Cheetah Mobile Announces Third Quarter 2015 Unaudited Financial Results

BEIJING, Nov. 17, 2015 /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 financial results for the quarter ended September 30, 2015.

Third Quarter 2015 Financial Highlights

• Total revenues increased by 110.7% year-over-year and 15.9% quarter-over-quarter to RMB1,008.7 million (US$158.7 million).
• Mobile revenues increased by 522.0% year-over-year and 25.6% quarter-over-quarter to RMB702.7 million (US$110.6 million), which was primarily driven by robust growth in mobile advertising revenues in both overseas and domestic markets. Mobile revenues accounted for 69.7% of total revenues. 
• Overseas revenues[1] increased by 891.6% year-over-year and 24.7% quarter-over-quarter to RMB537.7 million (US$84.6 million), which was driven by a continued increase in mobile advertising revenues in overseas markets. Overseas revenues accounted for 53.3% of total revenues and 76.5% of mobile revenues.
• Non-GAAP operating profit increased by 153.5% year-over-year and 40.4% quarter-over-quarter to RMB131.4 million (US$20.7 million).
• Non-GAAP net income attributable to Cheetah Mobile shareholders increased by 138.1% year-over-year and 23.7% quarter-over-quarter to RMB143.4 million (US$22.6 million).

Third Quarter 2015 Key Operating Metrics

• Mobile monthly active users ("Mobile MAUs") increased by 73 million quarter-over-quarter to 567 million in September 2015. Mobile MAUs from overseas markets were 74% of total mobile MAUs in September 2015.
• Total global mobile user installations increased by 346 million quarter-over-quarter to 1,942 million as of September 30, 2015.

Mr. Sheng Fu, Cheetah Mobile's Chief Executive Officer, stated, "We are pleased to report another solid quarter.  Mobile MAUs reached 567 million in September. Our total revenues also exceeded RMB 1 billion for the first time, reaching RMB 1.01 billion in the quarter. The strong result was driven by our continued success in the overseas mobile advertising business. In addition to expanding our direct sales team globally, we continue to work closely with key internet players to further enhance our monetization capability. We are delighted that we've recently reached a global strategic partnership with Yahoo, including the integration of our products with Yahoo's Gemini native advertising platform. Furthermore, Cheetah is a user- and product-focused company, first and foremost. So, it is particularly encouraging that our content-driven products, through both organic means and strategic investments, achieved some notable successes in the quarter. For example, Piano Tiles 2, a light, casual mobile game that we developed, reached the No. 1 spot in the United States and the No. 5 spot globally as the most downloaded free game on Google Play in September. Looking forward, we remain firmly committed to strengthening our foundation through high-quality content and user engagement, as well as partnerships as we continue to focus on becoming one of the leading mobile internet companies globally."     

Mr. Andy Yeung, Cheetah Mobile's Chief Financial Officer, commented, "The third quarter is another record-setting quarter for Cheetah Mobile, both financially and operationally. Total revenues grew 111% year-over-year and 16% quarter-over-quarter to RMB1,009 million, driven by growing user traffic and strong demand for our mobile advertising services.  Non-GAAP operating profit grew 154% year-over-year and 40% quarter-over-quarter to RMB131 million, demonstrating the operating leverage inherent in our business model.  Looking ahead, we remain focused on expanding our mobile platform throughout the global markets and building a solid foundation for long-term, sustainable growth."

Third Quarter 2015 Financial Results

REVENUES

Total revenues for the third quarter of 2015 increased by 110.7% to RMB1,008.7 million (US$158.7 million) from RMB478.7 million in the prior year period. This increase was mainly driven by the Company's organic business growth, which was attributable to the Company's growing global mobile user base and substantial improvements in mobile monetization, especially in overseas markets. 

• Revenues from online marketing services increased by 149.5% to RMB900.5 million (US$141.7 million) in the third quarter of 2015 from RMB360.9 million in the prior year period. Mobile advertising revenues represented approximately 72% of online marketing revenues in the quarter, which increased from approximately 21% of online marketing revenues in the prior year period. The increase in mobile advertising revenues was driven by the Company's growing global mobile user base, and strong demand from advertisers for the Company's mobile advertising services worldwide.  
• Revenues from internet value added services ("IVAS") decreased by 7.3% to RMB99.5 million (US$15.7 million) in the third quarter of 2015 from RMB107.3 million in the prior year period. The year-over-year decrease was primarily due to the suspension of our online lottery operation in response to regulatory changes in China.    
• Revenues from internet security services and others decreased by 16.0% to RMB8.7 million (US$1.4 million) in the third quarter of 2015 from RMB10.4 million in the prior year period. This decrease was primarily due to the Company ceasing to promote subscriptions services to paying users in a strategic reorientation which started in 2011, resulting in a decrease in the number of paying customers.

By platform, revenues generated from mobile business increased by 522.0% to RMB702.7 million (US$110.6 million) from RMB113.0 million in the prior year period. This increase was primarily driven by the Company's growing global mobile user base, and the increasing popularity of the Company's mobile marketing services in overseas and domestic markets. 

By region, revenues generated from overseas markets increased by 891.6% to RMB537.7 million (US$84.6 million) from RMB54.2 million in the prior year period. This increase was primarily due to continued growth of the Company's overseas mobile user base, and rapid growth of the Company's mobile advertising revenues in overseas markets.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues increased by 145.2% to RMB270.4 million (US$42.5 million) in the third quarter of 2015 from RMB110.3 million in the prior year period. The increase in cost of revenues was mainly due to higher traffic acquisition costs associated with the Cheetah Mobile ad platform business, higher bandwidth and internet data center (IDC) costs associated with increased user traffic worldwide and data analytics, in addition to higher amortization costs from intangible assets resulting from acquisitions.

Gross profit increased by 100.4% to RMB738.4 million (US$116.2 million) in the third quarter of 2015 from RMB368.4 million in the prior year period. Gross margin was 73.2% in the third quarter of 2015, compared to 77.0% in the prior year period.

OPERATING INCOME AND EXPENSES

Total operating expenses for the third quarter of 2015 increased by 93.4% to RMB721.6 million (US$113.5 million) from RMB373.2 million in the prior year period. Total non-GAAP operating expenses, which exclude share-based compensation expenses, increased by 91.8% to RMB608.6 million (US$95.8 million) from RMB317.3 million in the prior year period.

• Research and development expenses increased by 49.7% to RMB203.1 million (US$32.0 million) from RMB135.7 million in the prior year period. The increase was primarily due to higher share-based compensation and personnel-related costs. Non-GAAP research and development expenses, which exclude share-based compensation expenses, increased by 14.9% to RMB138.0 million (US$21.7 million) from RMB120.1 million in the prior year period.
• Selling and marketing expenses increased by 128.9% to RMB382.6 million (US$60.2 million) from RMB167.2 million in the prior year period. The increase was primarily due to the spending in promotional activities for the Company's mobile business. Non-GAAP selling and marketing expenses, which exclude share-based compensation expenses, increased by 127.7% to RMB375.2 million (US$59.0 million) from RMB164.8 million in the prior year period.
• General and administrative expenses increased by 93.2% to RMB135.9 million (US$21.4 million) from RMB70.4 million in the prior year period. The increase was primarily due to an increase in professional service fees, acquisition-related expenses and expenses associated with increased headcount. Non-GAAP general and administrative expenses, which exclude share-based compensation expenses, increased by 194.1% to RMB95.5 million (US$15.0 million) from RMB32.5 million in the prior year period.

Operating profit was RMB16.7 million (US$2.6 million) in the third quarter of 2015, compared to an operating loss of RMB4.8 million in the prior year period.

Non-GAAP operating profit increased by 153.5% to RMB131.4 million (US$20.7 million) in the third quarter of 2015 from RMB51.8 million in the prior year period. Non-GAAP operating margin increased to 13.0% from 10.8% in the prior year period.

For the third quarter of 2015, share-based compensation expenses were RMB114.7 million (US$18.0 million), compared to RMB56.6 million in the third quarter of 2014.

NET INCOME ATTRIBUTABLE TO CHEETAH MOBILE SHAREHOLDERS

Net income attributable to Cheetah Mobile shareholders increased by 687.2% to RMB28.8 million (US$4.5 million) in the third quarter of 2015 from RMB3.7 million in the prior year period.

Non-GAAP net income attributable to Cheetah Mobile shareholders increased by 138.1% to RMB143.4 million (US$22.6 million) from RMB60.3 million in the prior year period. Non-GAAP net margin increased to 14.2% in the third quarter of 2015 from 12.6% in the prior year period.

NET INCOME PER ADS

Diluted earnings per ADS in the third quarter of 2015 increased by 566.7% to RMB0.20 (US$0.03) from RMB0.03 in the prior year period.

Non-GAAP diluted earnings per ADS in the third quarter of 2015 increased by 132.6% to RMB1.00 (US$0.16) from RMB0.43 in the prior year period.

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

As of September 30, 2015, the Company had cash and cash equivalents, restricted cash and short-term investments of RMB1.373 billion (US$216.1 million). 

SHARES ISSUED AND OUTSTANDING

As of September 30, 2015, the Company had a total of 1,423,901,876 Class A and Class B ordinary shares issued and outstanding. One ADS represents 10 Class A ordinary shares.

ADJUSTED EBITDA

Adjusted EBITDA (non-GAAP) was RMB168.8 million ($26.6 million) for the third quarter of 2015, representing a 116.7% increase from the corresponding period in 2014.

Business Outlook

For the fourth quarter of 2015, the Company expects its estimated total revenues to be between RMB1,110 million (US$175 million) and RMB1,160 million (US$183 million), representing a year-over-year growth of approximately 88% to 97%. The forecast reflects the Company's current and preliminary view, which is subject to change.

Conference Call Information

Company will hold a conference call on Tuesday, November 17, 2015 at 8:00 am Eastern Time or 9:00 pm Beijing Time to discuss the financial results. Listeners may access the call by dialing the following numbers:

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

Exchange Rate

This press release contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars in this press release were made at a rate of RMB6.3556 to US$1.00, the noon buying rate in effect on September 30, 2015 in the City of New York for cable transfers in Renminbi per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York. 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. The Company aims to provide the best apps for mobile users worldwide, while building a leading global mobile ad platform for advertisers. Cheetah Mobile had approximately 567 million global mobile monthly active users in September 2015. 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 various platform products such as Duba.com, Cheetah browser, game centers, and mobile app stores to provide multiple user traffic entry points and global content distribution channels for its business partners.

Safe Harbor Statements

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 certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements.  These forward-looking statements include, but are not limited to, statements about: 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 from 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 operating margin is non-GAAP operating profit as a percentage of total revenues.
• Non-GAAP net income attributable to Cheetah Mobile shareholders is net income attributable to Cheetah Mobile shareholders excluding share-based compensation expenses.
• Non-GAAP net margin is non-GAAP net income attributable to Cheetah Mobile shareholders as a percentage of total revenues.
• Non-GAAP diluted earnings per ADS is non-GAAP net income 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 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. 66085
Email: IR@cmcm.com

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

 

 

 

 

  

 

 

SOURCE Cheetah Mobile