111,616)

408

12,312

(98,896)

(13,609)

Selling and marketing

(73,396)

154

469

(72,773)

(10,014)

(148,532)

110

938

(147,484)

(20,294)

General and administrative

(71,610)

7,831

-

(63,779)

(8,776)

(140,755)

15,076

-

(125,679)

(17,294)

Other operating income, net

228

-

-

228

31

736

-

-

736

101

Total operating income and expenses

(199,063)

8,101

6,625

(184,337)

(25,366)

(400,167)

15,594

13,250

(371,323)

(51,096)

Operating loss

(77,541)

8,458

6,625

(62,458)

(8,594)

(158,113)

16,043

13,250

(128,820)

(17,726)

Net loss attributable to Cheetah Mobile shareholders

(123,841)

8,458

6,625

(108,758)

(14,965)

(203,876)

16,043

13,250

(174,583)

(24,024)

Diluted losses per ordinary share (RMB)

(0.0841)

0.0057

0.0043

(0.0741)

(0.1391)

0.0107

0.0089

(0.1195)

Diluted losses per ADS (RMB)

(4.2067)

0.2850

0.2167

(3.7050)

(6.9542)

0.5350

0.4442

(5.9750)

Diluted losses per ADS (USD)

(0.5789)

0.0392

0.0299

(0.5098)

(0.9569)

0.0736

0.0611

(0.8222)

For The Three Months Ended June 30, 2023

For The Six Months Ended June 30, 2023

GAAP

Share-based

Non-GAAP

GAAP

Share-based

Non-GAAP

Result

Compensation

Result

Result

Compensation

Result

RMB

RMB

RMB

RMB

RMB

Revenues

166,951

-

166,951

337,385

-

337,385

Cost of revenues

(57,186)

107

(57,079)

(113,349)

226

(113,123)

Gross profit

109,765

107

109,872

224,036

226

224,262

Research and development

(47,426)

958

(46,468)

(92,854)

870

(91,984)

Selling and marketing

(62,561)

195

(62,366)

(130,827)

391

(130,436)

General and administrative

(66,333)

16,091

(50,242)

(110,459)

16,643

(93,816)

Other operating income, net

944

-

944

2,215

-

2,215

Total operating income and expenses

(175,376)

17,244

(158,132)

(331,925)

17,904

(314,021)

Operating loss

(65,611)

17,351

(48,260)

(107,889)

18,130

(89,759)

Net loss attributable to Cheetah Mobile shareholders

(258,794)

17,351

(241,443)

(277,393)

18,130

(259,263)

Diluted losses per ordinary share (RMB)

(0.1774)

0.0119

(0.1655)

(0.1933)

0.0125

(0.1808)

Diluted losses per ADS (RMB)

(8.8693)

0.5943

(8.2750)

(9.6665)

0.6243

(9.0422)

* This represents amortization of intangible assets resulting from business acquisitions.

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CHEETAH MOBILE INC.

Information about Segment

(Unaudited, amounts in thousands of Renminbi ("RMB") and US dollars ("US$"), except for percentage)

For The Three Months Ended June 30, 2024

For The Six Months Ended June 30, 2024

Internet Business

AI and others

Unallocated*

Consolidated

Internet Business

AI and others

Unallocated*

Consolidated

RMB

RMB

RMB

RMB

USD

RMB

RMB

RMB

RMB

USD

Revenue

113,729

73,688

-

187,417

25,790

222,749

154,956

-

377,705

51,974

Operating profit/(loss)

14,159

(83,242)

(8,458)

(77,541)

(10,670)

22,821

(164,891)

(16,043)

(158,113)

(21,758)

Operating margin

12.4%

(113.0)%

-

(41.4)%

(41.4)%

10.2%

(106.4)%

-

(41.9)%

(41.9)%

For The Three Months Ended June 30, 2023

For The Six Months Ended June 30, 2023

Internet Business

AI and others

Unallocated*

Consolidated

Internet Business

AI and others

Unallocated*

Consolidated

RMB

RMB

RMB

RMB

Revenue

115,336

51,615

-

166,951

235,645

101,740

-

337,385

Operating profit/(loss)

6,370

(54,630)

(17,351)

(65,611)

10,125

(99,884)

(18,130)

(107,889)

Operating margin

5.5%

(105.8)%

-

(39.3)%

4.3%

(98.2)%

-

(32.0)%

*Unallocated expenses refer to SBC expenses that are not allocated to individual segments.

9

CHEETAH MOBILE INC.

Reconciliation from Net Income Attributable to Cheetah Mobile Shareholders to Adjusted EBITDA (Non-GAAP)

(Unaudited, amounts in thousands of Renminbi ("RMB") and US dollars ("US$"))

For The Three Months Ended

For The Six Months Ended

June 30, 2023

June 30, 2024

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2024

RMB

RMB

USD

RMB

RMB

USD

Net loss attributable to Cheetah Mobile shareholders

(258,794)

(123,841)

(17,041)

(277,393)

(203,876)

(28,056)

Add:

Income tax expenses/ (benefits)

3,583

(6,391)

(879)

3,761

(6,193)

(852)

Interest income, net

(14,896)

(9,773)

(1,345)

(27,238)

(25,089)

(3,452)

Depreciation and amortization

8,273

12,317

1,695

17,106

24,629

3,389

Net income attributable to noncontrolling interests

3,461

3,288

452

4,608

6,997

963

Other expense, net

201,035

59,176

8,143

188,373

70,048

9,639

Share-based compensation

17,351

8,458

1,164

18,130

16,043

2,208

Adjusted EBITDA

(39,987)

(56,766)

(7,811)

(72,653)

(117,441)

(16,161)

10