Cheetah Mobile Announces First Quarter 2021 Unaudited Consolidated Financial Results

Cheetah Mobile Inc. (NYSE: CMCM) (“Cheetah Mobile” or the “Company”), a leading internet company, today announced its unaudited consolidated financial results for the first quarter 2021 ended March 31, 2021.

Management Commentary

Mr. Sheng Fu, Cheetah Mobile’s Chairman and Chief Executive Officer, stated, “Despite seasonality, Cheetah Mobile’s total revenues in the first quarter of 2021 were RMB198 million, which was within our guidance. Our internet business is in line with our strategy of focusing on driving our membership growth to deliver superior user experience. In this quarter, we saw continued increase in revenues from our membership services, in terms of both absolute numbers and a percentage of total internet revenues. For our AI business, we are on the right track of deploying robots in shopping malls in China’s tier one and tier two cities to amplify our partners’ promotions and help them build brand recognition. So far, we have successfully entered into approximately 1,200 shopping malls in more than 40 cities. We believe that we have been off to a good start and on a firm footing to achieve our strategic goals step by step.”

Mr. Thomas Ren, Cheetah Mobile’s Chief Financial Officer, commented, “In the first quarter of 2021, we continued to improve our operational efficiency. Our costs were well controlled and gross margin was 70.1% in this quarter, compared to 62.1% in the fourth quarter of 2020. Our operating loss narrowed to RMB57 million, from RMB148 million in the same period last year and RMB74 million in the fourth quarter of 2020. In addition, our balance sheet remained robust, with cash and cash equivalents, restricted cash, and short-term investments of approximately US$276 million on March 31, 2021. The abundant cash resources enable us to invest according to our strategies and create new milestones for the Company.”

First Quarter 2021 Consolidated Financial Results

REVENUES

Total revenues were RMB198.4 million (US$30.3 million) in the first quarter of 2021, representing a decrease of 62.4% year over year and a decrease of 25.2% quarter over quarter.

Revenues from the Company’s internet business decreased by 62.2% year over year and 25.3% quarter over quarter to RMB187.6 million (US$28.6 million) in the first quarter of 2021. The year-over-year decrease was due to the suspension of the Company’s collaboration with Google since February 2020, as well as the Company’s disposal of certain gaming-related business and assets in the second half of 2020. The quarter-over-quarter decrease was mainly due to the impact of seasonality and decreased revenues from the diminishing mobile gaming business.

Revenues from the AI and others was RMB10.8 million (US$1.7 million) in the first quarter of 2021, representing a 65.9% year-over-year decrease and a 24.0% quarter-over-quarter decrease. The decline was primarily attributable to a decline in sale of consumer-facing AI-related products.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues decreased by 59.8% year over year and 40.9% quarter over quarter to RMB59.4 million (US$9.1 million) in the first quarter of 2021. The decrease was primarily due to the Company’s ongoing efforts to improve operational efficiency as well as disposals of certain overseas utility and gaming-related business and assets. Non-GAAP cost of revenues decreased by 60.0% year over year and 41.0% quarter over quarter to RMB59.0 million (US$9.0 million) in the first quarter of 2021.

Gross profit decreased by 63.4%year over year and 15.6%quarter over quarter to RMB139.1 million (US$21.2 million) in the first quarter of 2021. Non-GAAP gross profit decreased by 63.4% year over year and 15.6% quarter over quarter to RMB139.4 million (US$21.3 million) in the first quarter of 2021.

Gross margin was 70.1% in the first quarter of 2021, compared to 72.0% in the first quarter of 2020 and 62.1% in the fourth quarter of 2020. Non-GAAP gross margin was 70.2% in the first quarter of 2021, compared to 72.0% in the first quarter of 2020 and 62.3% in the fourth quarter of 2020.

OPERATING INCOME/LOSS AND EXPENSES

Total operating expenses decreased by 63.0% year over year and 18.2% quarter over quarter to RMB195.6 million (US$29.9 million) in the first quarter of 2021. Total non-GAAP operating expenses decreased by 62.1% year over year and 11.3% quarter over quarter to RMB197.5 million (US$30.1 million) in the first quarter of 2021.

• Research and development expenses decreased by 48.6% year over year and slightly increased by 4.8% quarter over quarter to RMB73.3 million (US$11.2 million) in the first quarter of 2021. The year over year decrease was primarily attributable to the streamlining of our business, such as the deconsolidation of certain gaming business. While at the same time, we have been keeping investing in R&D in our domestic utility and AI business to optimize our products and services. Non-GAAP research and development expenses decreased by 48.1% year over year and increased by 9.3% quarter over quarter to RMB70.5 million (US$10.8 million) in the first quarter of 2021.
• Selling and marketing expenses decreased by 73.7% year over year and 14.4% quarter over quarter to RMB79.7 million (US$12.2 million) in the first quarter of 2021. This decrease was mainly due to strategic cut of promotional activities and disposals of certain gaming business. Non-GAAP selling and marketing expenses decreased by 73.8% year over year and 13.9% quarter over quarter to RMB79.8 million (US$12.2 million) in the first quarter of 2021.
• General and administrative expenses decreased by 50.2% year over year and 34.2% quarter over quarter to RMB44.1 million (US$6.7million) in the first quarter of 2021. This decrease was primarily due to effective expense control, through which both general and administrative personnel and professional service fees have been reduced. Non-GAAP general and administrative expenses decreased by 44.2% year over year and 13.8% quarter over quarter to RMB48.7million (US$7.4million) in the first quarter of 2021.

Operating loss was RMB56.5 million (US$8.6 million) in the first quarter of 2021, reduced from RMB148.0 million in the same period last year and RMB74.2 million in the fourth quarter of 2020. Non-GAAP operating loss was RMB58.2 million (US$8.9 million) in the first quarter of 2021, compared to RMB141.1 million in the same period last year and RMB57.4 million in the fourth quarter of 2020.

• Operating profit for the internet business was RMB27.7 million in the first quarter of 2021, compared to an operating profit of RMB7.8 million in the same period last year and RMB75.6 million in the fourth quarter of 2020.
• Operating loss for AI and others business was RMB85.9 million in the first quarter of 2021, narrowed from an operating loss of RMB148.9 million in the same period last year and an operating loss of RMB133.0 million in the fourth quarter of 2020.

Share-based compensation expenses were negative RMB1.6 million (US$0.2 million) in the first quarter of 2021, compared to RMB6.9 million in the same period last year and RMB16.8 million in the fourth quarter of 2020. The negavie share-based compensation was mainly due to the personnel adjustment for business streamlining.

OTHER INCOME, NET

Other income, net was RMB85.6 million (US$13.1 million) in the first quarter of 2021, which was primarily due to the gains from a partial disposal of some of our investees.

NET INCOME ATTRIBUTABLE TO CHEETAH MOBILE SHAREHOLDERS

Net income attributable to Cheetah Mobile shareholders was RMB76.4 million (US$11.7 million) in the first quarter of 2021, compared to a net loss attributable to Cheetah Mobile shareholders of RMB104.6 million in the same period last year and a net income attributable to Cheetah Mobile shareholders of RMB68.4 million in the fourth quarter of 2020.

Non-GAAP net income attributable to Cheetah Mobile shareholders was RMB74.8 million (US$11.4 million) in the first quarter of 2021, compared to a non-GAAP net loss attributable to Cheetah Mobile shareholders of RMB97.7 million in the same period last year and non-GAAP net income attributable to Cheetah Mobile shareholders of RMB85.2 million in the fourth quarter of 2020.

NET INCOME PER ADS

Diluted earnings per ADS was RMB0.54 (US$0.08) in the first quarter of 2021, compared to losses per ADS of RMB0.76 in the same period last year and earnings per ADS of RMB0.49 in the fourth quarter of 2020. Non-GAAP diluted earnings per ADS was RMB0.53 (US$0.08) in first quarter of 2021, compared to losses per ADS of RMB0.71 in the same period last year and earnings per ADS of RMB0.60 in the fourth quarter of 2020.

BALANCE SHEET

As of March 31, 2021, the Company had cash and cash equivalents, restricted cash, and short-term investments of RMB1,806.3 million (US$275.7 million).

SHARES ISSUED AND OUTSTANDING

As of March 31, 2021, the Company had a total of 1,403,070,144 Class A and Class B ordinary shares issued and outstanding. One ADS represents 10 Class A ordinary shares.

Business Outlook

For the second quarter of 2021, the Company expects its total revenues to be between RMB175 million (US$26.7 million) and RMB225 million (US$34.3 million). This amount reflects the Company’s current and preliminary expectations.

Conference Call Information

The Company will hold a conference call on June 11, 2021, 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:

The replay will be accessible through June 18, 2021 by dialing the following numbers:

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 RMB6.5518 to US$1.00, the exchange rate in effect as of March 31, 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”).