Q1 2021 Cheetah Mobile Inc Earnings Call
Good day.
Welcome to the Cheetah mobile first quarter 2021 conference call.
All participants will be on listen only mode.
After todays presentation, there will be an opportunity to ask questions.
Please note this event is being recorded.
I would now like to turn the conference over to share zone.
Investor Relations director of Cheetah Mobile. Please go ahead ma'am.
Thank you operator, welcome to Cheetah Mobile, Inc. First quarter 'twenty 'twenty, 1 earnings conference call with US today of Mr. Sheng Fu, our chairman and CEO and Mr. Tomas Yeah, all of the C of O. Following management's prepared remarks, we will conduct a Q&A session.
Cheetah mobile earnings release was distributed earlier and is available on all of IR web site at Www Dot IR, though cheetah mobile don't come the fall. They begin I mean for you to the Safe Harbor statement in our earnings release, which will also applies to this call today as the way it will make.
Certain forward looking statements now I'd like to turn the conference call or 2 of our chairman and the C O. Mr. Schoen for please go ahead total sense.
Oh, sorry, Hello, everyone.
In the fourth quarter of 2021.
Our our appropriate guidance Cheetah mobile was the revenue was about.
On the 200 of the media.
The company has the efficiently improved operating.
Operational efficiency.
As much of a continuous today.
Increased too.
7 T.
Points 1 percentage.
Okay.
Operating loss narrowed to RMB per.
<unk> 7 media and the net income attribute to our shareholder was RMB 76.
Got it.
Our cash flow.
So what day she has it been increasing to about U S dollar.
276 media as of March 30.
The second part.
2010.
Post 2000 of 21.
GAAP and cash.
Cash we saw enable us to keep investing in our copies of the news.
To empower the companys the long term for the tempo for.
The pent up for growth.
For all of our Internet business in this quarter. The company had the beam focused on the dermis the piece I think the high in.
The enhancing memberships the silly.
Our business type of.
Gradually transform the from a single advertisement although it ties the modal.
To date, the alerts that time model of how do I take it.
Zing pop subscription.
Yeah.
Our put back on so it all center on how to the dealer.
Periods of user experience.
On the improve our user.
Fiction.
As a result, we see a continued increase in revenue from our membership of Silly Inc.
Terms of both absolute <unk>.
Number and the percentage of total Internet revenue.
Besides the company has the beam contented day.
Coffee is tend to lag the envelope developing new utility product on mobile platform too.
The increase the use of high and attract more higher value young users.
Despite the huge challenge from the market.
2 of them.
Mike optimized our business model and the pride that our internet of things magnitude to rollout the light.
Net profit for 5.
Conceptually true quota.
For all of our AI business, we have seen some initial a true much in the business model of the show P Mod robot side.
Now we have more of them.
12000 robot you know about 1200 of the shopping more.
In more than 40.
The 40 cities.
Tyler.
The subway as chunky more shown should the.
Saving coupon by all of it.
Robots could efficiently in fact, you day.
<unk> attract new customers to Manhattan.
Much of it now.
Yeah.
Our Q2.
But particularly page.
Because it is a win win situation for both customer and my checks.
<unk> also launched the media based on the shopping mall of robots.
Paul.
Come on the steady modal.
In May we study of the 2 expense hit the business and the housing Rhapsody.
We believe.
Net of weight per well founded the key points to 1 of the pack this business and expect the specs a push in the coming quarters.
Lastly, I would like to emphasize that in spite of.
The extension handle wouldn't loved.
Last year, we have will come sisterly.
I realize the net profit of roughly sorry, net profit and the increase our cash reserves.
From this cannot be achieved without of our.
Cause the mutation and the improved operational efficiency.
In the coming quarter, we will keep the profitable growth of.
Our domestic internet business and at the same kind of our top priority, whereas the D O b the monetization of our shop, you're more of robot business.
The work, which.
Which will create new growth engine for the company.
I will now turn the call to our CFO Tomas again to go through the detail of our pool.
Fourth quarter financial results.
Thank you for them and Hello, everyone. Thank you all for joining us today.
Now I'll walk you through our financial results. Please note that unless stated otherwise all money of month are in RMB terms.
In the fourth quarter of 2021, our total revenue for 198 commodity beechwood the it in our previous guidance.
It represented a year over year decrease of 62% on the quarter.
Quarter over quarter decrease of 25% the year.
Year over year decrease was from the suspension of the company's collaborations with Google Since February 2020, and the company's strategic retrenchment gaming related business and assets last year.
The quarter over quarter decrease was mainly due to the normal seasonal change in the fourth quarter on the decrease of revenues from the company's diminishing mobile gaming business.
Now, let me breakdown the revenue into Internet and AI on others.
The other sectors.
Revenues from the company's Internet business decreased by 62% year over year, and 25% quarter over quarter to 188 million in the fourth quarter of 2020.
Revenues from our Internet the products have been the account for a lot the majority of our total revenue.
All of the changes were mainly due to the same reasons.
David Abbas.
Revenues from AI, and others were $11 million in the quarter, representing a year over year decrease of 66%.
Quarter over quarter of decrease of 24%.
Our AI business is still in a very early stage short term volatility if the season our expectation.
Turning to costs and expenses for the fall.
Following discussion of results the Ob.
On a non-GAAP basis.
Which exclude stock based compensation expense.
The use of non-GAAP measures in this context, the will help us to better present, the results of all of our operating performance.
All of 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, our ongoing streamlining of business is on the Red truck, we have successfully improved our operational efficiency and the narrowed operating losses.
In the fourth quarter of 2021.
Total costs and expenses decreased by 62% year over year kind of turnkey percentage quarter over quarter.
As a result, our operating losses.
$58 million in the quarter compared to 100, and the $41 million in the same period last year.
The $57 million in the previous quarter.
Cost of revenue decreased by 50% year over year on 41% quarter over quarter to 59 million in the fourth quarter of 2021.
The decrease in costs were mainly from disposal of certain overseas utility on the gaming related business on assets.
The highlights for improved operational efficiency.
Research and development expenses decreased by 48% year over year, and the increased by 9% quarter over quarter 2 of $71 million in the first quarter of 2020.
Along with our efforts to streamline our business, we have been keeping investing in R&D in our domestic utility on AI business to optimize our products on the services.
Selling on the marketing expenses decreased by 74% year over year on the 14% quarter on quarter to $80 million in the fourth quarter of 2021.
This decrease was mainly due to more strategic and the disciplined promotional activities.
General and administrative expenses decreased by 44% year over year, and 14% quarter over quarter to $49 million in the first quarter of 2021.
This year over year decrease Shaw.
Shows Val the excellent execution of our call.
Cost optimization strategy.
Now, let me turn to our balance sheet, which remains robust.
As of March 31st 2020, we had cash and cash equivalents the restricted cash on the short term investments.
Of U S dollar $276 million.
And long term average madmen.
The U S dollar $365 million.
Our strong balance sheet enabled us to continue to invest according to our strategy to rejuvenate long term growth for the company.
And for our second quarter revenue guidance. The currently expect total revenues to be between 100 and the $75 million.
And $225 million.
Please note this forecast reflects our current on the preliminary revealed.
It is subject to change.
This concludes our prepared remarks, operator, we are now ready to take questions.
Q.
Thank you we will now begin the question answer session.
To ask a question you May Press Star then 1 on your Touchtone phone.
If you were using the speaker phone please pickup your handset before pressing the keys.
To withdraw your question. Please press Star then 2.
When asking the question. Please state your question in Chinese Spurs the repeat your question in English for the convenience of everyone on the call.
We will pause momentarily to assemble our roster.
And today's first question comes from Vicky Wei at Citi. Please go ahead.
Good evening management. Thanks for taking my question. So on management share of which was the latest industry trends for the business and the Companys strategy.
Should we see a revenue decline due to the decline in social consumer facing the native product.
Thank you Denise I can share them.
1 is how long the somehow cause the additional 1 of 2 line.
Okay. Your chikungunya chunk on the 1 message on this yet.
Any idea of well shouldn't.
Shouldn't that changing the yeah the gene.
Now comes to the target.
In terms of of F. On the on the showrooms and that's true and then they shut down anyway.
The consumer facing the AI from being no social from them. They said you just yet.
The data just kind of on.
Neither of them.
I would see the social which is 2 days about the search out.
Should you sort of assume a fabric.
Fiber to the OSM with Jim and Jim Zynga teams of is on GDS neutrogena and challenges of the niche of scenarios in the body.
For the new Roomba Archie enforcing at all of these shifts either highway the XE the.
Shifting shadow of adoption Shabaab, just sort of crews.
Chris NPR, the ability of the year, which is sort of the HFC the.
Hygiene tons of being born in challenged on to the AI The Asia Sandy.
Okay, Let me translate the first part.
So.
As the or to your question regarding the decrease for our AI to see revenues.
I think.
The Oh no.
The competition.
In the Chinese AI hardware industry is very severe 2 seats of the shortage of yes.
Facing to the customers.
So, especially in the <unk>.
The speaker.
Industry and.
The thing is.
It's difficult to Ah Hi thought true are real.
<unk> Corp at all of our profit and also for US Our company the met some challenge in the overseas market.
The it should be on increased some.
All of our operating.
The losses, so the 2 of them a strategy shift.
To cut down on this.
2 of the busiest but I don't think of <unk> affect the hour.
Our strategy in Aibt.
Dockyard usual emissions at the time the answer any of <unk> to be Glenn Let me a kind of <unk> initiatives, how challenging the features of that price.
The lipsey diagnosis each of them.
Yeah.
Our company's strategy in AI.
On the steel focusing on.
To be business on the oath Obi.
We are seeing tremendous.
The increase in the.
Our market regarding us from service robust the especially after the pandemic.
We're moving kind of the other than the Holly aim of hunting the teeth.
<unk> so it's all of that.
Thank you again see the.
Okay.
Counting just new operations.
So, let's say that in the filing of the slowdown does.
Non-GAAP is on plan.
Yeah.
For the example, because here in the net.
True.
Well I think sunbelt ILEC.
Delivery service or a prolonged the NOLA for it.
For the restaurant.
Now at the delivery of 13 hotels.
Such demand and the increase in AR.
The significantly and also for the whole industry.
Sales volume for such cutting off of our service robots is also increasing Microsoft.
The above those of the idea of pushing home.
The principal attending for TTM <unk>, some cases source social for tooling.
So the types of its assets.
Sure the <unk> 10 billion of about.
Of course should open for U S total.
Total <unk>.
Got it.
Yes.
Alrighty Star button off hour.
In that piece.
The rest are promoting the.
Survey robart for.
Restaurants to deliver of tissue and.
Our railcar.
Alrighty.
<unk>.
On a sale or a need for such kind of service whoever is the January.
The rental per month is a volatile the 100, RMB and because of the tremendous growth for the.
The pop.
Mark.
Gotcha.
That's all day I felt that sort of muscle.
You may be about you know should be of which in constant.
Thank you for the Matsui is Joshua on the <unk> plenty of pushing on a total of 2 under the Tulsa.
The guidance either.
On the initial dilution accounts.
Yes.
We cannot hydrogen as well.
Yes, because cheetah mobile is the.
The single largest shareholder of Dar.
So actually.
Through the cooperation we saw on star and almost all of our investment in this company.
It means the can.
Such kind of cooperation.
On the launch.
In such kind of new.
The scenario.
The woman chances on payer whether its on her body of solar women's I think the hunting for tiny the somehow fuji share needles selling upon.
Cash ability jingle abdominal comes through the hole for majority of the type of Buzz on Morpheus Shippable that's for sure.
Tens of thousands hunting cheetah, particularly.
A quick check on that.
Cash in crop limitations, yet somehow the <unk> media and kind of.
Each of <unk> Youll agenda shell of the issue to work harder.
Hi side most of them in our prepared remarks.
On the pile.
Pilot for the.
The Asian model for our shopping mall robust the hotspot.
Some of my initial achievements for <unk>.
Sure.
Our.
The pilot.
The part.
A couple of years.
Pulled out of that for.
For this model maybe the broadening of advertising is not the best day, but now we realized the.
We cannot sell coupons for the restaurants all of the local merchants in the shopping more through our service Roberts and also to help the merchant to.
Attract new customers on the <unk> see some.
Very good trend in our pilots are shopping more.
Most of the.
The.
As efficiency.
Okay.
All of our service robots ASR.
We kind of see the growth potential.
Okay.
As of <unk>.
Sales of emotional interest.
Well most of that's.
Just out of Baton Josh on non foods.
But the key channel gel for the health of the relation with 14 of the ECS in the Penn Gene the circle on the G samples of that T J, Inc.
I think of that total control of the child on here.
Pending cheating deal kind of malicious from hydro can claw some of the.
Due to the for the CIS.
Zone, pushing shebat dose of GSO.
Yes.
The biggest difference between our model on the traditional.
Screen in the disease.
On the shopping mall is that the.
The actual customers cut in half.
Interaction is an hour.
Robots in the shopping loss on the customer may ask.
Is there any.
Updated restaurant.
The service is robust.
But the.
The coupons.
Very high on this call.
To attract the customers too.
Truly restaurant.
No.
Both of the restaurant on the customers.
The army.
Active for such cutting of models.
I think that's I imagine they sort of lack of again the situation.
So on the I sure for engage the hydrogel will mention that you don't see the.
It's usually the for warranty share, let's say some pension.
Downloads housing kind of somehow kind of.
The sale of parts of that cash flow of Debottleneck or majority of between kind of the.
Both of those on the.
So that's the pressure.
In conclusion, we.
We believe that.
Narrow the speed.
<unk> got the wrong are shopping more.
The very fast growth potential for.
For service for all of Us.
And.
I think the can.
Launch our.
Copies of our initial.
Pallets models too.
More shopping mall.
Hi, guys its out of the health.
Health net and the Thursday.
The question Mickey.
Thank you.
And ladies and gentlemen, as a reminder to asking the question. Please press Star then 1 part.
Our next question comes from all of the Chung with Jefferies. Please go ahead.
Hi management. Thank you for taking my question I have the question, though regarding all of our Internet business.
Given that we have transfer of it from the advertising model true membership subscription model can you share a bit more on our strategy on the subscription business and how should we think about the potential and the growth drive through all of it no or finding the charge offs you. While you got 1 cheaper ship on you want mango excuse me.
I'll make a walk down so a strong EBITDA woman definitely Yan Fu no okay.
Clearly our first line he tried to share woman's I guess on the.
So.
All of them then you got the men's shoes shocked when I found out in the call again, how Joe share make Oh, Gee I thought not just yet.
Hey, just as just the Jenkins from let's say the.
Some goods from good funding the.
To the shelf at the Geneva.
The.
Turns out of handbags.
Jim O'connor for Fame eating cash again for the land.
It's on.
Yeah I saw today I think the.
The poll for the Chinese Internet users.
How big do you think.
Radio trend the users.
Yes.
I would like to pay for the software or certain features of.
Of the softer theirs.
Hey, Don.
She said she the.
And can you share I think the.
So you won't get a whole notion of Bureau, Shaw to the Amgen the <unk> share.
The texture taste alisha agenda for well known theater shows the shares.
She had shown bedroom bath tissue share the CPD affluent agenda, so won't have hands against you from Russia.
So you don't see the total.
So the hurdle from class.
Especially for some key features.
In sum the whole like.
Some security functions on the PC all of ours.
Security protection function or.
On some functions lack of light office features like the PDF conversion on a PDF of view feature.
Because of the.
The growth on yields or the payment is.
The fast.
Okay.
On a changing the mix.
Which of those initiatives.
She says you can you kind of hint that youll kind of the audits of all of that just don't actually hold his own Charles's question most of that play out for this.
They just shifting of more Sheila.
I'll turn the.
The adjusted helped us in the long average.
They were on natural attrition of 1 sort of the deep water ship I'm chairman of the extra day shopping and all of that.
For the shallow ankle franchise from of fulfilled.
Sure.
The tie up also on the vessel.
Good day.
Sure the talent.
P J, but at the top of the power.
Jamie This is true.
Some of.
Those of you sort of things out there.
Can you send the wise I don't see the ASP on the indirect channel by channel.
Pick up on Baltimore share.
So with the monetary Marcelo of hype autonomous easy button does either some of the telecom recession. So we'll either see the agenda to the.
If you do the math you should see the alpha.
For a more shop, which is on that.
Uh huh.
As to the.
The filter I'll look for the industry, we can see now nowadays.
Most of the software has adopted the subscriber subscription model on membership payment model.
And the the.
The market sizes or stopped growing and for us the.
The.
The chart.
Converting our.
The authors on both PC or mobile apps to a payment and users.
In the.
Our PC revenue is also growing.
Contributed by the payment user skull.
And for our key products on PC.
You've talked in general Bob.
The Iris detection software on PC.
It's already existed for lack of 20 years on.
Most of the authors of our thinking they don't like the.
Advertising model.
On the convert the model and also the the great satisfaction by our users for our.
The payment model.
Okay.
Well ill just wait till you see the.
What day of along with that relate to the <unk>, sometimes the association for us.
Yes.
On that the very confident on that.
The comprehends that.
The our internet business revenue.
Ken.
The growth in the next couple of quarters.
Over the past.
That just yourself.
I hope this answers the question balance.
Thank you.
Thank you. Thank you for the detailed answer.
And ladies and gentlemen. This concludes today's question and answer session I would like to turn the conference back over to management for any final remarks.
Thank you all for joining US today, if you have any questions. Please do not hesitate to contact us. Thank you bye.
Thank you.
Today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.