Cheetah Mobile Announces Second Quarter 2016 Unaudited Consolidated Financial Results

August 19, 2016 5:00 AM

BEIJING, Aug. 19, 2016 /PRNewswire/ -- Cheetah Mobile Inc. (NYSE: CMCM) ("Cheetah Mobile" or the "Company"), a leading mobile internet company that provides mission critical applications to help make the internet and mobile experience speedier, simpler, and safer for users worldwide, today announced its unaudited consolidated financial results for the second quarter of 2016.

Second Quarter 2016 Highlights

  • Total revenues increased by 18.1% year-over-year to RMB1,046.7 million (US$157.5 million), exceeding the Company's previous guidance of RMB975 million to RMB1,000 million. The better-than-expected results in total revenues was primarily driven by the Company's strategies to rejuvenate revenue growth in 2016, including refreshing its app products and ad layouts as well as improving its direct sales programs.
  • Mobile revenues increased by 36.7% year-over-year to RMB772.3 million (US$116.2 million). Mobile revenues accounted for 73.8% of total revenues.
  • Overseas revenues[1] increased by 25.3% year-over-year to RMB560.7 million (US$84.4 million). Overseas revenues accounted for 53.6% of total revenues and 72.6% of mobile revenues.
  • Content-driven products made solid progress in the second quarter of 2016, particularly in the U.S. market. According to App Annie's July 2016 data, News Republic, a global mobile news service operator recently acquired by the Company, was ranked as one of the top three news & magazine apps in the U.S. on Google Play. Live.me, the Company's recently launched live streaming app, was ranked as one of the top five social apps in the U.S. on Google Play. In early August, Live.me was also ranked as one of the top ten social networking apps in the U.S. on Apple App Store.

Second Quarter 2016 Key Operating Metrics

  • The number of mobile monthly active users ("Mobile MAUs") was 623 million in June 2016. The number of mobile MAUs from overseas markets accounted for 79.4% of total mobile MAUs in June 2016.
  • Total global mobile user installations was 3,099 million as of June 30, 2016.

Mr. Sheng Fu, Cheetah Mobile's Chief Executive Officer, stated, "We are pleased that the initiatives we have implemented to rejuvenate sustainable growth for our company are starting to bear fruit. In the second quarter of 2016, we achieved better-than-expected total revenue growth. We expect revenues to resume its sequential growth trends in the second half of 2016, primarily driven by steady and sustained revenue growth generated by our existing utility apps. Additionally, we further expanded our content-driven product portfolio to include news service, short video, live streaming and casual gaming. Most notably, two of our content-driven products, News Republic and Live.me, demonstrated strong performance over the past quarter, particularly in the U.S. market. According to App Annie's July data, News Republic, our newly acquired global mobile news service operator with thousands of high-profile media partners worldwide, was ranked as one of the top 3 news & magazine apps in the U.S. on Google Play. Live.me, a live streaming app, was ranked as one of the top 5 social apps in the U.S. on Google Play in July and was ranked as one of the top 10 social networking apps in the U.S. on Apple App Store in early August. While we don't want to downplay the challenges we face in our transformation from a utility app based mobile company to a content-driven mobile company, our initial success proves that we are on the right track and is progressing according to plans. Going forward, we will continue to leverage our over 600 million mobile MAUs to support our content strategy, deliver more personalized and relevant content to our users, and build Cheetah into one of the world's leading mobile Internet companies."

Mr. Andy Yeung, Cheetah Mobile's Chief Financial Officer, commented, "Our total revenues this quarter increased to RMB1,047 million, which well exceeded our guidance and was primarily driven by the success of our strategies to rejuvenate revenue growth in 2016, including plans to refresh our app products and ad layouts as well as improve our direct sales programs. On the cost side, we have also implemented stricter controls and more efficient management of our product promotion strategies. We expect these initiatives to continue to help sustain our growth and improve our financial recovery in the coming quarters. Looking ahead, we remain focused on aggressively executing on our content strategy to establish a sustainable and profitable growth model for the long term. We are confident that by doing so, we will be well positioned to grow our business and deliver additional value to all of our shareholders."

Second Quarter 2016 Consolidated Financial Results

REVENUES

Total revenues increased by 18.1% to RMB1,046.7 million (US$157.5 million) in the second quarter of 2016 from RMB886.2 million in the prior year period. This increase was primarily driven by the Company's organic business growth, which was attributable to the Company's larger global mobile user base compared to the prior year period and its continued improvements in mobile monetization.

  • Revenues from online marketing services increased by 24.0% to RMB939.1 million (US$141.3 million) in the second quarter of 2016 from RMB757.2 million in the prior year period. Mobile advertising revenues represented approximately 77.9% of online marketing revenues in the quarter, as compared with approximately 66.7% in the prior year period. The increase in mobile advertising revenues was driven by the Company's larger global mobile user base compared to the prior year period, and higher demand from advertisers, including third-party advertising platforms, for the Company's mobile advertising services worldwide, as well as the improved monetization of light causal games through in-game advertising.
  • Revenues from internet value added services ("IVAS") were RMB79.6 million (US$12.0 million) in the second quarter of 2016, as compared with RMB109.3 million in the prior year period. The year-over-year decrease was due to the decline of mobile game publishing revenues in China, which was offset by the Company's growth in overseas markets.
  • Revenues from internet security services and others increased by 41.5% to RMB27.9 million (US$4.2 million) in the second quarter of 2016 from RMB19.7 million in the prior year period. The year-over-year increase was primarily driven by higher internet software licensing revenues from Kingsoft Japan.

By platform, revenues generated from mobile business increased by 36.7% to RMB772.3 million (US$116.2 million) from RMB565.1 million in the prior year period. This increase was primarily driven by the Company's larger global mobile user base, and the higher popularity of the Company's mobile marketing services worldwide.

By region, revenues generated from overseas markets increased by 25.3% to RMB560.7 million (US$84.4 million) from RMB447.5 million in the prior year period. This increase was primarily driven by the Company's larger overseas mobile user base and improvements in overseas monetization compared with the prior year period.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues increased by 58.4% to RMB354.7 million (US$53.4 million) in the second quarter of 2016 from RMB223.9 million in the prior year period. This increase was primarily driven by increased investments in content for the Company's content-driven products, higher traffic acquisition costs associated with the Company's third-party advertising publishing business on the Cheetah Ad Platform, and higher bandwidth and internet data center costs associated with increased user traffic worldwide and data analytics.

Gross profit increased by 4.5% to RMB692.0 million (US$104.1 million) in the second quarter of 2016 from RMB662.3 million in the prior year period.

OPERATING INCOME/LOSS AND EXPENSES

Total operating expenses increased by 19.5% to RMB755.0 million (US$113.6 million) in the second quarter of 2016 from RMB632.0 million in the prior year period. Total non-GAAP operating expenses increased by 15.6% to RMB666.6 million (US$100.3 million) from RMB576.6 million in the prior year period.

  • Research and development expenses increased by 54.9% to RMB227.5 million (US$34.2 million) from RMB146.9 million in the prior year period, primarily driven by an increase in personnel-related costs and share-based compensation expenses. The increase in personnel costs associated with research and development was primarily driven by the Company's increased investments in big data analytics and new product development, particularly the development of new content-driven mobile applications and services. Non-GAAP research and development expenses, which exclude share-based compensation expenses, increased by 37.5% to RMB178.1 million (US$26.8 million) from RMB129.5 million in the prior year period.
  • Selling and marketing expenses increased by 16.2% to RMB407.2 million (US$61.3 million) from RMB350.3 million in the prior year period, primarily driven by higher expenses on promotional activities for the Company's content-driven products, as well as on sales and marketing personnel as a result of the Company's strategy to expand direct sales operations. Non-GAAP selling and marketing expenses, which exclude share-based compensation expenses, increased by 16.9% to RMB405.9 million (US$61.1 million) from RMB347.2 million in the prior year period.
  • General and administrative expenses increased by 33.0% to RMB160.7 million (US$24.2 million) from RMB120.9 million in the prior year period. The year-over-year growth was primarily driven by an increase in expenses associated with higher headcount, share-based compensation expenses and staff benefits. Non-GAAP general and administrative expenses, which exclude share-based compensation expenses, increased by 43.0% to RMB123.0 million (US$18.5 million) from RMB86.0 million in the prior year period.
  • Other operating income was RMB40.4 million (US$6.1 million) for the second quarter 2016, which primarily consisted of government grants, subsidies and financial incentives that the Company received for its operations that were not subsidies for research and development projects.

Operating loss was RMB63.0 million (US$9.5 million), as compared with an operating profit of RMB30.3 million in the prior year period.

Non-GAAP operating profit was RMB25.5 million (US$3.8 million), as compared with RMB86.4 million in the prior year period.

Share-based compensation expenses increased by 57.8% to RMB88.6 million (US$13.3 million) from RMB56.1 million in the prior year period.

OTHER EXPENSES

The Company recognized impairment losses of long-term investments of RMB95.2 million (US$14.3 million) for the second quarter of 2016, primarily driven by one-time non-cash write downs in certain investment assets, which the Company considered other-than-temporary, to their fair value. These write-downs were a result of lower-than-expected performance and financial position of the Company's investees, including a web game developer as well as a global social and mobile advertising software provider.

NET LOSS ATTRIBUTABLE TO CHEETAH MOBILE SHAREHOLDERS

Net loss attributable to Cheetah Mobile shareholders was RMB150.5 million (US$22.6 million) in the second quarter of 2016, as compared with net income attributable to Cheetah Mobile shareholders of RMB60.1 million in the prior year period. The decline in net income was partly attributable to increased investments in content-driven products and an RMB95.2 million net impairment loss of investments.

Non-GAAP net loss attributable to Cheetah Mobile shareholders was RMB61.9 million (US$9.3 million), as compared with Non-GAAP net income attributable to Cheetah Mobile shareholders of RMB116.2 million in the prior year period.

NET LOSSES PER ADS

Diluted losses per ADS in the second quarter of 2016 was RMB1.08 (US$0.16), as compared with diluted earnings per ADS of RMB0.42 in the prior year period.

Non-GAAP dilute losses per ADS in the second quarter of 2016 was RMB0.44 (US$0.07), as compared with Non-GAAP diluted earnings per ADS of RMB0.81 in the prior year period.

ADJUSTED EBITDA

Adjusted EBITDA (Non-GAAP) decreased by 46.0% to RMB67.6 million (US$10.2 million) from RMB125.3 million in the prior year period.

CASH AND CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM INVESTMENTS BALANCE

As of June 30, 2016, the Company had cash and cash equivalents, restricted cash and short-term investments of RMB1,421.1 million (US$213.8 million).

SHARES ISSUED AND OUTSTANDING

As of June 30, 2016, the Company had a total of 1,425,162,680 Class A and Class B ordinary shares issued and outstanding. One ADS represents 10 Class A ordinary shares.

Recent Developments

Acquisition on News Republic

During the second quarter of 2016, Cheetah Mobile acquired News Republic, a global mobile news service operator, for a total consideration of up to US$57 million. Headquartered in Bordeaux and San Francisco, News Republic leverages editorial, algorithmic and community intelligence to offer a sharp and wide perspective on the world by enhancing relevance and discoverability in custom news flows. Readers can gain access to articles, videos and photos from thousands of high-profile media partners around the world. News Republic is available in 37 languages and 40 editions. Users can download the app from both the Google Play Store and the Apple App Store, and the app is also preloaded on certain popular smartphones brands. News Republic has received multiple Best News App awards globally, including the Best Media and Publishing App at MWC 2015, as well as the Editors Choice and Super Developer on Google Play and recognition of "Great Apps" and "Best of AppStore" on iOS. News Republic is now a wholly owned subsidiary of Cheetah Mobile, and the News Republic app will continue to operate independently while receiving development assistance and improvements from the global Cheetah Mobile team.

Disposal of Suzhou Jiangduoduo

During the second quarter of 2016, Cheetah Mobile disposed of its 65% interest in Suzhou Jiangduoduo ("JDD") and realized a gain on disposal of RMB13.6 million (US$2.0 million). JDD is engaged in online lottery sales business in China, which has been suspended since March 2015 in response to the PRC government's regulatory measures.

Departure of Chief Marketing Officer

Mr. Xinhua Liu, Chief Marketing Officer of Cheetah Mobile, resigned from his position for personal reasons, effective July 11, 2016.

Update on Share Repurchase Program

On March 16, 2016, the Company's Board of Directors authorized a share repurchase plan, pursuant to which the Company may repurchase its own issued and outstanding ADSs with an aggregate value of up to US$100 million from the open market, in negotiated transactions off the market, or through other legally permissible means in accordance with applicable securities laws from time to time within one year after March 16, 2016. The share repurchase plan does not require the Company to acquire a specific number of ADSs. As of August 18, 2016, the Company had repurchased a total of 2,536,808 ADSs, representing 25,368,080 Class A ordinary shares, at an average price of $10.7483 per ADS.

Business Outlook

For the third quarter of 2016, the Company expects its total revenues to be between RMB1,100 million (US$166 million) and RMB1,150 million (US$173 million), representing an estimated year-over-year growth of 7% to 12%, and quarter-over-quarter growth of 5% to 10%. This estimate represents management's preliminary view as of the date of this release, which is subject to change and any change could be material.

Conference Call Information

Company will hold a conference call on Friday, August 19, 2016 at 8:00 am Eastern Time or 8:00 pm Beijing Time to discuss the 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

China Toll Free:

4001-201203

Hong Kong Toll Free:

800-905945

Conference ID:

Cheetah Mobile

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 RMB6.6459 to US$1.00, the exchange rate in effect as of June 30, 2016 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 leading mobile internet company. It aims to provide the best apps for mobile users worldwide, while building a leading global mobile ad platform for advertisers.

Cheetah Mobile had approximately 623 million global mobile monthly active users in June 2016. Its mission critical applications, including Clean Master, CM Security, Battery Doctor and Duba Anti-virus, help make the internet and mobile experience speedier, simpler, and safer for users worldwide. The Company also provides multiple user traffic entry points and global content promotional channels capable of delivering targeted content to hundreds of millions of users. Its customers include direct advertisers and mobile advertising networks through which advertisers place their advertisements.

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

To supplement Cheetah Mobile's consolidated financial information presented in accordance with U.S. GAAP, Cheetah Mobile uses the following non-GAAP financial measures:

  • Non-GAAP operating expenses reflect operating expenses excluding share-based compensation expenses.
  • Non-GAAP operating profit reflects operating profit excluding share-based compensation expenses.
  • Non-GAAP net income (losses) attributable to Cheetah Mobile shareholders is net income attributable to Cheetah Mobile shareholders excluding share-based compensation expenses.
  • Non-GAAP diluted earnings (losses) per ADS is non-GAAP net income (loss) attributable to Cheetah Mobile shareholders divided by weighted average number of diluted ADSs.
  • Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, other non-operating income and share-based compensation expenses.

The Company believes that separate analysis and exclusion of share-based compensation expenses and the use of Adjusted EBITDA add clarity to the constituent parts of its performance from the cash perspective. 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, 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. Reconciliations of GAAP and Non-GAAP Results" and "Cheetah Mobile Inc. Reconciliation of Net Income (Loss) Attributable to Cheetah Mobile Shareholders to Adjusted EBITDA (Non-GAAP)" at the end of this release.

[1] Overseas revenues refers to revenues generated by the Company's operating legal entities incorporated outside the People's Republic of China (excluding Hong Kong, Macau and Taiwan for the purposes of this press release), or the PRC. Such revenues are primarily attributable to customers located outside the PRC.

Cheetah Mobile Inc.

Condensed Consolidated Balance Sheets

(Unaudited, in '000)

As of

December 31, 2015

June 30, 2016

June 30, 2016

RMB

RMB

USD

(As adjusted, unaudited) (a)

(Unaudited)

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

1,843,233

883,721

132,972

Restricted cash

156,161

156,822

23,597

Short-term investments

29,234

380,597

57,268

Accounts receivable

633,440

581,952

87,566

Prepayments and other current assets

360,004

440,042

66,213

Due from related parties

60,794

80,756

12,151

Deferred tax assets

5,101

8,874

1,335

Total current assets

3,087,967

2,532,764

381,102

Non-current assets:

Property and equipment, net

121,241

131,990

19,860

Intangible assets, net

233,092

266,723

40,133

Goodwill

617,863

953,572

143,483

Investment in equity investees

124,708

103,775

15,615

Other long-term investments

700,113

920,427

138,495

Deferred tax assets

12,843

19,732

2,969

Other non-current assets

28,724

24,652

3,709

Total non-current assets

1,838,584

2,420,871

364,264

Total assets

4,926,551

4,953,635

745,366

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Bank loans

130,273

344,450

51,829

Accounts payable

137,883

186,819

28,110

Accrued expenses and other current liabilities

1,308,717

1,107,800

166,689

Redemption right liabilities

474

866

130

Deferred revenue

56,070

56,933

8,567

Due to related parties

56,932

69,180

10,409

Income tax payable

29,822

47,119

7,090

Deferred tax liabilities

414

-

-

Total current liabilities

1,720,585

1,813,167

272,824

Non-current liabilities:

Bank loans

10,523

69,209

10,414

Deferred revenue

8,166

8,062

1,213

Deferred tax liabilities

99,006

102,478

15,420

Other non-current liabilities

73,826

33,123

4,984

Total non-current liabilities

191,521

212,872

32,031

Total liabilities

1,912,106

2,026,039

304,855

Shareholders' equity:

Ordinary shares

226

229

34

Treasury stock

-

(178,991)

(26,933)

Additional paid-in capital

2,414,706

2,589,594

389,653

Retained earnings

317,818

178,073

26,794

Accumulated other comprehensive income

121,317

165,332

24,878

Total Cheetah Mobile shareholders' equity

2,854,067

2,754,237

414,426

Noncontrolling interests

160,378

173,359

26,085

Total equity

3,014,445

2,927,596

440,511

Total liabilities, noncontrolling interests and shareholders' equity

4,926,551

4,953,635

745,366

Note:

(a) The above condensed consolidated balance sheets have been prepared as if the Kingsoft Japan had been owned and operated by the Cheetah Mobile throughout the periods presented in accordance with ASC 805-50. Kingsoft Japan became a subsidiary of the Company on January 29, 2016.

Cheetah Mobile Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited, in '000, except for per share data and number of shares and ADSs)

For The Three Months Ended

June 30, 2015

March 31, 2016

June 30, 2016

June 30, 2016

RMB

RMB

RMB

USD

(As adjusted, unaudited)

(b)

(Unaudited)

(Unaudited)

(Unaudited)

Revenues

886,222

1,114,988

1,046,664

157,490

Online marketing services

757,170

992,279

939,125

141,309

Internet value-added services

109,308

102,268

79,601

11,977

Internet security services and others

19,744

20,441

27,938

4,204

Cost of revenues (a)

(223,929)

(321,010)

(354,710)

(53,373)

Gross profit

662,293

793,978

691,954

104,117

Operating income and expenses:

Research and development (a)

(146,875)

(207,462)

(227,496)

(34,231)

Selling and marketing (a)

(350,323)

(443,782)

(407,206)

(61,272)

General and administrative (a)

(120,878)

(133,085)

(160,735)

(24,186)

Impairment of goodwill and intangible assets

(20,216)

(2,350)

-

-

Other operating income

6,340

14,948

40,446

6,086

Total operating income and expenses

(631,952)

(771,731)

(754,991)

(113,603)

Operating profit (loss)

30,341

22,247

(63,037)

(9,486)

Other income (expense):

Interest income, net

4,028

3,387

2,715

409

Changes in fair value of redemption right and put options granted

167

20

(308)

(46)

Settlement and changes in fair value of contingent consideration

2,677

(683)

(664)

(100)

Foreign exchange (loss) gain, net

(188)

(1,362)

486

73

Impairment of investments

-

-

(95,206)

(14,326)

Losses from equity method investments

(6,846)

(7,731)

(6,070)

(913)

Other income, net

35,777

651

17,620

2,651

Income (Loss) before taxes

65,956

16,529

(144,464)

(21,738)

Income tax expenses

(9,646)

(2,998)

(1,964)

(296)

Net income (loss)

56,310

13,531

(146,428)

(22,034)

Less: net (loss) income attributable to noncontrolling interests

(3,786)

2,826

4,022

605

Net income (loss) attributable to Cheetah Mobile shareholders

60,096

10,705

(150,450)

(22,639)

Earnings (Losses) per share

Basic

0.04

0.01

(0.11)

(0.02)

Diluted

0.04

0.01

(0.11)

(0.02)

Earnings (Losses) per ADS

Basic

0.44

0.08

(1.08)

(0.16)

Diluted

0.42

0.07

(1.08)

(0.16)

Weighted average number of shares outstanding

Basic

1,374,275,098

1,392,324,511

1,391,355,172

1,391,355,172

Diluted

1,438,132,050

1,441,882,966

1,391,355,172

1,391,355,172

Weighted average number of ADSs used in computation

Basic

137,427,510

139,232,451

139,135,517

139,135,517

Diluted

143,813,205

144,188,297

139,135,517

139,135,517

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

Foreign currency translation adjustments

(7,352)

(6,473)

54,165

8,150

Unrealized gains (losses) on available-for-sale securities, net

7,161

1,215

(389)

(59)

Other comprehensive (loss) income

(191)

(5,258)

53,776

8,091

Total comprehensive income (loss)

56,119

8,273

(92,652)

(13,943)

Less: Total comprehensive (loss) income attributable to noncontrolling interests

(3,323)

4,234

7,117

1,071

Total comprehensive income (loss) attributable to Cheetah Mobile shareholders

59,442

4,039

(99,769)

(15,014)

(a) Share-based compensation expenses

(In '000)

For The Three Months Ended

June 30, 2015

March 31, 2016

June 30, 2016

June 30, 2016

RMB

RMB

RMB

USD

(As adjusted, unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Cost of revenues

744

339

140

21

Research and development

17,387

40,129

49,410

7,435

Selling and marketing

3,117

6,144

1,300

196

General and administrative

34,858

44,835

37,707

5,674

Total

56,106

91,447

88,557

13,326

Notes:

(b) The above condensed consolidated statements of comprehensive income have been prepared as if the Kingsoft Japan had been owned and operated by the Cheetah Mobile throughout the periods presented in accordance with ASC 805-50. Kingsoft Japan became a subsidiary of the Company on January 29, 2016.

Cheetah Mobile Inc.

Reconciliation of GAAP and Non-GAAP Results

(Unaudited, in'000, except for per share data and percentage)

For The Three Months Ended June 2016

GAAP

% of Net

Share-based

% of Net

Non-GAAP

% of Net

Non-GAAP

Result

Revenues

Compensation

Revenues

Result

Revenues

Result ($)

Revenues

1,046,664

1,046,664

157,490

Cost of revenues

(354,710)

33.9%

140

0.0%

(354,570)

33.9%

(53,352)

Gross profit

691,954

66.1%

140

0.0%

692,094

66.1%

104,138

Research and development

(227,496)

21.7%

49,410

4.7%

(178,086)

17.0%

(26,796)

Selling and marketing

(407,206)

38.9%

1,300

0.1%

(405,906)

38.8%

(61,076)

General and administrative

(160,735)

15.4%

37,707

3.6%

(123,028)

11.8%

(18,512)

Other operating income

40,446

3.9%

-

-

40,446

3.9%

6,086

Total operating income and expenses

(754,991)

72.1%

88,417

8.4%

(666,574)

63.7%

(100,298)

Operating (loss) profit

(63,037)

6.0%

88,557

8.5%

25,520

2.4%

3,840

Net loss attributable to Cheetah Mobile shareholders

(150,450)

14.4%

88,557

8.5%

(61,893)

5.9%

(9,313)

Diluted losses per ordinary share (RMB)

(0.11)

0.07

(0.04)

Diluted losses per ADS (RMB)

(1.08)

0.64

(0.44)

Diluted losses per ADS (USD)

(0.16)

0.09

(0.07)

For The Three Months Ended March 2016

GAAP

% of Net

Share-based

% of Net

Non-GAAP

% of Net

Result

Revenues

Compensation

Revenues

Result

Revenues

Revenues

1,114,988

1,114,988

Cost of revenues

(321,010)

28.8%

339

0.0%

(320,671)

28.8%

Gross profit

793,978

71.2%

339

0.0%

794,317

71.2%

Research and development

(207,462)

18.6%

40,129

3.6%

(167,333)

15.0%

Selling and marketing

(443,782)

39.8%

6,144

0.6%

(437,638)

39.3%

General and administrative

(133,085)

11.9%

44,835

4.0%

(88,250)

7.9%

Impairment of goodwill and intangible assets

(2,350)

0.2%

-

-

(2,350)

0.2%

Other operating income

14,948

1.3%

-

-

14,948

1.3%

Total operating income and expenses

(771,731)

69.2%

91,108

8.2%

(680,623)

61.0%

Operating profit

22,247

2.0%

91,447

8.2%

113,694

10.2%

Net income attributable to Cheetah Mobile shareholders

10,705

1.0%

91,447

8.2%

102,152

9.2%

Diluted earnings per ordinary share (RMB)

0.01

0.06

0.07

Diluted earnings per ADS (RMB)

0.07

0.64

0.71

For The Three Months Ended June 2015

GAAP

% of Net

Share-based

% of Net

Non-GAAP

% of Net

Result

Revenues

Compensation

Revenues

Result

Revenues

Revenues

886,222

886,222

Cost of revenues

(223,929)

25.3%

744

0.1%

(223,185)

25.2%

Gross profit

662,293

74.7%

744

0.1%

663,037

74.8%

Research and development

(146,875)

16.6%

17,387

2.0%

(129,488)

14.6%

Selling and marketing

(350,323)

39.5%

3,117

0.4%

(347,206)

39.2%

General and administrative

(120,878)

13.6%

34,858

3.9%

(86,020)

9.7%

Impairment of goodwill and intangible assets

(20,216)

2.3%

-

-

(20,216)

2.3%

Other operating income

6,340

0.7%

-

-

6,340

0.7%

Total operating income and expenses

(631,952)

71.3%

55,362

6.2%

(576,590)

65.1%

Operating profit

30,341

3.4%

56,106

6.3%

86,447

9.8%

Net income attributable to Cheetah Mobile Shareholders

60,096

6.8%

56,106

6.3%

116,202

13.1%

Diluted earnings per ordinary share (RMB)

0.04

0.04

0.08

Diluted earnings per ADS (RMB)

0.42

0.39

0.81

Cheetah Mobile Inc.

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

(Unaudited, in '000)

For The Three Months Ended

June 30, 2015

March 31, 2016

June 30, 2016

June 30, 2016

RMB

RMB

RMB

USD

Net income (loss) attributable to Cheetah Mobile shareholders

60,096

10,705

(150,450)

(22,639)

Add:

Income tax expense

9,646

2,998

1,964

296

Interest income,net

(4,028)

(3,387)

(2,715)

(409)

Depreciation and amortization

38,867

37,076

42,126

6,339

Net (loss) income attributable to noncontrolling interests

(3,786)

2,826

4,022

605

Other non-operating (income) expense, net

(31,587)

9,105

84,142

12,661

Share-based compensation

56,106

91,447

88,557

13,326

Adjusted EBITDA

125,314

150,770

67,646

10,179

Cheetah Mobile Inc.

Revenues Generated from PC-based and Mobile-based Applications and Services

(Unaudited, in '000)

For The Three Months Ended

June 30, 2015

March 31, 2016

June 30, 2016

June 30, 2016

RMB

RMB

RMB

USD

PC

321,107

288,398

274,329

41,278

Mobile

565,115

826,590

772,335

116,212

Total

886,222

1,114,988

1,046,664

157,490

Cheetah Mobile Inc.

Revenues Generated from Domestic and Overseas Markets

(Unaudited, in '000)

For The Three Months Ended

June 30, 2015

March 31, 2016

June 30, 2016

June 30, 2016

RMB

RMB

RMB

USD

Domestic revenues

438,697

481,373

485,972

73,123

Overseas revenues

447,525

633,615

560,692

84,367

Total

886,222

1,114,988

1,046,664

157,490

Investor Relations Contact

Cheetah Mobile Inc.Helen Jing ZhuTel: +86 10 6292 7779 ext. 1600Email: IR@cmcm.com

ICR, Inc.Jessie Fan Tel: +1 (646) 417-5395Email: IR@cmcm.com

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/cheetah-mobile-announces-second-quarter-2016-unaudited-consolidated-financial-results-300315819.html

SOURCE Cheetah Mobile

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