Q4 2020 Cheetah Mobile Inc Earnings Call

Perfect and then well.

So the Cheetah mobile fourth quarter and full year 2020 earnings conference call.

All participants will be in listen only mode.

After todays presentation, there will be and opportunity to ask questions.

Please note this event is being recorded.

I would now like to turn the conference over to Helen Xu and.

Investor Relations director of Cheetah Cheetah Mobile. Please go ahead ma'am.

Thank you operator, and welcome to Cheetah mobile fourth quarter, and full year 2020 earnings Conference call. We said today, our company's chairman and CEO, Mr. Fu Sheng and there were a competency Apple and Mr. Thomas Kim following management's prepared remarks, we will come back with interest.

Section before we begin I refer you to the Safe Harbor statements in our earnings release, which also applies to our conference call today, and we will make forward and since then.

And this time I would now like to turn the conference call over to our CEO and chairman Mr. Fu Sheng. Please go ahead. Please I'll send to you Helen and Hello, everybody.

And the macro environment remains challenging with brokerage and if you permit me.

And Asia, China, mobile and improved operation operational and efficiency, they refine our revenue streams beyond advertising and it stayed focused on that.

And that mistake.

Market in 2020, we earned RMB one point.

Media revenue and non B.

417 media net.

Income attributes attributable to our shareholders and our business began to take hold.

And we remained committed to our AI related to robotics business to build and sustain.

They're both.

Cheetah mobile in the long time.

Long run.

Here on the operating highlights.

We cut our costs and these patents.

As a result, non-GAAP operating loss continued to narrow.

Q4, 2019, and the fourth quarter of 2020, non-GAAP operating loss was RMB 57 and media.

Reduced from RMB 200, and full media in the same period last year and RMB 119 media in the previous quarter.

Especially quickly.

Our internet business.

About RMB 76 media and non-GAAP operating profit in the fourth quarter of 2020.

Compared to <unk> and.

Operating loss of RMB 92 media and the same period last year and operating profit of RMB 17, one media in the previous quarter. Thanks to our continued operating.

At the time might be okay.

And I became mutation.

Cheetah mobile still holds U S tool.

And yet for a 255 media and <unk>.

And despite instead of we paint U S U S dollar.

Our U S dollar.

200 immediate cash.

You bet and to our shareholders.

2020.

2000, and Hyundai looking ahead, we will continue to cut our costs.

And then dependent and and improve operating efficiency.

Second.

Through operating membership so silly low.

Thank you.

Utility per day.

And our sites our revenue streams beyond.

And the way it hides Inc. In 2010 day.

Put it user is geared and users.

And so.

Vacation.

Yeah.

So to say.

So it is free.

Cushing and our user privacy protected the protection and our top priority and our home market and I won't go is to improve the user education.

And to attract more users through word of mouth word of mouth and the domestic domestic market. We continue to encourage users to subscribe fun and free your peer is.

Such and ratio.

Initiatives, such initiative helped us reduce reliant and <unk>.

And.

And Oh by the way nice thing and allow our utility per tonnage to D. D var superdrug.

If there is as a result, both paying user accounts and the subscription revenue continued to grow in 2020.

And we expect this Matt.

Metrics to continue to growth pace in the future the party to buy the membership service and our effort one day.

And you'll say experience, we expect revenue from our key internet and business to gradually.

The.

Stabilized and Brazil.

Brazil quarter over quarter growth in the coming quarters.

Sure.

We optimized.

Robert and Mike our operation for our AI business by focusing and focusing all our selected a number.

Oh user case, well with them and he's a deep deep deploying our AI robots and shopping mall.

COVID-19, and China hasn't been where can shoot and it is.

Chinese Inc.

Economic headwinds and colored our air relapsing related robots.

She'll kick the shopping mall, operator, Bachelor and silver, so and there are customer and.

Our brand and share.

Sure.

Our moats and their product and the service.

Our AI business is still in its early stage. We believe we are in the right direction of our business.

Before I turn the call to tomo for financial highlights I would like to emphasize.

Our job John cash cash would be itself.

And our comfort and the shareholder return in 2010 day, we will continue to cut our cost and the Japan, Inc.

And.

It is.

And if a pediments more monetization models for our AI business two rebuilds at a 10 boat growth model for the long term.

With that I will now turn the call to our simple.

And then too.

We'll go through the details of our fourth quarter financial results.

And good day, everybody and thank you all for joining us today.

Now I will walk you through our financial results. Please note that unless stated otherwise all money amounts are in RMB terms.

And the fourth quarter of 2020, our total revenues were 200 and the $75 million you Didnt downward revenue guidance is it represented a year over year decrease.

<unk> 56 per cent.

The year over year decline was primarily due to the suspension of our collaborations with Google Since February 2020 and smell.

And the disposal of certain gaming related business and the ISS.

On February 21st 'twenty, and 'twenty, Cheetah mobile and announced that the company is Google play store, Google Admob, and Google AD manager accounts had been disabled, which negatively affected its ability to attract new users and channel revenue from Google.

Given the unfavorable environment.

And the overseas market, we have chosen to shift our focus from overseas markets towards the domestic market.

And the second half of 'twenty.

The company disposed certain gaming related fitness and ASUR.

Overseas markets.

And as a result, we expect that revenue contribution from the mobile game business to decrease in the foreseeable future.

Such disposals Cheetah mobile business, primarily comprises of two pieces.

And then is the internet.

This includes our utility products and both the PC and mobile platforms and the domestic market and a remaining and diminishing portion of the mobile game business.

The other is the AI and other business.

And therefore, we started reporting our revenue and operating profit.

Bob two business lines from this quarter.

We have retrospectively revert.

Segment information from the previous period to be comparable with the current period.

Revenue from the company's Internet expenses decreased by 56% year over year to RMB 257 million in the fourth.

And fourth quarter of 2020 due to the above mentioned factors.

In the fourth quarter of 2020, nearly 74 per cent.

The company's revenues from its Internet Tvs were generated from utility products and now the remaining came from the diminishing mobile game pieces.

And the future Big spec revenue from our utility products to account for a vast majority of this reporting segment.

Revenue from AI, and others were $14 million in the quarter, representing a year over year decrease of 15% mainly due to a decline in consumer facing AI related products.

Turning to our fourth quarter of 2020 cost and expenses.

Following discussion of results.

On a non-GAAP basis, which.

Exclude stock based compensation expenses and goodwill impairment.

The use of non-GAAP measures in this context, we will help us to better present, the results of our operating performance without the effect of noncash items.

For financial information presented in accordance with U S. GAAP, please refer to our earnings release.

In the past several quarters, we continue to streamline our operations and and cut our costs and expenses in the fourth quarter of 2020 total costs and expenses decreased by six 1% year over year.

And 33% quarter over quarter as a result, our operating loss significantly narrowed to $57 million in the quarter from $203 million in the same period last year.

And 119 million in the previous quarter.

Notably the operating profit for the Internet expenses.

And what $76 million in the fourth quarter of 2020.

Increased from an operating loss of 92 million and the same period last year.

And and operating profit of 17 9 million in the previous quarter due to our cost and expenses carting.

As of December 31st 2020, Cheetah had about 150 full time employees decreasing by about 50% from the and up 2019.

In 2020, our total operating expenses decreased by 44%.

In 2021 day, they will continue to cut our costs and expenses, particularly sales and marketing and personnel related expenses.

Turning to non operating items.

During the quarter the fair value of some of our Investees increased.

As a result vs reported a 19 income attributable to Cheetah mobile and shareholders.

Of 85 million in the fourth quarter.

In potash.

And our balance sheet remains strong.

At December 31st 2020, we had cash cash equivalents restricted cash and short term investments of U S.

S dollar 200 and.

55 million and long term equity investments of U S dollar 369 million.

Our strong balance sheet gives us the confidence to continue to invest in the AI related business to rejuvenate long term growth for the company.

And for our fourth quarter revenue guidance. We currently expect total revenues to be between.

RMB 165 million.

And RMB $215 million per.

Please note this forecast reflects our current and preliminary views and a subject to change.

This concludes our prepared remarks, operator, we're now ready to take questions. Thank you.

Thank you we will now begin the question and answer session.

To ask a question you May Press Star then one on your Touchtone phone.

If you're using a speaker phone we ask you. Please pickup your handset before pressing the keys.

To withdraw your question. Please press Star then two.

Asking the question. Please state your question and Chinese first that immediately repeat your question in English for the convenience of everyone on the call.

And once again, ladies and gentlemen that has started and one if you have a question and well pull we will pause momentarily to assemble our roster.

Our first question today comes from Vicky Wei with Citi. Please go ahead.

Could even and management. Thanks for taking my question. My question is about to advertise and market and that and go.

So what this management and close the call that advertise and market sentiment going into the first quarter 2021 and what was the top three key advertising vertical for fourth quarter and then.

Second question is post the pandemic does management and witness any behavioral changes in habits in terms of adoptions.

But.

Any color about the programs.

Cheetah, mobiles, and robots and adoptions and you'll be great. What did you say.

And she said you wanted to zone, well, the one day supply and you quite well.

Monday Antici since day, one by any chance.

And that $10.

One Oh and they said you don't want to.

Oh and culture.

Well number one and music on your I P T J.

You can go home.

And they'll come down sorry, yeah.

And I'm not sure my young who she gonna coffee and and boy. It was small and I think she runs on me and she's on the fringe Huh.

Now punching Bonnie and taken back actually John cash.

Okay.

Thank you Vicki So I will answer your first question about.

The channel advertising market and food only I'll answer your second question so for the.

Advertising market it seems.

Seems that COVID-19 pandemic.

Now already under control and China, we can see.

Strong recovery trend.

Marco economy in China, which in turn lead to a recovery to our advertising market is low so specifically.

For a few sector's lack of FMC G auto gaming.

Gaming and education I think those are a few sectors deal maintained strong growth momentum and also you can see and the recovery from the travel and entertainment and factors from last year.

I also want to draw your attention that therefore.

For us that we mentioned and the.

And with prepared remarks, Vietnam the <unk>.

Focusing our reliance on advertising mail, we are developing.

And the user subscription model.

We expect we can see.

And more contribution from user contributed revenue for our domestic utility products.

The answer to your question, so I'm going to turn to a force to answer your question about the <unk>.

Hi.

Uh huh.

Sure and he can go home and a woman or $3 <unk> and Dorothy the soldier.

C C.

As you know food teacher, and digital tools have canceled and Chicago I can't give.

He won't go cheap to get down yeah and bus.

So two things I tried to peruse, the Asian Asia tissue bulk home and towards the video bridging home Podiatry champions of the channel that so much of it were nimble and shutdowns and this should help the Av and with.

He sure does either.

Judge issued a bike and suddenly it all day.

Okay.

And you translate this part so after.

After the COVID-19 pandemic.

And the.

Indeed, and noticed that there are a lot of these customers.

They are their acceptance level for the AI and robotics.

Accelerating and wholesale it benefits from the past few years.

<unk>.

Continue to.

And that.

Hi technologies, including the hour in that P. A R.

And star Toolbar and reduce the cost of the.

Robotics, so he can feel.

Feel that the whole market.

Adapting to the AI and robotics.

It's becoming a.

Much more than before.

And they got Peugeot and they're somehow the G cheetah, you'll use it yourself, how good your low playful and playful and home.

Ted say pushed out and shout out and try and do the shunyata should be each and shields and Canada continued shantou and see that.

And hey, hopefully he ultimately see why and you should have lead with many key share Nadil take a 90 day period.

And you'll have more ships and pads Hefei and was a module and that is hanging downhole and ideal trustful and see the take that.

And hopefully can high shear zone to zone and whatnot.

Okay. So I had to try.

And slate that is parked saw funding simple, our robotics and the shopping more and.

Along with the traffic and the shopping more it's recovering.

We can see.

And more and more shopping more.

Interaction with our shopping more robotics is increasing so some are some customers already are used to.

Asking.

Our robotics about that are there to fund certain brands of coffee and brands off the restaurant and the various non toilet et cetera. So are we seeing that more and more customers and the shock and more.

You too.

Such kind of inquiry to our robotics.

And I hope you and Nick talked.

The deal pushing home and see the attach rates.

And so what are your cash that she and N D by already hardly any NAV and faithfully and per se.

And the attending Fuji share well known.

And hunting and the Joe Douglas you won't give and take.

<unk> and switching maybe up without changing and renminbi.

Sure.

And can be fully Iot and I got a whole team to say D zone, the shoulder pardon me and shrinking.

And then she day that's either.

And it does take US a day too.

And so.

So we had to adapt and I believe our baggage and cancel that your bad debts and Japan.

And hopefully it'll take I can share.

Net.

Yeah.

Net.

Another example is.

Got it and robotics and restaurants.

Promoted by our and that PRA and star again so.

Towards the end of 2020.

And star.

Promoting restaurant service robotics.

And the monthly run coal or a star is collecting from non restaurants last day in 2000, and RMB and actually this coffee is already lower than.

And.

Carmen waiters cost and efficiency on the.

Delivery is.

Alrighty.

Enough to a substitute.

Later and.

Just a couple.

A couple of months.

And Arista already entered into a.

A few hundred restaurant.

Each day.

And our restaurant robotics.

Okay.

And so I thought I'd just.

And so they each single hold your shares have day to.

Figure, which is D C and D and cash of course, you see interest total day and channel by channel women Veterans day.

And I'll, let you go Chicago, They just show the day the people that holds and dedication and see the churches because she's Hal just show just how many channel.

And so if he would tell you that if you change it doesn't mean, we're just would've wassa and it changed salaried and Tina Charles and it definitely.

True switching and the seasonality and additional channel.

And it wasn't heritage and it to give guidance and with all day.

Yeah, so, especially after the COVID-19.

COVID-19 pandemic so.

And also our continuing investment into the AI technology, I think we already reduced our cost tools and level that could be adapted by by.

By the market.

And also you can see.

And touch service and also a lot of surveys Lisa.

And you were a face to face communication.

And so.

Gradually adopted by the market. So we think it's the right timing.

We can.

And we can benefit from the.

Market effective.

So that's all of the food answer respond and hope it answers your question.

Thank you and much.

Thank you.

And ladies and gentlemen, as a reminder to ask a question. Please press Star then one.

And there's no further.

Oh, please standby, while we poll for questions.

Yeah.

Yeah.

Yeah.

Yes.

And our next question today comes from multi channel with Jefferies. Please go ahead.

Okay.

And for taking my question, so I have two questions.

Okay.

And so some deals.

And two.

Our Clos and <unk>.

Sachin.

And then my second question.

So Apple recently and cool.

Privacy controls and all.

And App developers.

And require to have the approval.

Yes.

So well and both of them.

Hi.

Uh huh.

And finally, I'm sad to see if I went and Jason sure.

And why does it.

Yeah, well, so ambition and go get them.

Thanks Charles.

Hum and.

And like I said.

Yeah.

Hey.

And that's it.

Yeah.

Oh, Yeah go ahead and Joseph.

And the applications Jasmine.

And can be can they go.

And what.

And that shows you the answer is yes.

It didn't go up.

Yeah.

And he thought about what they can't well gosh, yes.

Plaza.

And that's job one.

Hello.

Because hershey's and yard time alone.

And we'll Minneapolis, Chicago, and Washington, installation, and one that had dormant and <unk> and wish him.

I'm glad I don't she hit that long, but just to dig in a country.

Okay, and Charlotte Wilmington, and they won't okay.

And you want to highlight and that's all you and Bob.

And does it all come back and do I stay woman and she and.

She's with us so they just shouldn't tick up with Google and they tend to Apache and our mobile and anything you don't put it all and you won't see them pushing so it will be more Wednesday and life chat session Emailed me now and put it somehow.

And so I'm, putting that you've accomplished zone.

And to the profit on Russia.

Cash and you want a day, it's either just as to who they want you all to think of mobile hydraulic jewel and somebody about you don't have sharply and close with O'connor.

Yeah.

Okay. So I will.

Firstly and this part skull.

Full doors of talking about the I'll look for our own business. So the fourth as we mentioned just now I think the.

And that's great talent in the overseas market last year for the <unk>.

And for us in the prior year with two are returned to our home market and which is our domestic market and now it seems that all of our.

Domestic mobile Internet business.

Oh no.

Not only we stabilized our revenue level and also the.

We expect we can now begin.

And some growth in this year and the growth and not.

Only coming from the.

Advertising and also coming from.

Our yields on a subscription model and.

Yeah.

We believe for the Internet.

Segment.

You can see a recovery trend in AR and AP.

And here Okay.

Okay.

The whole neighborhood.

And what we're going to wait and see the tango and.

Indeed, Canadians and the ugly.

And I've got football club.

Nathan one day, a country that junior banana and the interest of Guangdong and do our eating else like nasal kosher.

So you can dial and tissue that was on the computer and Nintendo playful Buddy.

Yeah. So first of all talking about the net.

Coming here, we can see.

More severe computation for the whole internet industry and for us our utility products and.

Not only to some functional feed.

Features and also we need to.

To be connected with.

Content.

And if he or the Claude functions, and then we cut and navigating some Ah and Nash.

And you all flower and utility software.

And I hope your lunch.

So a T shirt and the tango two comparable and show that would remain quite good from that all day.

Do I see I thought that and kind of Ishares. He goes so we have mentioned and leadership.

To Juniors and Pall Mall for me up with US I'm sure Cindy which it is.

The state and the hunger that show up and Bushnell question team and you really want to know that you can't and hung up with some call. It should the E dingo needed season should be off with and he says that you can know what a show called <unk> Inc.

In fact, and not eating and that's really being held.

And so it can have dealt and take a core to the cigarettes and.

And suddenly you have mainly inflation and the Dominion GSI as usual blend they hold a tissue and the kardashians do hold me and attacking and before we're able to show value within zone.

And since in the Caribbean, but she thought she.

Cash and take the.

Cash and pushing the T. The potato chips and emotional and particular incident patients and hadn't yet I shouldn't think of a question, but that doesn't mean the voucher.

Okay. So I suggest that for the <unk>.

Yeah, and there's orthotics industry I think.

It's now the attending plus although you could see some.

So some AI company.

Not that we and great our.

And if not smooth for them to either toward new round financing hard the IPO, but I think generally it's not a bad thing for the whole industry and.

For the AI and robotics fitness.

It's not only about the some certain technology and indicate our aura.

You published some I say are a bit and some price competition.

Josh standard so I think now.

I've been attending to a stage that.

Net.

And the product should be.

Core.

Uh huh.

Core.

Teacher and.

Yeah.

And as long as your product.

Meet your.

Customers need and also to reduce customers' actual cost and to leverage D. R.

And.

And Paul the Youll start experience I think that's all.

The car.

Computation.

And if you for the product.

Yeah.

Children, and Symington, and Belgium, and all women's pay for their 40 share and see the Hampton telephone call. It shouldn't take the zoom phone.

Some flavor and balances and tackle the patches. So we all of us and don't matches low fashion with it so I take it that way and so that's actually quite a pillar and.

And Haynesville again cash it simple Zoe they show you won't see that she'll.

And the high age and creates a different kind of average.

Yeah.

Yeah.

I'll be there.

Uh huh.

Javier.

And now I'm Gonna have you can see that.

The for the robotic products previously.

It depends on highly on the.

Governance purchase but or to use us.

Biotech.

In sum and activation, but now it has been converted to.

By their youth.

Either the restaurant or hotel and.

Efficient and more each patient and tool so I think.

And I'm quite confident that this industry growth.

And I have thought.

And I hope you and when she hydrogen and what's the trigger and golf.

And she and they've got kingbird, and Hooper things that they want and making sure you'll mobile.

And to that channel and more churn and that's all she and thoughtful if she's seriously and compare them.

Neither.

And you'll see it cheaper and faster.

And as Sean said, it right and to go ahead and catalogs.

She buys and that you'll be able to handle the Shaw.

So you need a sea change and its.

And so there shouldn't do and bushel platelets.

Yeah.

And for your second question about the <unk>.

And you policy by alcohol I think it's basically that.

Very minimum effect on our utility product because our.

Utility apps our products.

Really on the either Android or PC platforms and.

The wholesale.

For the hour overseas gaming products.

Already as we mentioned and the already disposed and certain overseas gaming products. So.

For the IPO policy itself.

Areas.

And I with minimum impact on us.

Yeah, David I don't need cash.

What is sort of share Julien it's armando.

Singapore.

Well and they did go out with all the different games.

Uh huh.

Oh, yeah, well the ultra low vehicles biodiesel sales.

Luckily shall take Oh.

Oh, Thank you and cash about Oh, Yeah, again tell us and it's something out of Appalachia.

Yeah, I know I also want to emphasize that.

Another although because its about.

No matter the overseas market to automate and market knowledge.

Becoming more and more important.

<unk>.

For the users' privacy information.

<unk>.

More and more focus for the whole AR apps developers because he and the recent.

March 15th.

Gala CCTV.

The either the fraud and if it hasn't been our disruptive at the attachment is also becoming forecast by a government.

Well you didn't take the chips and the honey and actually.

You should see the yellow here and there are 2000 and quite large amounts of loans that you can tell you when you said about her.

Uh huh.

Sure.

Cooler weather issues at central down I should say to take the.

Ill touch on later.

Yeah, so for the whole industry I think.

In the future the advertisement.

Low quality ore.

And our violating some user privacy information and.

It will be a controlled more and more uptake by either the government or a mobile phone.

Mobile phone manufacturers.

And usually you don't day.

She is changing and how she is.

Single women shows all she said that there have I sort of on call day, you Shouldnt see that's a there's a whole lot and this is an issue.

So you should not think when she and I say that.

And part of GWG, just simple Denis Sheahan, and save the day and show them, the bulk of Otago chunky and Dave.

Or should it hold and take.

Take a fast and to the fact that so don't forget the channel clear so low Moshe.

And you guys did average is on all of it yet, but would you say almost guaranteed genie and air ticket countries, just suddenly and tragedies that decision.

Instead, the accumulated and she is shale.

And male patients each and all that.

And well just a whole and I'd say that the shiny and Moshe listen he doesn't see the again show and database.

Yeah, so badly.

We were facing some challenge from either a Facebook or Google and lofty <unk> the year before so have you already realized that the.

And the user experience and also the low quality.

And out of attachment.

So we are already in the 2000 <unk> E V already start to.

And we deal with our advertisement and also too.

And we deal with our relearn TWA advertising for the developer.

User subscription model I think it improve our user experience.

And so.

So in the.

And just mention on the <unk>.

CCTV Carla so there is no cheetah mobile product was involved I think a factor.

Peak relation or great relation and this hour change our business model flour and OTT product.

Our digital day took up a boat and chassis.

And just how that had happened and yet.

So thank you and also.

And I want to supplement and about a little bit about the outlook for 'twenty.

2021 for the because luckily I emphasize that because first.

And B B were terminated at Google and last year and all.

And secondly, the already disposed of.

And gaming related part of top business and the second half of 2020, So I think that generally for our full year outlook I think Dave you'll still see.

<unk> tried and for the full year revenue.

We are confident that stance.

Q2, because Q1 is.

Oh, yes.

Slack season for advertising, so I think the.

And we can expect some.

And recovery of prop model, our revenue per truck is kill too.

That's why our occupancy information.

Okay.

Thank you.

Yeah.

Thank you and then.

There are no further questions at this time I'd like to turn it back over to our management team for final remarks.

Thank you all for joining US today, if you have any further questions. Please not to talk about that thank you bye.

Thank you. This concludes today's conference call and thank you all for attending today's presentation. You may now disconnect your lines.

Yeah.