Cheetah Mobile Announces Third Quarter 2021 Unaudited Consolidated Financial Results

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Cheetah Mobile Inc. (NYSE: CMCM) (“Cheetah Mobile” or the “Company”), a leading internet company, today announced its unaudited consolidated financial results for the third quarter 2021 ended September 30, 2021.

Management Commentary

Mr. Sheng Fu, Cheetah Mobile’s Chairman and Chief Executive Officer, stated, “Cheetah Mobile’s total revenue in the third quarter of 2021 was RMB196.1 million (USD30.4 million), which is consistent with our previous guidance. In this quarter, we successfully consolidated the gains of transforming our internet business from a single advertising model to a diversified model of advertising plus subscription. The numbers of our membership kept a double-digit growth. Additionally, we are delighted to see that revenues from our membership business have increased for more than 5 quarters consecutively. For our AI business, GMV (Gross Merchandise Volume) and revenues from shopping-mall coupon-selling robots have been up for several months in a row, which again verified this business model. We are highly confident in our business strategies and will achieve our goals step by step.”

Mr. Thomas Ren, Cheetah Mobile’s Chief Financial Officer, commented, “Despite the sales boom on June 18 in the second quarter, we managed to keep our Non-GAAP operating loss flat at RMB58.5 million (US$9.1 million) in this quarter. This result shows that we have been strictly and effectively controlling expenses to operate efficiently. We ended this quarter with RMB1,853 million (US$288 million) in cash and cash equivalents, restricted cash and short-term investments. The adequate cash balance is critical for us to follow our long-term development plans and achieve our strategic goals.”

Third Quarter 2021 Consolidated Financial Results

REVENUES

Total revenues were RMB196.1 million (US$30.4 million) in the third quarter of 2021, representing a decrease of 46.3% year over year and 7.4% quarter over quarter.

As a result of the Company’s ongoing business streamlining efforts, the Company realigned its segments based on the change of the way that the management assessed the Company’s segment performance. The Company’s overseas advertising agency services, which assists domestic companies to launch advertisement on overseas advertising platforms, are changed from the Internet business into AI and others due to the synergies created between the Company’s advertising agency services and global cloud services. Consequently, the Company has retrospectively revised segment information and related revenue presentation to conform to the change in the Company’s segments.

Revenues from the Company’s internet business decreased by 50.8% year over year and 15.5% quarter over quarter to RMB160.5 million (US$24.9 million) in the third quarter of 2021. The year-over-year decrease was due to the Company’s strategic efforts to diminish the game-related business in past quarters. The quarter-over-quarter decrease was mainly because revenue in the second quarter of 2021 was temporarily increased due to June 18 promotional events and no such promotional event occurred in the third quarter of 2021.

Revenues from the AI and others were RMB35.6 million (US$5.5 million) in the third quarter of 2021, representing a 8.8% year-over-year decrease and a 62.8% quarter-over-quarter increase. The year-over-year decline was primarily attributable to the drop in sales of AI-related hardware products. The quarter-over-quarter increase was from our shopping-mall coupon-selling robots business as well as our global cloud services.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues decreased by 34.5% year over year and increased by 47.1% quarter over quarter to RMB74.4 million (US$11.5 million) in the third quarter of 2021. The year-over-year decrease was primarily due to the decreased revenue. The quarter-over-quarter increase was due to increased spending over AI related business. Non-GAAP cost of revenues decreased by 34.5% year over year and increased by 47.7% quarter over quarter to RMB74.2 million (US$11.5 million) in the third quarter of 2021.

Gross profit decreased by 51.6% year over year and 24.5% quarter over quarter to RMB121.7 million (US$18.9 million) in the third quarter of 2021. Non-GAAP gross profit decreased by 51.6% year over year and decreased 24.5% quarter over quarter to RMB121.9 million (US$18.9 million) in the third quarter of 2021.

Gross margin was 62.1% in the third quarter of 2021, compared to 68.9% in the third quarter of 2020 and 76.1% in the second quarter of 2021. Non-GAAP gross margin was 62.2% in the third quarter of 2021, compared to 69.0% in the third quarter of 2020 and 76.3% in the second quarter of 2021.

OPERATING INCOME/LOSS AND EXPENSES

Total operating expenses decreased by 51.0% year over year and by 15.9% quarter over quarter to RMB184.9 million (US$28.7 million) in the third quarter of 2021. Total non-GAAP operating expenses decreased by 51.3% year over year and by 17.2% quarter over quarter to RMB180.4 million (US$28.0 million) in the third quarter of 2021.

  • Research and development expenses decreased by 52.9% year over year and increased by 17.2% quarter over quarter to RMB55.4 million (US$8.6 million) in the third quarter of 2021. The year-over-year decrease was mainly due to the deconsolidation of certain mobile game business in prior year. Our investment in research and development has been keeping flat. The quarter-over-quarter change was mainly due to less government grants in this quarter.  Non-GAAP research and development expenses decreased by 53.7% year over year and increased 10.5% quarter over quarter to RMB52.0 million (US$8.1 million) in the third quarter of 2021.
  • Selling and marketing expenses decreased by 48.3% year over year and 29.8% quarter over quarter to RMB85.6 million (US$13.3 million) in the third quarter of 2021. This year-over-year decrease was attributable to the streamlining of our business and the strategic reduction of our costs. While the quarter-over-quarter decrease was mostly because we incurred incremental promotion expenses for the June 18 promotional events in the second quarter. Non-GAAP selling and marketing expenses decreased by 49.0% year over year and 30.0% quarter over quarter to RMB85.0 million (US$13.2 million) in the third quarter of 2021.
  • General and administrative expenses decreased by 46.5% year over year and 8.1% quarter over quarter to RMB48.7 million (US$7.6 million) in the third quarter of 2021. The decrease was mainly due to the our business operation streamlining and the effective expense control. Non-GAAP general and administrative expenses decreased by 45.5% year over year and 6.7% quarter over quarter to RMB48.1 million (US$7.5 million) in the third quarter of 2021.

Operating loss was RMB63.2 million (US$9.8 million) in the third quarter of 2021, compared to RMB126.0 million in the same period of the last year and RMB58.8 million in the second quarter of 2021. Non-GAAP operating loss was RMB58.5 million (US$9.1 million) in the third quarter of 2021, compared to RMB118.9 million in the same period of the last year and RMB56.4 million in the second quarter of 2021.

  • Operating profit for the internet business was RMB1.8 million in the third quarter of 2021, compared to an operating profit of RMB64.2 million in the same period last year and operating loss of RMB8.2 million in the second quarter of 2021.
  • Operating loss for AI and others was RMB60.3 million in the third quarter of 2021, compare with an operating loss of RMB183.1 million in the same period last year and an operating loss of RMB48.3 million in the second quarter of 2021.

Share-based compensation expenses were RMB4.7 million (US$0.7 million) in the third quarter of 2021, compared to RMB7.1 million in the same period of the last year and RMB2.4 million in the second quarter of 2021.

OTHER INCOME, NET

Other income, net was RMB13.5 million (US$2.1 million) in the third quarter of 2021, which was primarily from the disposal of some investments.

NET INCOME/(LOSS) ATTRIBUTABLE TO CHEETAH MOBILE SHAREHOLDERS

Net loss attributable to Cheetah Mobile shareholders was RMB49.5 million (US$7.7 million) in the third quarter of 2021, compared to a net income attributable to Cheetah Mobile shareholders of RMB259.2 million in the same period of the last year and a net income attributable to Cheetah Mobile shareholders of RMB0.9 million in the second quarter of 2021.

Non-GAAP net loss attributable to Cheetah Mobile shareholders was RMB44.7 million (US$6.9 million) in the third quarter of 2021, compared to a non-GAAP net income attributable to Cheetah Mobile shareholders of RMB266.3 million in the same period of the last year and non-GAAP net income attributable to Cheetah Mobile shareholders of RMB3.3 million in the second quarter of 2021.

NET INCOME/(LOSS) PER ADS

Diluted loss per ADS was RMB0.34(US$0.05) in the third quarter of 2021, compared to diluted income per ADS of RMB1.82 in the same period of the last year and diluted income per ADS of RMB0.01 in the second quarter of 2021. Non-GAAP diluted loss per ADS was RMB0.31 (US$0.05) in third quarter of 2021, compared to Non-GAAP diluted income per ADS RMB1.87 in the same period of the last year and RMB0.02 in the second quarter of 2021.

BALANCE SHEET

As of September 30, 2021, the Company had cash and cash equivalents, restricted cash and short-term investments of RMB1,853.3 million (US$287.6 million).

SHARES ISSUED AND OUTSTANDING

As of September 30, 2021, the Company had a total of 1,408,070,144 Class A and Class B ordinary shares issued and outstanding. One ADS represents 10 Class A ordinary shares.

Business Outlook

For the fourth quarter of 2021, the Company expects its total revenues to be between RMB130 million (US$20.2 million) and RMB180 million (US$27.9 million). This amount reflects the Company’s current and preliminary expectations.

Conference Call Information

The Company will hold a conference call on November 24th, 2021, at 7:00 a.m. Eastern Time (or 8:00 p.m. Beijing Time) to discuss its financial results. Listeners may access the call by dialing the following numbers:

International: +1-412-902-4272
United States Toll Free: +1-888-346-8982
Mainland China Toll Free: 4001-201-203
Hong Kong Toll Free: 800-905-945
Conference ID: Cheetah Mobile

The replay will be accessible through December 1, 2021 by dialing the following numbers:

International: +1-412-317-0088
United States Toll Free: +1-877-344-7529
Access Code: 10162140

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 RMB6.4434 to US$1.00, the exchange rate in effect as of September 30, 2021, 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”).