Form 6-K Cheetah Mobile Inc. For: Mar 26

March 26, 2019 8:38 AM

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of March 2019

 

 

Commission File Number: 001-36427

 

 

CHEETAH MOBILE INC.

 

 

Building No. 8

Hui Tong Times Square

Yaojiayuan South Road

Beijing 100123

People’s Republic of China

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

 

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

CHEETAH MOBILE INC.
By   :    /s/ Vincent Zhenyu Jiang                        
Name   :    Vincent Zhenyu Jiang
Title   :    Chief Financial Officer

Date: March 26, 2019


Exhibit Index

Exhibit 99.1 — Press release

Exhibit 99.1

Cheetah Mobile Announces Fourth Quarter and Full Year 2018

Unaudited Consolidated Financial Results

Beijing, China, March 25, 2019 – Cheetah Mobile Inc. (NYSE: CMCM) (“Cheetah Mobile” or the “Company”), a leading mobile internet company with global market coverage, today announced its unaudited consolidated financial results for the fourth quarter and full year ended December 31, 2018.

Fourth Quarter 2018 Financial Highlights

 

   

Total revenues1 increased by 1.8% year over year and 2.2% quarter over quarter to RMB1,381.2 million (US$200.9 million).

 

   

Revenues1 from the mobile entertainment business increased by 39.4% year over year and 11.6% quarter over quarter to RMB555.6 million (US$80.8 million), accounting for 40.2% of total revenues in the fourth quarter of 2018.

 

   

Gross profit was RMB964.8 million (US$140.3 million). Gross margin was 69.9%. Non-GAAP2 gross profit was RMB964.9 million (US$140.3 million). Non-GAAP gross margin was 69.9%.

 

   

Net income attributable to Cheetah Mobile shareholders was RMB770.2 million (US$112.0 million). Non-GAAP2 net income attributable to Cheetah Mobile shareholders was RMB805.5 million (US$117.2 million).

 

   

Diluted net income per ADS was RMB5.35 (US$0.78). Non-GAAP2 diluted net income per ADS was RMB5.60 (US$0.81).

Fiscal Year 2018 Financial Highlights

 

   

Total revenues1 increased by 2.2% to RMB4,981.7 million (US$724.6 million).

 

   

Revenues1 from the mobile entertainment business increased by 19.0% to RMB1,778.9 million (US$258.7 million).

 

   

Gross profit was RMB3,441.1 million (US$500.5 million). Gross margin was 69.1%. Non-GAAP2 gross profit was RMB3,441.3 million (US$500.5 million). Non-GAAP gross margin was 69.1%.

 

   

Net income attributable to Cheetah Mobile shareholders was RMB1,203.8 million (US$175.1 million). Non-GAAP2 net income attributable to Cheetah Mobile shareholders was RMB1,288.9 million (US$187.5 million).

 

   

Diluted net income per ADS was RMB8.10 (US$1.18). Non-GAAP2 diluted net income per ADS was RMB8.69 (US$1.26).

 

1 

Starting from January 1, 2018, Cheetah Mobile adopted a new revenue accounting standard (ASC 606), which reclassifies value added tax from the cost of revenues to net against revenues. To increase comparability of operating results and help investors better understand the Company’s business performance and operating trends, 2017 net revenues have been used to calculate all percentage changes in revenues. 2017 net revenues are defined as gross revenues under legacy GAAP after the deduction of value added taxes, which is presented on the same basis as 2018 and going forward.

2 

Non-GAAP measures exclude share-based compensation expenses. See details in the section titled “USE OF NON-GAAP FINANCIAL MEASURES”.

 

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Net cash from operating activities in 2018 was RMB342.1 million (US$49.8 million). Free cash flow was RMB276.7 million (US$40.2 million) in 2018.

Fourth Quarter 2018 Operating Metrics

 

   

The average number of global mobile monthly active users (“Mobile MAUs”) was 470 million in the fourth quarter of 2018. The number of Mobile MAUs from markets outside of China, or overseas markets, accounted for 72% of the total number of Mobile MAUs in the fourth quarter of 2018.

Mr. Sheng Fu, Cheetah Mobile’s Chairman and Chief Executive Officer, stated, “We achieved full year 2018 financial results that were in line with our previous expectations, mostly driven by growths in our mobile games operation, mobile utility products business in the domestic market, and artificial intelligence (“AI”) powered business. In 2018, we further expanded our product offerings by launching many new games including Bricks n Balls, a popular casual elimination game, and introducing a number of new utility products focused on delivering personalized experiences. We also made substantial progress in attracting our users to purchase virtual items and premium services within our mobile applications, which diversified our revenue streams. More importantly, we have been leveraging AI technologies and expanding into AI-powered businesses. We have successfully launched AI hardware such as Cheetah Translator and deployed Cheetah GreetBot in many customer locations. Looking ahead, we are confident that our long-term growth prospects remain healthy and that our business will maximize the benefits of our users and advertisers continuously.”

Mr. Vincent Jiang, Cheetah Mobile’s Chief Financial Officer, commented, “In 2018, we grew our profits and expanded our margins. Our gross profit increased to RMB3.4 billion, and gross margin expanded to 69.1%. Our operating profit increased to RMB467 million and operating margin expanded to 9.4%. In addition, we continued investing in our mobile games business and our mobile utility products business in the domestic market. More importantly, we generated RMB342 million of net cash from operating activities in 2018. In the fourth quarter of 2018, we sold a certain portion of our equity ownership in Bytedance Ltd., which generated a total investment gain of US$87 million and further augmented our balance sheet. As of December 31, 2018, we had cash and cash equivalents, restricted cash, and short-term investments of approximately US$541 million. Our strong cash generation capabilities and our high cash balance should allow us to continue to invest in our long-term growth and our business expansion into the AI space.”

Fourth Quarter 2018 Consolidated Financial Results

REVENUES

Total revenues in the fourth quarter increased by 1.8% year over year and 2.2% quarter over quarter to RMB1,381.2 million (US$200.9 million).

Revenues from utility products and related services decreased by 16.5% year over year and 6.3% quarter over quarter to RMB783.0 million (US$113.9 million) in the fourth quarter of 2018. The year over year decrease was mainly due to the discontinuation of certain ad formats, i.e., ads on mobile phone lock screens, by the Company’s overseas third-party advertising partners. The quarter over quarter decrease was mainly due to disruptions to the Company’s business as a result of the negative publicity caused by a news article released in November 2018, about which the Company has made a number of public clarification statements.

 

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Revenues from the mobile entertainment business increased by 39.4% year over year and 11.6% quarter over quarter to RMB555.6 million (US$80.8 million) primarily driven by the growth of the Company’s mobile games business in the fourth quarter of 2018. Revenues from the mobile entertainment business contributed to 40.2% of total revenues in the quarter.

 

   

Revenues from the mobile games business increased by 91.4% year over year and 14.3% quarter over quarter to RMB326.2 million (US$47.4 million). The increases were mainly due to contributions from Bricks n Balls, a casual elimination game that started ramping up in the middle of July 2018.

 

   

Revenues from the content-driven products, namely LiveMe, increased by 0.6% year over year and 7.9% quarter over quarter to RMB229.4 million (US$33.4 million), primarily driven by growths in both of its paying user count and average revenue per user as LiveMe continued to introduce new features to increase its user stickiness.

Revenues from others increased to RMB42.6 million (US$6.2 million) from RMB20.0 million in the same period last year and RMB18.5 million in the third quarter of 2018, mainly driven by the sales of Cheetah Translator, an AI-based interpretation device. Revenues from others accounted for 3.1% of total revenues in the fourth quarter of 2018.

By region, revenues generated from the China market increased by 3.7% year over year, but decreased by 0.6% quarter over quarter to RMB533.2 million (US$77.6 million), and constituted 38.6% of the Company’s total revenues in the fourth quarter of 2018, compared to 37.9% in the same period last year and 39.7% in the third quarter of 2018. The year over year revenue growth in the China market was primarily attributable to the sales of Cheetah Translator.

Revenues generated from the overseas market increased by 0.7% year over year and 4.0% quarter over quarter to RMB848.0 million (US$123.3 million), constituting 61.4% of the Company’s total revenues in the fourth quarter of 2018, up from 62.1% in the same period last year and 60.3% in the third quarter of 2018. The revenue growth in the overseas market was primarily driven by the rapid growth of the Company’s mobile games business, whose market is mostly overseas.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues decreased by 3.2% year over year and increased by 9.1% quarter over quarter to RMB416.4 million (US$60.6 million) in the fourth quarter of 2018. The year-over-year decrease was primarily due to (i) reduced traffic acquisition costs associated with third-party advertising, and (ii) reduced bandwidth and IDC costs and personnel costs involved in the Company’s operation for the News Republic business. The quarter-over-quarter increase was primarily driven by (i) higher revenue sharing with live broadcasters of the Company’s LiveMe business, (ii) higher costs as a result of revenue growth in the Company’s hardware business, and (iii) higher costs of payment channels, such as Google Play and Apple’s App Store, for the Company’s mobile games business, as in-game purchase revenues from

 

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the Company’s mobile games business grew. Non-GAAP cost of revenues decreased by 3.5% year over year and increased by 9.1% quarter over quarter to RMB416.2 million (US$60.5 million) in the fourth quarter of 2018.

Gross profit increased by 4.1% year over year and remained relatively flat quarter over quarter at RMB964.8 million (US$140.3 million). Non-GAAP gross profit increased by 4.3% year over year and remained relatively flat quarter over quarter at RMB964.9 million (US$140.3 million) in the fourth quarter of 2018. Gross margin was 69.9% in the fourth quarter of 2018, as compared to 68.3% in the same period last year and 71.8% in the third quarter of 2018. Non-GAAP gross margin was 69.9% in the fourth quarter of 2018, as compared to 68.2% in the same period last year and 71.8% in the third quarter of 2018.

OPERATING INCOME AND EXPENSES

Total operating expenses increased by 26.3% year over year and 5.6% quarter over quarter to RMB889.7 million (US$129.4 million) in the fourth quarter of 2018. Total non-GAAP operating expenses increased by 22.1% year over year and 4.7% quarter over quarter to RMB854.6 million (US$124.3 million) in the fourth quarter of 2018.

 

   

Research and development (R&D) expenses increased by 25.9% year over year and 9.0% quarter over quarter to RMB191.1 million (US$27.8 million) in the fourth quarter of 2018. The increases were primarily due to increased share-based compensation expenses and increased R&D headcount for the mobile games business. Non-GAAP R&D expenses, which exclude share-based compensation expenses, increased by 19.4% year over year and 5.5% quarter over quarter to RMB176.0 million (US$25.6 million) in the fourth quarter of 2018.

 

   

Selling and marketing expenses increased by 38.1% year over year but remained relatively flat quarter over quarter at RMB580.3 million (US$84.4 million) in the fourth quarter of 2018. The increases were mainly due to increased marketing promotions for the Company’s utility products and related services business in the domestic market and its mobile games business in all markets. Non-GAAP selling and marketing expenses, which exclude share-based compensation expenses, increased by 36.5% year over year and 2.2% quarter over quarter to RMB577.7 million (US$84.0 million) in the fourth quarter of 2018.

 

   

General and administrative expenses increased by 14.6% year over year and 21.8% quarter over quarter to RMB131.8 million (US$19.2 million) in the fourth quarter of 2018. The year-over-year increase was primarily due to the increased share-based compensation expenses. The quarter-over-quarter increase was primarily due to higher employee benefits. Non-GAAP general and administrative expenses, which exclude share-based compensation expenses, increased by 2.2% year over year and 22.0% quarter over quarter to RMB114.6 million (US$16.7 million) in the fourth quarter of 2018.

Operating profit decreased by 66.2% year over year and 41.3% quarter over quarter to RMB75.1 million (US$10.9 million). The year-over-year decrease in the Company’s operating profit was primarily due to the Company’s investments in both its mobile utility products business in the domestic market and its mobile games business in all markets. Non-GAAP operating profit decreased by 51.1% year over year and 28.4% quarter over quarter to RMB110.3 million (US$16.0 million).

 

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The Company has reported its operating profit along the following segments since the second quarter of 2017:

 

   

Operating profit for utility products and related services decreased by 31.5% year over year and 15.2% quarter over quarter to RMB224.0 million (US$32.6 million) in the fourth quarter of 2018. The decreases were primarily due to a decrease in revenues from this segment and the Company’s increased marketing promotions for its utility products and related services business in the domestic market.

 

   

Operating loss for the mobile entertainment business was RMB64.8 million (US$9.4 million) in the fourth quarter of 2018, compared to an operating loss of RMB61.8 million in the same period last year and RMB74.1 million in the third quarter of 2018. The wider year-over-year loss was mainly due to higher sales and marketing expenses for the Company’s mobile games operation. The reduced quarter-over-quarter loss was mainly a result of reduced expenses from the LiveMe business.

Share-based compensation expenses increased to RMB35.3 million (US$5.1 million) in the fourth quarter of 2018 from RMB3.4 million in the same period last year and RMB26.3 million in the third quarter of 2018, as the Company granted a certain quantity of restricted shares to key employees.

IMPAIRMENT OF INVESTMENTS

Impairment of investments were RMB98.9 million (US$14.4 million) in the fourth quarter of 2018 primarily due to a one-time non-cash write-down of some investment assets, which the Company considered as other-than-temporary, to its fair value. This write-down was the result of lower-than-expected performance and financial position of the investment assets.

OTHER INCOME, NET

Other income, net, was RMB789.3 million (US$114.8 million) in the fourth quarter of 2018, mainly resulting from the disposals of a certain portion of the Company’s equity ownership in Bytedance Ltd., whose transaction agreement was entered in the fourth quarter of 2018 and resulted in a disposal gain of investment of US$43.3 million. This transaction also resulted in a fair value gain of US$43.3 million in the fourth quarter of 2018 for the remaining portion of the equity ownership which the Company still holds, in accordance with ASC 321, adopted on January 1, 2018.

NET INCOME ATTRIBUTABLE TO CHEETAH MOBILE SHAREHOLDERS

Net income attributable to Cheetah Mobile shareholders decreased by 26.4% year over year, and increased by 361.1% quarter over quarter to RMB770.2 million (US$112.0 million) in the fourth quarter of 2018. Non-GAAP net income attributable to Cheetah Mobile shareholders decreased by 23.3% year over year and increased by 316.6% quarter over quarter to RMB805.5 million (US$117.2 million) in the fourth quarter of 2018.

 

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NET INCOME PER ADS

Diluted income per ADS decreased by 26.4% year over year and increased by 390.8% quarter over quarter to RMB5.35 (US$0.78) in the fourth quarter of 2018. Non-GAAP diluted income per ADS decreased by 23.2% year over year and increased by 340.9% quarter over quarter to RMB5.60 (US$0.81) in the fourth quarter of 2018.

BALANCE SHEET

As of December 31, 2018, the Company had cash and cash equivalents, restricted cash, and short-term investments of RMB3,720.6 million (US$541.1 million).

SHARES ISSUED AND OUTSTANDING

As of December 31, 2018, the Company had a total of 1,433,343,199 Class A and Class B ordinary shares issued and outstanding. One ADS represents 10 Class A ordinary shares.

Fiscal Year 2018 Results

REVENUES

Total revenues increased by 2.2% to RMB4,981.7 million (US$724.6 million) in 2018.

Revenues from utility products and related services decreased by 6.7% year over year to RMB3,119.5 million (US$453.7 million) in 2018. The decrease was due to (i) a decline in revenues from the Company’s mobile utility products and related services business in the overseas markets mostly as a result of the discontinuation of certain ad formats, i.e., ads on mobile phone lock screens, by the Company’s overseas third-party advertising partners, and (ii) a decline in the Company’s PC-related revenues. This decrease was largely offset by an increase in revenues from the mobile utility products and related services business in China. Revenues from utility products and related services in the domestic market increased by 22.3% year over year to RMB1,794.4 million (US$261.0 million) in 2018, accounting for 36.0% of total revenues.

Revenues from the mobile entertainment business increased by 19.0% year over year to RMB1,778.9 million (US$258.7 million), mostly driven by the growth of the Company’s mobile games operations. Revenues from the mobile entertainment business contributed 35.7% of total revenues in 2018.

 

   

Revenues from the mobile game business increased by 48.5% year over year to RMB925.0 million (US$134.5 million). The increases were mainly due to the contribution from Bricks n Balls, a casual elimination game that started ramping up in the middle of July 2018.

 

   

Revenues from the content-driven products remained relatively flat year over year at RMB853.9 million (US$124.2 million).

 

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By region, revenues generated from the China market increased by 27.5% year over year to RMB 1,971.1 million (US$286.7 million), and constituted 39.6% of the Company’s total revenues in 2018, up from 31.7% in 2017. The revenue growth in the China market was primarily attributable to a ramp-up of the mobile utility products and related services in China.

Revenues generated from the overseas market decreased by 9.5% year over year to RMB3,010.6 million (US$437.9 million), constituting 60.4% of the Company’s total revenues in 2018, down from 68.3% in 2017. The revenue decrease in the overseas market was primarily driven by a decline in revenues from the mobile utility products and related services business in the overseas markets.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues decreased by 8.3% year over year to RMB1,540.6 million (US$224.1 million) in 2018, primarily due to (i) reduced traffic acquisition costs associated with the Company’s third-party advertising business, (ii) reduced bandwidth and IDC costs associated with the Company’s mobile utility applications in the overseas markets, (iii) reduced personnel costs involved in the Company’s PC business, and (iv) lower amortization of intangible assets in 2018 as the Company had disposed News Republic and completed the amortization of MobPartner, which was acquired in April 2015. Non-GAAP cost of revenues decreased by 8.3% year over year to RMB1,540.4 million (US$224.0 million) in 2018.

Gross profit increased by 7.7% year over year to RMB3,441.1 million (US$500.5 million) in 2018. Gross Margin expanded to 69.1% in 2018 from 65.5% in 2017. Non-GAAP gross profit increased by 7.7% year over year to RMB3,441.3 million (US$500.5 million) in 2018. Non-GAAP gross margin expanded to 69.1% in 2018 from 65.6% in 2017.

OPERATING INCOME/LOSS AND EXPENSES

Total operating expenses increased by 8.2% year over year to RMB2,973.9 million (US$432.5 million) in 2018. Total non-GAAP operating expenses increased by 8.0% year over year to RMB2,888.9 million (US$420.2 million).

 

   

Research and development expenses decreased by 2.3% year over year to RMB668.9 million (US$97.3 million) in 2018, mainly due to lower share-based compensation expenses. Non-GAAP research and development expenses, which exclude share-based compensation expenses, decreased by 1.4% year over year to RMB654.7 million (US$95.2 million).

 

   

Selling and marketing expenses increased by 15.3% year over year at RMB1,910.0 million (US$277.8 million) in 2018, which was primarily due to increased promotional activities for the Company’s utility products and related services business in the domestic market and its mobile games business in all markets. Non-GAAP selling and marketing expenses, which exclude share-based compensation expenses, increased by 14.8% year over year to RMB1,901.1 million (US$276.5 million).

 

   

General and administrative expenses increased by 5.7% year over year to RMB430.8 million

 

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(US$62.7 million) in 2018, which was mainly due to higher share-based compensation expenses and an increase in allowances for doubtful accounts. Non-GAAP general and administrative expenses, which exclude share-based compensation expenses, increased by 3.8% year over year to RMB369.1 million (US$53.7 million).

Operating profit increased by 4.6% to RMB467.2 million (US$68.0 million) in 2018. Operating margin was 9.4% in 2018, as compared to 9.2% in 2017. Non-GAAP operating profit increased by 6.2% year over year to RMB552.3 million (US$80.3 million) in 2018. Non-GAAP operating margin was 11.1% in 2018, as compared to 10.7% in 2017.

The Company has reported its operating profit along the following segments since the second quarter of 2017:

 

   

Operating profit for utility products and related services increased by 5.7% year over year to RMB1,035.0 million (US$150.5 million) in 2018. The increase was a result of the Company’s strategy to optimize the cost and expense structure of the mobile utility products and related services business in the overseas markets, as well as revenue increase from the Company’s mobile utility products and related services business in the domestic market.

 

   

Operating loss for the mobile entertainment business decreased to RMB312.5 (US$45.5 million) in 2018 from RMB417.4 million in 2017. The reduced loss was mainly a result of the year-over-year increases in revenues generated from the Company’s mobile games business and reduced costs and expenses from News Republic business, which were partially offset by the Company’s increased investments in the LiveMe operations.

Share-based compensation expenses increased by 16.1% year over year to RMB85.1 million (US$12.4 million) in 2018, as the Company granted a certain quantity of restricted shares to key employees.

NET INCOME ATTRIBUTABLE TO CHEETAH MOBILE SHAREHOLDERS

Net income attributable to Cheetah Mobile shareholders was RMB1,203.8 million (US$175.1 million) in 2018 as compared to RMB1,348.2 million in 2017. Net margin was 24.2% in 2018, as compared to 27.7% in 2017. Non-GAAP net income attributable to Cheetah Mobile shareholders was RMB1,288.9 million (US$187.5 million) in 2018, as compared to RMB1,421.5 million in 2017. Non-GAAP net margin was 25.9% in 2018, as compared to 29.2% in 2017.

NET INCOME PER ADS

Diluted income per ADS was RMB8.10 (US$1.18) in 2018, as compared to RMB9.37 in 2017. Non-GAAP diluted income per ADS was RMB8.69 (US$1.26) in 2018, as compared to RMB9.88 in 2017.

CASH FLOW

Net cash from operating activities in 2018 was RMB342.1 million (US$49.8 million). Free cash flow was RMB276.7 million (US$40.2 million) in 2018.

 

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BUSINESS OUTLOOK

For the first quarter of 2019, the Company expects its total revenues to be between RMB1,060 million (US$154.3 million) and RMB1,090 million (US$158.5 million). This estimate represents management’s preliminary view as of the date of this release, which is subject to change.

SHARE REPURCHASE PROGRAM

On September 13, 2018, the Company announced that its board of directors had approved a share repurchase program of up to US$100 million of the Company’s outstanding ADSs for a period not to exceed 12 months. Cheetah funded repurchases made under this program from its available cash balance. As of March 22, 2019, the Company had repurchased approximately 4.5 million ADSs for approximately US$32 million under this program.

CONFERENCE CALL INFORMATION

The Company will hold a conference call on Monday, March 25, 2019 at 8:00 am Eastern Time or 8:00 pm 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

China Toll Free:    4001-201-203

Hong Kong Toll Free:    800-905-945

Conference ID:     Cheetah Mobile

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

A presentation for the Company’s earnings call is also available at the aforementioned website.

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 RMB6.8755 to US$1.00, the exchange rate in effect as of December 31, 2018, 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 with global market coverage. It has attracted

 

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hundreds of millions of monthly active users through its mobile utility products such as Clean Master and Cheetah Keyboard, casual games such as Piano Tiles 2, Bricks n Balls, and live streaming product LiveME. The Company provides its advertising customers, which include direct advertisers and mobile advertising networks through which advertisers place their advertisements, with direct access to highly targeted mobile users and global promotional channels. The Company also provides value-added services to its mobile application users through the sale of in-app virtual items on selected mobile products and games. Cheetah Mobile is committed to leveraging its cutting-edge artificial intelligence technologies to power 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

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 cost of revenues reflects cost of revenues excluding the portion of share-based compensation expenses allocated to cost of revenues.

 

   

Non-GAAP gross profit reflects gross profit excluding the portion of share-based compensation expenses allocated to gross profit.

 

   

Non-GAAP operating income and expenses reflect operating income and expenses excluding the portion of share-based compensation expenses allocated to operating expenses.

 

   

Non-GAAP operating profit reflects operating profit excluding share-based compensation expenses.

 

   

Non-GAAP net income attributable to Cheetah Mobile shareholders is net income attributable to Cheetah Mobile shareholders excluding share-based compensation expenses.

 

   

Non-GAAP diluted earnings per ADS is non-GAAP net income attributable to Cheetah Mobile shareholders excluding net income attributable to redeemable non-controlling interests, divided by weighted average number of diluted ADSs.

 

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Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, other non-operating income and share-based compensation expenses.

 

   

Free cash flow is net cash generated by operating activities less capital expenditure.

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 Attributable to Cheetah Mobile Shareholders to Adjusted EBITDA (Non-GAAP)” at the end of this release.

INVESTOR RELATIONS CONTACT

Cheetah Mobile Inc.

Helen Jing Zhu

Tel: +86 10 6292 7779 ext. 1600

Email: helenjingzhu@cmcm.com

ICR Inc.

Jack Wang

Tel: +1 (646) 417-5395

Email: IR@cmcm.com

 

11  /  20


CHEETAH MOBILE INC.         

Condensed Consolidated Balance Sheets         

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

 

     As of  
     December 31, 2017      December 31, 2018     December 31, 2018  
     RMB      RMB     USD  

ASSETS

       

Current assets:

       

Cash and cash equivalents

     2,317,488        2,783,843       404,893  

Restricted cash

     90,149        6,133       892  

Short-term investments

     1,395,694        930,610       135,352  

Accounts receivable

     621,272        655,261       95,304  

Prepayments and other current assets

     918,243        1,064,714       154,853  

Due from related parties

     54,052        126,990       18,470  
  

 

 

    

 

 

   

 

 

 

Total current assets

     5,396,898        5,567,551       809,764  
  

 

 

    

 

 

   

 

 

 

Non-current assets:

       

Property and equipment, net

     89,137        63,919       9,297  

Intangible assets, net

     70,225        48,421       7,043  

Goodwill

     634,157        617,837       89,861  

Investment in equity investees

     149,969        151,533       22,040  

Other long term investments

     1,002,721        1,697,510       246,893  

Due from related parties

     5,216        21,139       3,075  

Deferred tax assets

     57,642        93,733       13,633  

Other non-current assets

     42,966        35,830       5,211  
  

 

 

    

 

 

   

 

 

 

Total non-current assets

     2,052,033        2,729,922       397,053  
  

 

 

    

 

 

   

 

 

 

Total assets

     7,448,931        8,297,473       1,206,817  
  

 

 

    

 

 

   

 

 

 

LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY

       

Current liabilities:

       

Bank loans

     336,304        —         —    

Accounts payable

     164,537        171,055       24,879  

Accrued expenses and other current liabilities

     1,532,489        1,514,642       220,296  

Due to related parties

     81,810        37,298       5,425  

Income tax payable

     50,614        117,957       17,156  
  

 

 

    

 

 

   

 

 

 

Total current liabilities

     2,165,754        1,840,952       267,756  
  

 

 

    

 

 

   

 

 

 

Non-current liabilities:

       

Deferred tax liabilities

     73,393        73,718       10,722  

Other non-current liabilities

     54,574        63,632       9,255  
  

 

 

    

 

 

   

 

 

 

Total non-current liabilities

     127,967        137,350       19,977  
  

 

 

    

 

 

   

 

 

 

Total liabilities

     2,293,721        1,978,302       287,733  
  

 

 

    

 

 

   

 

 

 

Mezzanine equity:

       

Redeemable noncontrolling interests

     649,246        687,847       100,043  
  

 

 

    

 

 

   

 

 

 

Shareholders’ equity:

       

Ordinary shares

     229        230       33  

Treasury stock

     —          (198,360     (28,850

Additional paid-in capital

     2,644,043        2,742,893       398,937  

Retained earnings

     1,564,883        2,742,839       398,929  

Accumulated other comprehensive income

     84,206        225,639       32,818  
  

 

 

    

 

 

   

 

 

 

Total Cheetah Mobile shareholders’ equity

     4,293,361        5,513,241       801,867  

Noncontrolling interests

     212,603        118,083       17,174  
  

 

 

    

 

 

   

 

 

 

Total equity

     4,505,964        5,631,324       819,041  
  

 

 

    

 

 

   

 

 

 

Total liabilities, mezzanine equity and equity

     7,448,931        8,297,473       1,206,817  
  

 

 

    

 

 

   

 

 

 

 

12  /  20


CHEETAH MOBILE INC.    

Condensed Consolidated Statements of Comprehensive

(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  
     December 31, 2017     September 30, 2018     December 31, 2018     December 31, 2018  
     RMB     RMB     RMB     USD  

Revenues (a)

     1,387,806       1,351,979       1,381,173       200,883  

Utility products and related services

     967,232       835,606       783,021       113,886  

Mobile entertainment

     399,493       497,911       555,597       80,808  

Others

     21,081       18,462       42,555       6,189  

Cost of revenues (b)

     (461,383     (381,692     (416,399     (60,563
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     926,423       970,287       964,774       140,320  

Operating income and expenses:

        

Research and development (b)

     (151,867     (175,303     (191,135     (27,799

Selling and marketing (b)

     (420,080     (568,445     (580,330     (84,405

General and administrative (b)

     (115,089     (108,270     (131,849     (19,177

Impairment of goodwill and intangible assets

     (38,690     —         (7,180     (1,044

Other operating income

     21,307       9,595       20,771       3,021  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating income and expenses

     (704,419     (842,423     (889,723     (129,404

Operating profit

     222,004       127,864       75,051       10,916  

Other income (expense):

        

Interest income, net

     10,227       24,120       27,519       4,002  

Foreign exchange (loss) gain, net

     (5,943     10,532       6,096       887  

Impairment of investment impairment

     (209,565     —         (98,885     (14,382

Gain from equity method investments, net

     1,921       2,479       2,694       392  

Other income, net

     1,088,965       1,242       789,325       114,803  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before taxes

     1,107,609       166,237       801,800       116,618  

Income tax expenses

     (40,259     (26,957     (20,138     (2,929
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     1,067,350       139,280       781,662       113,689  
  

 

 

   

 

 

   

 

 

   

 

 

 

Less: net income (loss) attributable to noncontrolling interests

     20,264       (27,757     11,457       1,666  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Cheetah Mobile shareholders

     1,047,086       167,037       770,205       112,023  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share

        

Basic

     0.74       0.11       0.55       0.08  

Diluted

     0.73       0.11       0.54       0.08  

Earnings per ADS

        

Basic

     7.43       1.12       5.46       0.79  

Diluted

     7.27       1.09       5.35       0.78  

Weighted average number of shares outstanding

        

Basic

     1,400,420,814       1,408,570,797       1,393,015,891       1,393,015,891  

Diluted

     1,432,849,633       1,440,581,762       1,420,765,216       1,420,765,216  

Weighted average number of ADSs outstanding

        

Basic

     140,042,081       140,857,080       139,301,589       139,301,589  

Diluted

     143,284,963       144,058,176       142,076,522       142,076,522  

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

        

Foreign currency translation adjustments

     (52,267     149,722       (47,900     (6,967

Unrealized losses on available-for-sale securities, net

     (433     —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income

     (52,700     149,722       (47,900     (6,967
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

     1,014,650       289,002       733,762       106,722  

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

     18,568       (17,293     12,573       1,829  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income attributable to Cheetah Mobile shareholders

     996,082       306,295       721,189       104,893  
  

 

 

   

 

 

   

 

 

   

 

 

 
                          

 

13  /  20


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)

(a) On January 1, 2018, The Group adopted ASC 606, applying the modified retrospective method to contracts that were not completed as of January 1, 2018. Adoption did not have a material impact as of January 1, 2018. Results for reporting periods beginning on or after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with historic accounting under ASC 605.

As ASC 605 has been superseded by ASC 606 on this subject, value added tax was reclassified from the cost of revenues to net against revenues. Advertising-for-advertising barter transactions should be recorded at the fair value of the advertising received by reference to the fair value of advertising services provided to other customers. Revenues are recognized in the same amount with costs and expenses. Previously, such transactions were recorded at cost which was nil as no consideration was exchanged. The following table illustrates the effect of the adoption of ASC 606 by presenting a comparison of revenues for the three months ended December 31, 2018, as actually reported and as they would have been reported under ASC 605, without the adoption of ASC 606:

 

     For The Three Months Ended  
     December 31, 2018      December 31, 2018  
     RMB      USD  

As reported

     1,381,173        200,883  

Add: value added taxes

     34,412        5,005  

Less: barter transactions

     4,432        645  
  

 

 

    

 

 

 

Without adoption of ASC 606

     1,411,153        205,243  
  

 

 

    

 

 

 

 

     For The Three Months Ended  
     December 31, 2017      September 30, 2018      December 31, 2018      December 31, 2018  
(b) Share-based compensation expenses    RMB      RMB      RMB      USD  

Cost of revenues

     (981      46        160        23  

Research and development

     4,471        8,563        15,169        2,206  

Selling and marketing

     (3,049      3,317        2,665        388  

General and administrative

     2,933        14,380        17,266        2,511  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     3,374        26,306        35,260        5,128  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

14  /  20


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 December 31, 2018  
     GAAP
Result
    % of Net
Revenues
    Share-based
Compensation
     % of Net
Revenues
    Non-GAAP
Result
    % of Net
Revenues
    Non-GAAP
Result ($)
 

Revenues

     1,381,173              1,381,173         200,883  

Cost of revenues

     (416,399     30.1     160        0.0     (416,239     30.1     (60,540
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     964,774       69.9     160        0.0     964,934       69.9     140,343  

Research and development

     (191,135     13.8     15,169        1.1     (175,966     12.7     (25,593

Selling and marketing

     (580,330     42.0     2,665        0.2     (577,665     41.8     (84,017

General and administrative

     (131,849     9.5     17,266        1.3     (114,583     8.3     (16,666

Impairment of goodwill and intangible assets

     (7,180     0.5     —          0.0     (7,180     0.5     (1,044

Other operating income

     20,771       1.5     —          0.0     20,771       1.5     3,021  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total operating income and expenses

     (889,723     64.4     35,100        2.5     (854,623     61.9     (124,299

Operating profit

     75,051       5.4     35,260        2.6     110,311       8.0     16,044  

Net income attributable to Cheetah Mobile shareholders

     770,205       55.8     35,260        2.6     805,465       58.3     117,150  

Diluted earnings per ordinary share (RMB)

     0.54         0.02          0.56      

Diluted earnings per ADS (RMB)

     5.35         0.25          5.60      

Diluted earnings per ADS (USD)

     0.78         0.03          0.81      

 

     For The Three Months Ended September 30, 2018  
     GAAP
Result
    % of Net
Revenues
    Share-based
Compensation
     % of Net
Revenues
    Non-GAAP
Result
    % of Net
Revenues
 

Revenues

     1,351,979              1,351,979    

Cost of revenues

     (381,692     28.2     46        0.0     (381,646     28.2
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Gross profit

     970,287       71.8     46        0.0     970,333       71.8

Research and development

     (175,303     13.0     8,563        0.6     (166,740     12.3

Selling and marketing

     (568,445     42.0     3,317        0.2     (565,128     41.8

General and administrative

     (108,270     8.0     14,380        1.1     (93,890     6.9

Other operating income

     9,595       0.7     —          0.0     9,595       0.7
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total operating income and expenses

     (842,423     62.3     26,260        1.9     (816,163     60.4

Operating profit

     127,864       9.5     26,306        1.9     154,170       11.4

Net income attributable to Cheetah Mobile shareholders

     167,037       12.4     26,306        1.9     193,343       14.3

Diluted earnings per ordinary share (RMB)

     0.11         0.02          0.13    

Diluted earnings per ADS (RMB)

     1.09         0.18          1.27    

 

     For The Three Months Ended December 31, 2017  
     GAAP
Result
    % of Net
Revenues
    Share-based
Compensation
    % of Net
Revenues
    Non-GAAP
Result
    % of Net
Revenues
 

Revenues

     1,387,806             1,387,806    

Cost of revenues

     (461,383     33.2     (981     0.1     (462,364     33.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     926,423       66.8     (981     0.1     925,442       66.7

Research and development

     (151,867     10.9     4,471       0.3     (147,396     10.6

Selling and marketing

     (420,080     30.3     (3,049     0.2     (423,129     30.5

General and administrative

     (115,089     8.3     2,933       0.2     (112,156     8.1

Impairment of goodwill and intangible assets

     (38,690     2.8     —         0.0     (38,690     2.8

Other operating income

     21,307       1.5     —         0.0     21,307       1.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating income and expenses

     (704,419     50.8     4,355       0.3     (700,064     50.4

Operating profit

     222,004       16.0     3,374       0.2     225,378       16.2

Net income attributable to Cheetah Mobile shareholders

     1,047,086       75.4     3,374       0.2     1,050,460       75.7

Diluted earnings per ordinary share (RMB)

     0.73         0.00         0.73    

Diluted earnings per ADS (RMB)

     7.27         0.02         7.29    

 

15  /  20


CHEETAH MOBILE INC.         

Information about Segment          

(Unaudited, in’000, except for percentage)

 

     For The Three Months Ended December 31, 2018  
     Utility Products
and
Related Services
    Mobile
Entertainment
    Others     Unallocated*     Consolidated  
     RMB     RMB     RMB     RMB     RMB     USD  

Revenue

     783,021       555,597       42,555       —         1,381,173       200,883  

Operating profit (loss)

     224,033       (64,780     (48,942     (35,260     75,051       10,916  

Operating margin

     28.6     (11.7 )%      (115.0 )%        5.4     5.4

 

     For The Three Months Ended September 30, 2018  
     Utility Products
and
Related Services
    Mobile
Entertainment
    Others     Unallocated*     Consolidated  
     RMB     RMB     RMB     RMB     RMB  

Revenue

     835,606       497,911       18,462       —         1,351,979  

Operating profit (loss)

     264,139       (74,121     (35,848     (26,306     127,864  

Operating margin

     31.6     (14.9 )%      (194.2 )%        9.5

 

     For The Three Months Ended December 31, 2017  
     Utility Products
and
Related Services
    Mobile
Entertainment
    Others     Unallocated*     Consolidated  
     RMB     RMB     RMB     RMB     RMB  

Revenue

     967,232       399,493       21,081       —         1,387,806  

Operating profit (loss)

     326,950       (61,846     (39,726     (3,374     222,004  

Operating margin

     33.8     (15.5 )%      (188.4 )%        16.0

 

*

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

 

16  /  20


CHEETAH MOBILE INC.    

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

(Unaudited, in ‘000)         

 

For The Three Months Ended

 
     December 31, 2017      September 30, 2018      December 31, 2018      December 31, 2018  
     RMB      RMB      RMB      USD  

Net income attributable to Cheetah Mobile shareholders

     1,047,086        167,037        770,205        112,023  

Add:

           

Income tax expenses

     40,259        26,957        20,138        2,929  

Interest income, net

     (10,227      (24,120      (27,519      (4,002

Depreciation and amortization

     30,377        17,826        17,237        2,507  

Net income (loss) attributable to noncontrolling interests

     20,264        (27,757      11,457        1,666  

Other non-operating income, net

     (875,378      (14,253      (699,230      (101,700

Share-based compensation

     3,374        26,306        35,260        5,128  
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

     255,755        171,996        127,548        18,551  
  

 

 

    

 

 

    

 

 

    

 

 

 

CHEETAH MOBILE INC.    

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

(Unaudited, in ‘000)         

 

For The Three Months Ended

 
     December 31, 2017      September 30, 2018      December 31, 2018      December 31, 2018  
     RMB      RMB      RMB      USD  

PC

     170,259        143,322        171,837        24,993  

Mobile

     1,217,547        1,208,657        1,209,336        175,890  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,387,806        1,351,979        1,381,173        200,883  
  

 

 

    

 

 

    

 

 

    

 

 

 

CHEETAH MOBILE INC.    

Revenues Generated from Domestic and Overseas Markets    

(Unaudited, in ‘000)         

 

For The Three Months Ended

 
     December 31, 2017      September 30, 2018      December 31, 2018      December 31, 2018  
     RMB      RMB      RMB      USD  

Domestic

     543,974        536,435        533,221        77,554  

Overseas

     843,832        815,544        847,952        123,329  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,387,806        1,351,979        1,381,173        200,883  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

17  /  20


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)

 

     2017     2018     2018  
     RMB     RMB     USD  

Revenues

     4,974,757       4,981,705       724,559  

Utility products and related services

     3,439,563       3,119,483       453,711  

Mobile entertainment

     1,496,443       1,778,867       258,725  

Others

     38,751       83,355       12,123  

Cost of revenues (a)

     (1,780,089     (1,540,633     (224,076
  

 

 

   

 

 

   

 

 

 

Gross profit

     3,194,668       3,441,072       500,483  

Operating income and expenses:

      

Research and development (a)

     (684,863     (668,918     (97,290

Selling and marketing (a)

     (1,656,505     (1,910,044     (277,804

General and administrative (a)

     (407,410     (430,826     (62,661

Impairment of goodwill and intangible assets

     (38,862     (12,767     (1,857

Other operating income

     39,852       48,705       7,084  
  

 

 

   

 

 

   

 

 

 

Total operating income and expenses

     (2,747,788     (2,973,850     (432,528

Operating profit

     446,880       467,222       67,955  

Other income (expense):

      

Interest income, net

     22,603       87,716       12,758  

Settlement and changes in fair value of contingent consideration

     (9,014     —         —    

Foreign exchange (loss) gain, net

     (15,224     13,821       2,010  

Impairment of investments

     (275,026     (142,385     (20,709

Gains (Losses) from equity method investments, net

     495       (384     (56

Other income, net

     1,262,551       843,733       122,716  
  

 

 

   

 

 

   

 

 

 

Income before taxes

     1,433,265       1,269,723       184,674  

Income tax expenses

     (57,602     (80,130     (11,654
  

 

 

   

 

 

   

 

 

 

Net income

     1,375,663       1,189,593       173,020  
  

 

 

   

 

 

   

 

 

 

Less: net income (loss) attributable to noncontrolling interests

     27,469       (14,186     (2,063
  

 

 

   

 

 

   

 

 

 

Net income attributable to Cheetah Mobile shareholders

     1,348,194       1,203,779       175,083  
  

 

 

   

 

 

   

 

 

 

Earnings per share

      

Basic

     0.96       0.83       0.12  

Diluted

     0.94       0.81       0.12  

Earnings per ADS

      

Basic

     9.57       8.31       1.21  

Diluted

     9.37       8.10       1.18  

Non-GAAP earnings per ADS

      

Basic

     10.10       8.92       1.30  

Diluted

     9.88       8.69       1.26  

Weighted average number of shares outstanding

      

Basic

     1,394,303,326       1,403,089,609       1,403,089,609  

Diluted

     1,425,154,838       1,440,414,849       1,440,414,849  

Diluted (non-GAAP)

     1,425,154,838       1,440,414,849       1,440,414,849  

Weighted average number of ADSs used in computation

      

Basic

     139,430,333       140,308,961       140,308,961  

Diluted

     142,515,484       144,041,485       144,041,485  

Diluted (non-GAAP)

     142,515,484       144,041,485       144,041,485  

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

      

Foreign currency translation adjustments

     (148,304     155,578       22,628  

Unrealized losses on available-for-sale securities, net

     (433     —         —    
  

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income

     (148,737     155,578       22,628  
  

 

 

   

 

 

   

 

 

 

Total comprehensive income

     1,226,926       1,345,171       195,648  

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

     22,671       (41     (6
  

 

 

   

 

 

   

 

 

 

Total comprehensive income attributable to Cheetah Mobile shareholders

     1,204,255       1,345,212       195,654  
  

 

 

   

 

 

   

 

 

 

(a) Share-based compensation expenses

      

Cost of revenues

     762       206       30  

Research and development

     20,691       14,224       2,069  

Selling and marketing

     39       8,967       1,304  

General and administrative

     51,824       61,721       8,977  
  

 

 

   

 

 

   

 

 

 

Total

     73,316       85,118       12,380  
  

 

 

   

 

 

   

 

 

 

 

18  /  20


CHEETAH MOBILE INC.

Reconciliation of GAAP and Non-GAAP Results

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

 

     For The Year Ended December 31, 2018  
     GAAP     % of Net     Share-based      % of Net     Non-GAAP     % of Net     Non-GAAP  
     Result     Revenues     Compensation      Revenues     Result     Revenues     Result ($)  

Revenues

     4,981,705              4,981,705         724,559  

Cost of revenues

     (1,540,633     30.9     206        0.0     (1,540,427     30.9     (224,046
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     3,441,072       69.1     206        0.0     3,441,278       69.1     500,513  

Research and development

     (668,918     13.4     14,224        0.3     (654,694     13.1     (95,221

Selling and marketing

     (1,910,044     38.3     8,967        0.2     (1,901,077     38.2     (276,500

General and administrative

     (430,826     8.6     61,721        1.2     (369,105     7.4     (53,684

Impairment of goodwill and intangible assets

     (12,767     0.3     —          0.0     (12,767     0.3     (1,857

Other operating income

     48,705       1.0     —          0.0     48,705       1.0     7,084  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total operating income and expenses

     (2,973,850     59.7     84,912        1.7     (2,888,938     58.0     (420,178

Operating profit

     467,222       9.4     85,118        1.7     552,340       11.1     80,335  

Net income attributable to Cheetah Mobile shareholders

     1,203,779       24.2     85,118        1.7     1,288,897       25.9     187,462  

Diluted earnings per ordinary share (RMB)

     0.81         0.06          0.87      

Diluted earnings per ADS (RMB)

     8.10         0.59          8.69      

Diluted earnings per ADS (USD)

     1.18         0.09          1.26      

 

     For The Year Ended December 31, 2017  
     GAAP     % of Net     Share-based      % of Net     Non-GAAP     % of Net  
     Result     Revenues     Compensation      Revenues     Result     Revenues  

Revenues

     4,974,757              4,974,757    

Cost of revenues

     (1,780,089     35.8     762        0.0     (1,779,327     35.8
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Gross profit

     3,194,668       64.2     762        0.0     3,195,430       64.2

Research and development

     (684,863     13.8     20,691        0.4     (664,172     13.4

Selling and marketing

     (1,656,505     33.3     39        0.0     (1,656,466     33.3

General and administrative

     (407,410     8.2     51,824        1.0     (355,586     7.1

Impairment of goodwill and intangible assets

     (38,862     0.8     —          0.0     (38,862     0.8

Other operating income

     39,852       0.8     —          0.0     39,852       0.8
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total operating income and expenses

     (2,747,788     55.2     72,554        1.5     (2,675,234     53.8

Operating profit

     446,880       9.0     73,316        1.5     520,196       10.5

Net income attributable to Cheetah Mobile shareholders

     1,348,194       27.1     73,316        1.5     1,421,510       28.6

Diluted earnings per ordinary share (RMB)

     0.94         0.05          0.99    

Diluted earnings per ADS (RMB)

     9.37         0.51          9.88    

CHEETAH MOBILE INC.

Information about Segment

(Unaudited, in’000, except for percentage)

 

     For The Year Ended December 31, 2018  
     Utility Products
and
Related Services
    Mobile
Entertainment
    Others     Unallocated*     Consolidated  
     RMB     RMB     RMB     RMB     RMB     USD  

Revenue

     3,119,483       1,778,867       83,355       —          4,981,705       724,559  

Operating profit (loss)

     1,034,968       (312,515     (170,113     (85,118     467,222       67,955  

Operating margin

     33.2     (17.6 )%      (204.1 )%        9.4     9.4

 

     For The Year Ended December 31, 2017  
     Utility Products
and
Related Services
    Mobile
Entertainment
    Others     Unallocated*     Consolidated  
     RMB     RMB     RMB     RMB     RMB  

Revenue

     3,439,563       1,496,443       38,751       —          4,974,757  

Operating profit (loss)

     979,447       (417,350     (41,901     (73,316     446,880  

Operating margin

     28.5     (27.9 )%      (108.1 )%        9.0

 

*

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

 

19  /  20


CHEETAH MOBILE INC.

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

(Unaudited, in ‘000)

 

     31-Dec-17      31-Dec-18      31-Dec-18  
     RMB      RMB      USD  

Net income attributable to Cheetah Mobile shareholders

     1,348,194        1,203,779        175,083  

Add:

        

Income tax expense

     57,602        80,130        11,654  

Interest income, net

     (22,603      (87,716      (12,758

Depreciation and amortization

     136,301        80,108        11,651  

Net income (loss) attributable to noncontrolling interests

     27,469        (14,186      (2,063

Other non-operating income, net

     (963,782      (714,785      (103,961

Share-based compensation

     73,316        85,118        12,380  
  

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

     656,497        632,448        91,986  
  

 

 

    

 

 

    

 

 

 

Cheetah Mobile Inc.

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

(Unaudited, in ‘000)

 

For The Year Ended December 31

 
     31-Dec-17      31-Dec-18      31-Dec-18  
     RMB      RMB      USD  

PC

     659,744        580,016        84,360  

Mobile

     4,315,013        4,401,689        640,199  
  

 

 

    

 

 

    

 

 

 

Total

     4,974,757        4,981,705        724,559  
  

 

 

    

 

 

    

 

 

 

Cheetah Mobile Inc.

Revenues Generated from Domestic and Overseas Markets

(Unaudited, in ‘000)

 

For The Year Ended December 31

 
     31-Dec-17      31-Dec-18      31-Dec-18  
     RMB      RMB      USD  

Domestic revenues

     1,639,248        1,971,113        286,687  

Overseas revenues

     3,335,509        3,010,592        437,872  
  

 

 

    

 

 

    

 

 

 

Total

     4,974,757        4,981,705        724,559  
  

 

 

    

 

 

    

 

 

 

 

20  /  20

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