Cheetah Mobile Announces Second Quarter 2024 Unaudited Consolidated Financial Results

BEIJING, Sept. 13, 2024 /PRNewswire/ -- 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.

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).

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," "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
• 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".

Invest or Relations Contact

Helen Jing Zhu
Cheetah Mobile Inc.
Tel: [phone]
Email: [email protected]

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

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

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.

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.

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)

SOURCE Cheetah Mobile

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