Cheetah Mobile Announces Third Quarter 2018 Unaudited Consolidated Financial Results
BEIJING, Nov. 21, 2018 /PRNewswire/ -- 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 third quarter ended September 30, 2018.
Third Quarter 2018 Financial Highlights
-- Total revenues(([1])) grew by 15.6% year over year and 22.5% quarter
over quarter to RMB1,352.0 million (US$196.9 million).
-- Revenues from the mobile entertainment business increased by 37.5% year
over year and 49.6% quarter over quarter to RMB497.9 million (US$72.5
million). Revenues from utility products and related services increased
by 4.4% year over year and 10.5% quarter over quarter to RMB835.6
million (US$121.7 million).
-- Gross profit increased by 22.0% year over year to RMB970.3 million
(US$141.3 million). Gross margin expanded to 71.8% in the third quarter
of 2018 from 68.0% in the same period last year.
-- Net income attributable to Cheetah Mobile shareholders increased by
19.6% year over year to RMB167.0 million (US$24.3 million) in the third
quarter of 2018.
-- The Company generated RMB338.8 million (US$49.3 million) of net cash
from operating activities and RMB326.3 million (US$47.5 million) of free
cash flow in the third quarter of 2018.
Third Quarter 2018 Operating Metrics
-- The average number of global mobile monthly active users ("Mobile MAUs")
was 535 million in the third quarter of 2018. The number of Mobile MAUs
from markets outside of China, or overseas markets, accounted for 68% of
the total number of Mobile MAUs in the third quarter of 2018.
-- The average number of Mobile MAUs from China grew by 18% year over year
and 6% quarter over quarter to 171 million as the Company's mobile
products continued to gain popularity in the domestic market.
Mr. Sheng Fu, Cheetah Mobile's Chairman and Chief Executive Officer, stated, "We successfully reinvigorated our growth engine through our mobile games, mobile utility, and artificial intelligence ("AI") businesses. In the third quarter of 2018, both revenues and profits from our mobile games business hit record highs, driven mostly by the long-tail success of Bricks n Balls, a game we started to operate earlier this year, and users' increasing in-game purchases. In our mobile utility business, we grew the mobile utility revenue in the domestic market by 54% year over year, stopped the revenue decline in the overseas market, and stabilized the revenues from our PC business. In our AI business, our consumer product -- Cheetah Translator -- has been the top seller among its peers since its launch in July, while our enterprise product -- Cheetah GreetBot - has now gone into commercial production. Looking forward, we are confident that we have the strategy and the team in place to overcome the challenge of market uncertainties. To express our strong conviction about our long-term success, we have initiated a 12-month share repurchase plan of up to US$100 million."
[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.
Mr. Vincent Jiang, Cheetah Mobile's Chief Financial Officer, commented, "Driven by our mobile games operation and our mobile utility products and related services business in the domestic market, our total revenues resumed the year-over-year and quarter-over-quarter growth trajectory in the third quarter of 2018 and exceeded the high end of our guidance range. On the profit side, our utility products and related services business continued to generate strong profits and cash flow. Our mobile games operation also achieved significant margin improvement sequentially and year over year attributable to a better operating leverage. These improvements contributed to the strong cash flow generated from our operating activities in the third quarter of 2018. As of September 30, 2018, we had cash and cash equivalents, restricted cash, and short-term investments of approximately RMB3.6 billion. Our strong cash generation capabilities and our high cash balance are enabling us to continue to invest in our long-term growth and our business expansion into the AI space."
Third Quarter 2018 Consolidated Financial Results
REVENUES
Total revenues in the third quarter increased by 15.6% year over year and 22.5% quarter over quarter to RMB1,352.0 million (US$196.9 million).
Revenues from utility products and related services increased by 4.4% year over year and 10.5% quarter over quarter to RMB835.6 million (US$121.7 million) in the third quarter of 2018. The growths were mainly driven by increases in revenues from the mobile utility products and related services business in the domestic market due to the increasing mobile traffic and effective cost per mille ("eCPM"). Revenues from the mobile utility products and related services business in the domestic market accounted for 27.5% of the total revenues in the third quarter of 2018. This year-over-year growth was partially offset by (i) a decline in revenues from mobile utility products and related services business in the overseas markets as certain ad formats, i.e., ads on mobile phone lock screens, have been discontinued by the Company's overseas third-party advertising partners, and (ii) a decline in PC revenues as the internet traffic continued to migrate from PC to mobile.
Revenues from the mobile entertainment business increased by 37.5% year over year and 49.6% quarter over quarter to RMB497.9 million (US$72.5 million) driven by the growth of the Company's mobile game business in the third quarter of 2018.
-- Revenues from the mobile game business increased by 77.8% year over year
and 105.7% quarter over quarter to RMB285.3 million (US$41.5 million).
The year-over-year increase in the mobile game business mainly resulted
from the success of the new game Bricks n Balls, which was released in
the first half of 2018. The increase was also attributable to the
improved performances of the Company's existing game titles, including
Dancing Line, Piano Tiles 2, and Rolling Sky, as the Company continued
to add in-game purchase features to its existing game portfolio and
integrate its best-selling game titles with the WeChat mini game
platform to expand its user base. In addition, the Company further
improved its eCPM by utilizing innovative video advertisement placements
while leveraging machine learning technologies to improve the targeting
of its advertisements. The quarter-over-quarter increase was
attributable to the typical seasonality during the third quarter, which
has summer breaks and more holidays both in China and overseas. As a
result, the Company's players tend to spend more time on our games
during the third quarter.
-- Revenues from the content-driven products increased by 5.4% year over
year and 9.5% quarter over quarter to RMB212.6 million (US$31.0
million), due to the increase in revenues from Live.me, which introduced
a new series of features in the third quarter of 2018 to further expand
its average revenue per user. In addition, the appreciation of the US
dollar against the RMB in the third quarter of 2018 also contributed to
LiveMe's year-over-year revenue growth as most of its revenues were
generated in US dollars but reported in RMB.
By platform, revenues generated from the mobile business accounted for 89.4% of the Company's total revenues in the third quarter of 2018, up from 88.4% in the same period last year, and 87.5% in the second quarter of 2018.
By region, revenues generated from the Chinese market increased by 44.6% year over year and 18.2% quarter over quarter to RMB536.4 million (US$78.1 million), and constituted 39.7% of the Company's total revenues in the third quarter of 2018, up from 31.7% in the same period last year but down slightly from 41.1% in the second quarter of 2018. The revenue growth in the Chinese market was primarily attributable to a ramp-up of mobile utility products and related services in China.
Revenues generated from the overseas market increased by 2.1% year over year and 25.5% quarter over quarter to RMB815.5 million (US$118.7 million), constituting 60.3% of the Company's total revenues in the third quarter of 2018, down from 68.3% in the same period last year but up from 58.9% in the second quarter of 2018. The revenue growth in the overseas market was primarily driven by the rapid growth of our mobile games business, whose market is mostly overseas.
COST OF REVENUES AND GROSS PROFIT
Cost of revenues increased by 1.9% year over year and increased by 8.6% quarter over quarter to RMB381.7 million (US$55.6 million) in the third quarter of 2018. The sequential increase was primarily driven by higher costs of payment channels, such as Google Play and Apple's App Store, for the Company's mobile game business, and higher revenue sharing with live broadcasters of the Company's Live.me business. Non-GAAP cost of revenues decreased by 4.5% year over year and increased by 8.6% quarter over quarter to RMB381.6 million (US$55.6 million) in the third quarter of 2018.
Gross profit increased by 22.0% year over year and 29.0% quarter over quarter to RMB970.3 million (US$141.3 million). Non-GAAP gross profit increased by 22.1% year over year and 29.0% quarter over quarter to RMB970.3 million (US$141.3 million) in the third quarter of 2018. Gross margin expanded to 71.8% in the third quarter of 2018 from 68.0% in the same period last year and 68.2% in the second quarter of 2018, primarily due to higher revenue contribution from mobile games in the third quarter of 2018. Non-GAAP gross margin increased to 71.8% in the third quarter of 2018 from 68% in the same period last year and 68.2% in the second quarter of 2018.
OPERATING INCOME AND EXPENSES
Total operating expenses increased by 27.1% year over year and 35.0% quarter over quarter to RMB842.4 million (US$122.7 million) in the third quarter of 2018. Total non-GAAP operating expenses increased by 27.3% year over year and 33.9% quarter over quarter to RMB816.2 million (US$118.8 million) in the third quarter of 2018.
Research and development (R&D) expenses remained flat year over year and increased by 13.0% quarter over quarter to RMB175.3 million (US$25.5 million) in the third quarter of 2018. The quarter-over-quarter increase was primarily due to higher share-based compensation expenses. Non-GAAP R&D expenses, which exclude share-based compensation expenses, decreased by 2.9% year over year and increased by 5.2% quarter over quarter to RMB166.7 million (US$24.3 million) in the third quarter of 2018. The quarter-over-quarter increase was mainly due to increased R&D staff members.
Selling and marketing expenses increased by 39.0% year over year and 53.7% quarter over quarter to RMB568.4 million (US$82.8 million) in the third 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 markets and its mobile games business. Non-GAAP selling and marketing expenses, which exclude share-based compensation expenses, increased by 37.6% year over year and 53.9% quarter over quarter to RMB565.1 million (US$82.3 million) in the third quarter of 2018.
General and administrative expenses increased by 22.0% year over year and 8.2% quarter over quarter to RMB108.3 million (US$15.8 million) in the third quarter of 2018. The increases were primarily due to increased employee benefits, higher professional and legal service fees, and other administrative expenses. Non-GAAP general and administrative expenses, which exclude share-based compensation expenses, increased by 37.2% year over year and 10.6% quarter over quarter to RMB93.9 million (US$13.7 million) in the third quarter of 2018.
Operating profit decreased by 3.4% year over year and remained relatively flat quarter over quarter at RMB127.9 million (US$18.6 million). The year-over-year decrease in the Company's operating profit was primarily due to the Company's proactive investments in both its mobile utility product business in the domestic market and its mobile games operation. Both of these two businesses drove the Company's year-over-year and quarter-over-quarter revenue growth in the third quarter of 2018. Non-GAAP operating profit remained relatively flat year over year and increased by 8.1% quarter over quarter to RMB154.2 million (US$22.4 million).
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 1.4% year over year and decreased by 6.4% quarter over quarter to RMB264.1 million (US$38.5 million) in the third quarter of 2018. The quarter-over-quarter decrease was primarily due to 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 RMB74.1 million (US$10.8 million) in the third quarter of 2018, compared to an operating loss of RMB105.0 million in the same period last year and RMB98.6 million in the second quarter of 2018. The reduced losses were mainly a result of increased revenues from the mobile games operation and reduced costs and expenses from the News Republic business.
Share-based compensation expenses increased by 23.0% year over year and 79.8% quarter over quarter to RMB26.3 million (US$3.8 million) in the third quarter of 2018, as the Company granted a certain quantity of restricted shares to our key employees.
NET INCOME ATTRIBUTABLE TO CHEETAH MOBILE SHAREHOLDERS
Net income attributable to Cheetah Mobile shareholders increased by 19.6% year over year, and decreased by 15.0% quarter over quarter to RMB167.0 million (US$24.3 million) in the third quarter of 2018. Non-GAAP net income attributable to Cheetah Mobile shareholders increased by 20.0% year over year and decreased by 8.4% quarter over quarter to RMB193.3 million (US$28.2 million) in the third quarter of 2018. The quarter over quarter decrease in net income was mainly due to the investment income recognized in the second quarter of 2018.
NET INCOME PER ADS
Diluted income per ADS increased by 14.7% year over year, and decreased by 15.5% quarter over quarter to RMB1.09 (US$0.16) in the third quarter of 2018. Non-GAAP diluted income per ADS increased by 15.5% year over year and decreased by 8.6% quarter over quarter to RMB1.27 (US$0.19) in the third quarter of 2018. The quarter over quarter decrease was mainly due to the investment income recognized in the second quarter of 2018.
ADJUSTED EBITDA
Adjusted EBITDA (Non-GAAP) decreased by 8.0% year over year and increased by 4.8% quarter over quarter to RMB172.0 million (US$25.0 million) in the third quarter of 2018.
BALANCE SHEET AND CASH FLOW
Net cash from operating activities in the third quarter of 2018 was RMB338.8 million (US$49.3 million) compared to RMB197.8 million in the same period of 2017. Free cash flow in the third quarter of 2018 was RMB326.3 million (US$47.5 million) compared to RMB192.3 million in the same period of 2017.
As of September 30, 2018, the Company had cash and cash equivalents, restricted cash, and short-term investments of RMB3,624.7 million (US$527.8 million).
SHARES ISSUED AND OUTSTANDING
As of September 30, 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.
Business Outlook
For the fourth quarter of 2018, the Company expects its total revenues to be between RMB1,390 million (US$202 million) and RMB1,430 million (US$208 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 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 November 20, 2018, the Company had repurchased approximately 1 million ADSs for approximately US$8 million under this program.
Dispose of Certain Portion of Shares of Bytedance Ltd.
Cheetah Mobile has entered into an agreement to sell a certain portion of its equity ownership in Bytedance Ltd. and this transaction will result in a disposal gain of investment of approximately US$43 million in the fourth quarter of 2018. This transaction will also result in a fair value gain of US$43 million in the fourth quarter of 2018 for the remaining portion which the Company still holds. This transaction is expected to close by the end of November 2018, subject to customary closing conditions.
Conference Call Information
The Company will hold a conference call on Wednesday, November 21, 2018 at 8:00 am Eastern Time or 9:00 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 RMB6.868 to US$1.00, the exchange rate in effect as of September 30, 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 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 Live.me. 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 noncontrolling interests, 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.
-- 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
CHEETAH MOBILE INC.
Condensed Consolidated Balance Sheets
(Unaudited, amounts in thousands of Renminbi ("RMB") and US dollars ("US$")
As of
December 31, 2017
September 30, 2018
September 30, 2018
RMB
RMB
USD
ASSETS
Current assets:
Cash and cash equivalents 2,317,488 2,808,721 408,958
Restricted cash 90,149 6,119 891
Short-term investments 1,395,694 809,902 117,924
Accounts receivable 621,272 567,042 82,563
Prepayments and other current assets 918,243 851,657 124,004
Due from related parties 54,052 134,116 19,528
Total current assets 5,396,898 5,177,557 753,868
Non-current assets:
Property and equipment, net 89,137 68,546 9,980
Intangible assets, net 70,225 57,241 8,334
Goodwill 634,157 660,071 96,108
Investment in equity investees 149,969 151,072 21,997
Other long term investments 1,002,721 1,456,884 212,126
Due from related parties 5,216 15,539 2,263
Deferred tax assets 57,642 62,997 9,173
Other non-current assets 42,966 43,164 6,285
Total non-current assets 2,052,033 2,515,514 366,266
Total assets 7,448,931 7,693,071 1,120,134
LIABILITIES, MEZZANINE EQUITY AND
SHAREHOLDERS' EQUITY
Current liabilities:
Bank loans 336,304 -
Accounts payable 164,537 164,185 23,906
Accrued expenses and other current liabilities 1,532,489 1,484,952 216,215
Due to related parties 81,810 35,274 5,136
Income tax payable 50,614 59,238 8,625
Total current liabilities 2,165,754 1,743,649 253,882
Non-current liabilities:
Deferred tax liabilities 73,393 74,442 10,839
Other non-current liabilities 54,574 71,780 10,451
Total non-current liabilities 127,967 146,222 21,290
Total liabilities 2,293,721 1,889,871 275,172
Mezzanine equity:
Redeemable noncontrolling interests 649,246 677,606 98,661
Shareholders' equity:
Ordinary shares 229 230 33
Treasury stock - (19,191) (2,794)
Additional paid-in capital 2,644,043 2,705,890 393,985
Retained earnings 1,564,883 1,982,569 288,668
Accumulated other comprehensive income 84,206 274,655 39,991
Total Cheetah Mobile shareholders' equity 4,293,361 4,944,153 719,883
Noncontrolling interests 212,603 181,441 26,418
Total equity 4,505,964 5,125,594 746,301
Total liabilities, mezzanine equity and equity 7,448,931 7,693,071 1,120,134
CHEETAH MOBILE INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited, amounts in thousands of Renminbi ("RMB") and US dollars ("US$"), except for number of shares and per share(or ADS) data)
For The Three Months Ended
September 30, 2017 June 30, 2018
September 30, 2018
September 30, 2018
RMB
RMB
RMB
USD
Revenues (a) 1,194,687 1,103,456 1,351,979 196,852
Utility products and related services 824,764 756,093 835,606 121,667
Mobile entertainment 362,448 332,907 497,911 72,497
Others 7,475 14,456 18,462 2,688
Cost of revenues (b) (399,664) (351,360) (381,692) (55,575)
Gross profit 795,023 752,096 970,287 141,277
Operating income and expenses:
Research and development (b) (174,646) (155,202) (175,303) (25,525)
Selling and marketing (b) (409,045) (369,914) (568,445) (82,767)
General and administrative (b) (88,737) (100,107) (108,270) (15,764)
Impairment of goodwill and intangible assets - (5,587)
Other operating income 9,739 6,660 9,595 1,397
Total operating income and expenses (662,689) (624,150) (842,423) (122,659)
Operating profit 132,334 127,946 127,864 18,618
Other income (expense):
Interest income, net 7,380 19,425 24,120 3,512
Foreign exchange (loss) gain, net (3,867) 10,022 10,532 1,533
(Impairment) reversal of investment impairment (65,461) 14,500 -
(Losses) gain from equity method investments, net (582) (2,818) 2,479 361
Other income, net 82,370 52,666 1,242 181
Income before taxes 152,174 221,741 166,237 24,205
Income tax expenses (7,767) (27,993) (26,957) (3,925)
Net income 144,407 193,748 139,280 20,280
Less: net income (loss) attributable to noncontrolling interests 4,727 (2,792) (27,757) (4,041)
Net income attributable to Cheetah Mobile shareholders 139,680 196,540 167,037 24,321
Earnings per share
Basic 0.10 0.13 0.11 0.02
Diluted 0.09 0.13 0.11 0.02
Earnings per ADS
Basic 0.97 1.33 1.12 0.16
Diluted 0.95 1.29 1.09 0.16
Weighted average number of shares outstanding
Basic 1,396,601,023 1,407,191,965 1,408,570,797 1,408,570,797
Diluted 1,429,237,411 1,452,195,012 1,440,581,762 1,440,581,762
Weighted average number of ADSs outstanding
Basic 139,660,102 140,719,197 140,857,080 140,857,080
Diluted 142,923,741 145,219,501 144,058,176 144,058,176
Other comprehensive loss, net of tax of nil
Foreign currency translation adjustments (48,572) 188,530 149,722 21,800
Other comprehensive (loss) income (48,572) 188,530 149,722 21,800
Total comprehensive income 95,835 382,278 289,002 42,080
Less: Total comprehensive income (loss) attributable to 2,604 1,358 (17,293) (2,518)
noncontrolling interests
Total comprehensive income attributable to Cheetah Mobile 93,231 380,920 306,295 44,598
shareholders
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 September 30, 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
September 30, 2018
September 30, 2018
RMB
USD
As reported 1,351,979 196,852
Add: value added taxes 32,763 4,770
Less: barter transactions 4,810 700
Without adoption of ASC 606 1,379,932 200,922
For The Three Months Ended
September 30, 2017
June 30, 2018
September 30, 2018
September 30, 2018
(b) Share-based compensation expenses
RMB
RMB
RMB
USD
Cost of revenues (63) 90 46 7
Research and development 2,847 (3,365) 8,563 1,247
Selling and marketing (1,680) 2,683 3,317 483
General and administrative 20,288 15,225 14,380 2,094
Total 21,392 14,633 26,306 3,831
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 September 30, 2018
GAAP % of Net
Share-based % of Net Non-GAAP % of Net Non-GAAP
Result Revenues
Compensation Revenues
Result Revenues Result ($)
---
Revenues 1,351,979 1,351,979 196,852
Cost of revenues (381,692) 28.2% 46 0.0% (381,646) 28.2% (55,568)
Gross profit 970,287 71.8% 46 0.0% 970,333 71.8% 141,284
Research and development (175,303) 13.0% 8,563 0.6% (166,740) 12.3% (24,278)
Selling and marketing (568,445) 42.0% 3,317 0.2% (565,128) 41.8% (82,284)
General and administrative (108,270) 8.0% 14,380 1.1% (93,890) 6.9% (13,670)
Other operating income 9,595 0.7% 0.0% 9,595 0.7% 1,397
Total operating income and expenses (842,423) 62.3% 26,260 1.9% (816,163) 60.4% (118,835)
Operating profit 127,864 9.5% 26,306 1.9% 154,170 11.4% 22,449
Net income attributable to Cheetah Mobile shareholders 167,037 12.4% 26,306 1.9% 193,343 14.3% 28,151
Diluted earnings per ordinary share (RMB) 0.11 0.02 0.13
Diluted earnings per ADS (RMB) 1.09 0.18 1.27
Diluted earnings per ADS (USD) 0.16 0.03 0.19
For The Three Months Ended June 30, 2018
GAAP % of Net
Share-based % of Net Non-GAAP % of Net
Result Revenues
Compensation Revenues
Result Revenues
Revenues 1,103,456 1,103,456
Cost of revenues (351,360) 31.8% 90 0.0% (351,270) 31.8%
Gross profit 752,096 68.2% 90 0.0% 752,186 68.2%
Research and development (155,202) 14.1% (3,365) 0.3% (158,567) 14.4%
Selling and marketing (369,914) 33.5% 2,683 0.2% (367,231) 33.3%
General and administrative (100,107) 9.1% 15,225 1.4% (84,882) 7.7%
Impairment of goodwill and intangible assets (5,587) 0.5% 0.0% (5,587) 0.5%
Other operating income 6,660 0.6% 0.0% 6,660 0.6%
Total operating income and expenses (624,150) 56.6% 14,543 1.3% (609,607) 55.2%
Operating profit 127,946 11.6% 14,633 1.3% 142,579 12.9%
Net income attributable to Cheetah Mobile shareholders 196,540 17.8% 14,633 1.3% 211,173 19.1%
Diluted earnings per ordinary share (RMB) 0.13 0.01 0.14
Diluted earnings per ADS (RMB) 1.29 0.10 1.39
For The Three Months Ended September 30, 2017
GAAP % of Net
Share-based % of Net Non-GAAP % of Net
Result Revenues
Compensation Revenues
Result Revenues
Revenues 1,194,687 1,194,687
Cost of revenues (399,664) 33.5% (63) 0.0% (399,727) 33.5%
Gross profit 795,023 66.5% (63) 0.0% 794,960 66.5%
Research and development (174,646) 14.6% 2,847 0.2% (171,799) 14.4%
Selling and marketing (409,045) 34.2% (1,680) 0.1% (410,725) 34.4%
General and administrative (88,737) 7.4% 20,288 1.7% (68,449) 5.7%
Other operating income 9,739 0.8% 0.0% 9,739 0.8%
Total operating income and expenses (662,689) 55.5% 21,455 1.8% (641,234) 53.7%
Operating profit 132,334 11.1% 21,392 1.8% 153,726 12.9%
Net income attributable to Cheetah Mobile shareholders 139,680 11.7% 21,392 1.8% 161,072 13.5%
Diluted earnings per ordinary share (RMB) 0.09 0.02 0.11
Diluted earnings per ADS (RMB) 0.95 0.15 1.10
CHEETAH MOBILE INC.
Information about Segment
(Unaudited, in'000, except for percentage)
For The Three Months Ended September 30, 2018
Utility Products
Mobile Entertainment Others Unallocated* Consolidated
and
Related Services
---
RMB
RMB RMB
RMB
RMB USD
Revenue 835,606 497,911 18,462 1,351,979 196,852
Operating profit (loss) 264,139 (74,121) (35,848) (26,306) 127,864 18,618
Operating margin 31.6% (14.9)% (194.2)% 9.5% 9.5%
For The Three Months Ended June 30, 2018
Utility Products
Mobile Entertainment Others Unallocated* Consolidated
and
Related Services
RMB
RMB RMB
RMB
RMB
Revenue 756,093 332,907 14,456 1,103,456
Operating profit (loss) 282,090 (98,568) (40,943) (14,633) 127,946
Operating margin 37.3% (29.6)% (283.2)% 11.6%
For The Three Months Ended September 30, 2017
Utility Products
Mobile Entertainment Others Unallocated* Consolidated
and
Related Services
RMB
RMB RMB
RMB
RMB
Revenue 824,764 362,448 7,475 1,194,687
Operating profit (loss) 260,490 (104,957) (1,807) (21,392) 132,334
Operating margin 31.6% (29.0)% (24.2)% 11.1%
* Unallocated expenses refer to SBC expenses that are not allocated to individual segments.
CHEETAH MOBILE INC.
Reconciliation from Net Income Attributable to Cheetah Mobile Shareholders to Adjusted EBITDA (Non-GAAP)
(Unaudited, in '000)
For The Three Months Ended
---
September 30, 2017 June 30, 2018
September 30, 2018
September 30, 2018
RMB
RMB
RMB
USD
Net income attributable to Cheetah Mobile shareholders 139,680 196,540 167,037 24,321
Add:
Income tax expenses 7,767 27,993 26,957 3,925
Interest income, net (7,380) (19,425) (24,120) (3,512)
Depreciation and amortization 33,162 21,573 17,826 2,596
Net income (loss) attributable to noncontrolling interests 4,727 (2,792) (27,757) (4,041)
Other non-operating income, net (12,460) (74,370) (14,253) (2,075)
Share-based compensation 21,392 14,633 26,306 3,831
Adjusted EBITDA 186,888 164,152 171,996 25,045
===
CHEETAH MOBILE INC.
Revenues Generated from PC-based and Mobile-based Applications and Services
(Unaudited, in '000)
For The Three Months Ended
---
September 30, 2017 June 30, 2018
September 30, 2018
September 30, 2018
RMB
RMB
RMB
USD
PC 144,377 137,763 143,322 20,868
Mobile 1,050,310 965,693 1,208,657 175,984
---
Total 1,194,687 1,103,456 1,351,979 196,852
===
CHEETAH MOBILE INC.
Revenues Generated from Domestic and Overseas Markets
(Unaudited, in '000)
For The Three Months Ended
---
September 30, 2017 June 30, 2018
September 30, 2018
September 30, 2018
RMB
RMB
RMB
USD
Domestic 394,236 453,837 536,435 78,106
Overseas 800,451 649,619 815,544 118,746
---
Total 1,194,687 1,103,456 1,351,979 196,852
===
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SOURCE Cheetah Mobile
