Q2 2021 Cheetah Mobile Inc Earnings Call

Good day and welcome to the Cheetah mobile second quarter 2021 conference call.

All participants will be in listen only mode.

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

Please note this event is being recorded.

I'd now like to turn the conference over to Cheryl Dang Investor Relations Director of Cheetah Mobile. Please go ahead ma'am.

Thank you and you're welcome to Cheetah Mobiles second quarter 10, P Times Q1 earnings conference call with US today are Mr. Sheng Fu Chairman and CEO and Mr. Tomas Young CFO following management's prepared remarks, we will conduct the Q&A session.

Before we begin I refer you to the Safe Harbor statement in our earnings release, which also applies to our conference call today as we will make forward looking statements at this time I would now like to turn the conference call over to our CEO. Mr. Shao. Please go ahead.

Thank you Sheri.

Hello, everyone in the second quarter of 2021 <expletive> I'm almost revenue.

Yeah, I mean be RMB 200 top media, which is the leasing our Peru, Colombia was guidance.

Is it worth mentioning.

Is that it is for the first time in the past 10 quarters.

Real nice quarter over quarter revenue growth.

For our Internet business.

Our membership maintained strong momentum in both membership member and their revenue.

We are happy to see increased easy revenue Europe.

And your age and the more and the more member has it being choosy three months six months and even longer time.

Membership.

This shows our member members are satisfied with our superior it.

Spirit with the dealer.

The second.

Second I don't mind heightened modal has been successfully transformed toward Europe diversified model.

We have hired them cloud subscription.

We stick to this strategy to expand the size of our membership business.

In addition, our mobile on mobile platform, we have been developing and launching new products to attract more high value young users.

These products had to efficiently increase user time and broach in revenue for the company in general.

So in the past in past two years, we spear is huge.

External challenges.

We have efficiently reshaped, our internet business into right direction, how do you see this quarter we have resumed.

The sequential quarterly revenue growth.

Besides resume domestically Internet business. We just mentioned we also have two service to.

You Tonight.

Oh, Oh, what's the Oh is this experience in the resource the resource to empower Chinese company to develop business outside China.

So like I.

I'd say, it's just domestic companies to launch advertisement.

Large overseas advertising platform.

The other stuff so is pretty wide I integrate cloud of catapult, but enterprise.

Cause seamlessly.

<unk> auto niche.

Oh Tonight through my multi cloud platform at a low cost.

With our service company can improve operation and save costs. We expect these two business where take off the second second half over 2021.

Well, our AI business, we have made good progress with it.

Business modal of shopping mall coupon saving robots.

We created a brand new insights shopping more multimodal too.

<unk> customers.

Well my Chase and I have got.

Early positive feedback so far although robot C more than 1000, new kinds of coupons for more than 1000.

Merchandize in nearly 40 cities all over the country.

With average Jimmy you had increased the consequent consequently, oh sorry.

Please contact him.

11 <unk>.

Weeks without compounded growth growth rates of about 20%.

We plan to deepen our focus on high quality shop Tomorrow.

The matches.

In this model.

Yes.

Can I check capture.

Turning to customer.

Customers can get a good benefit in a way kind of I'd shape. Since then so it's kind of growth.

This is a real much march's being situation.

Lastly, I would like to mention that there is a great great effort to companies.

Operational if in fact, you would say.

Patient C has been significantly improved in past quarter say, the gross margin has been increasing and that non-GAAP operating loss has been idled.

We will keep working to get the best outcome.

It's a very reasonable input.

As of June 30th 2021, our cash position was around the U S. Dollar 259 medium and the long term.

You're correct you investment was about Europe U S dollar 374 million.

Bound and cash pay enabled so really of our internet business as well as the rapid development of our AI and other business, where our confidence in the second half of 2021.

We will get out difficult.

But they should treat all around gorilla.

In our business with that I will now turn the call to our CFO Tomas has yet to go through details of our fourth.

I think Scott second cloud her financial results.

Thank you for them and Hello, everybody. Thank.

Thank you all for joining US today now I will walk you through our key financial highlights.

Please note that unless stated otherwise oh money amounts are in RMB terms.

As Jim just mentioned, we delivered a healthy call occur in the second quarter of 2020 by our total revenues were 212 million representing a year over year decrease.

What do you <unk>, 6% in the quarter over quarter increase of 7%. The revenue was within the range of our previous guidance to explain the reasons behind the changes now let me break down our revenue into Internet and others.

Other sectors.

Revenue from the company's Internet P fees decreased by 46% year over year and increased by 9% quarter over quarter to 204 million in this quarter.

The year over year decrease was due to the company's strategic efforts to diminish the gaming related business in past call here.

In the quarter over quarter increase was mainly from the growth of our membership business and.

The commercialization of several new utility products.

Revenue from others or $8 million in the second quarter of 2025, representing a 15, 9% year over year decrease on that.

27% quarter over quarter decrease there.

The year over year decline was primarily attributable to the drop in sales of consumer facing AI related products.

Her overcalled or decrease was from the expected volatility during the transition of business model.

Although in the last couple of months, we have seen some preliminary success in our business model of shopping more coupon selling rabat fluctuations could happen in the short term as we are still optimizing the business model.

Turning to costs and expenses. The following discussion of results will be on a non-GAAP basis, which excludes stock based compensation expenses. The use of non-GAAP measures. In this context, you will help us to fight represents the result of our operator.

<unk> performance without the effect of noncash items.

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

Our operating loss has been further narrow this consistently improved operational efficiency.

In the second quarter of 2021, our operating loss was $56 million narrowed from 133 million in the same.

Same period of last year, and 58 million in the previous quarter.

Okay.

Cost of revenue decreased by 56% year over year, and 15% quarter over quarter to $50 million in the second quarter of 2020, but the decrease reflects our ongoing efforts to seek treatment on our business and improve the operational efficiency.

Yeah.

Research and development expenses decreased by 58% year over year.

33% quarter over quarter.

$47 million in the second quarter of 2020.

The decrease was due to the deconsolidation of certain gaming Pcs in past quarters.

At the same time the technologies to support our current AIP as these have been relatively well developed so comparing this quarters the investment in AI related R&D was lower this quarter.

Selling and marketing expenses decreased by 41% year over year and increased by 52% quarter over quarter.

Two $121 million in our second quarter 2025.

This year over year decrease.

What's attributable to the streamlining of our cities and our strategic cost cutting now quarter over quarter increase was mostly from the promotion of our new utility products.

General and administrative expenses decreased by 47% year over year and increased by 6% quarter over quarter to 52 million second quarter of 2021.

The year over year decrease was mainly due to the streamlining of our business and our effective expense control, while the quarter over quarter increase was caught.

By a one time reversal of share based compensation expenses due to the features in the first quarter of 'twenty forgive us.

Now, let me turn to our balance sheet.

As of June 32030, but we had cash cash equivalents restricted cash and short term investments.

U S dollar $259 million.

And long term equity investments off the U S dollar 374 million.

<unk> maintained a strong balance sheet as always this makes it possible for us to invest across our core business to support our long term growth plan.

And for our third quarter revenue guidance. We currently expect total revenues to be between RMB $180 million.

And $230 million.

Please note this forecast reflects our current and preliminary view and is.

Subject to change.

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

We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad.

If youre using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two.

When asking a question. Please state your question in Chinese first then repeat your question in English for the convenience of everyone on the call.

At this time, we will pause momentarily to assemble our roster.

And our first question will come from melody Chen of Jefferies. Please go ahead.

Yeah.

Oh, Wow well would be helpful. Thank you Walt myself, Oh, Yeah, Oh, that's a one time Oh.

Yes.

Hey, Sheila Yeah, yeah.

How about yourself.

I think that no matter what my thoughts are sometimes off on me I saw that he got his friendship.

Oh, Oh Oh.

And that's why that is.

Thanks for taking my question I have two questions. The first one is on the Oh, I think that Oh, well and the second one is about our AI.

Paying more well, Bob Smith, I can management share a bit more on that.

Okay. Thank you.

Yeah.

Thank you Mallory for your question. So I will answer your first question.

Regarding the advertising industry, and I think for somebody or I'm sorry. Your second question regarding the <unk> business so for the.

Industry recently killed tool as we all know there were some even though no COVID-19 cases.

In several cities across China. So therefore, you can see some negative impact on advertising for travel and transportation.

And also because of.

The recent regulation.

K 12 education, so we can see that.

Although the education industry is gradually starting out of the market.

However, we still see industry.

Active such as Internet service consumer goes cars and so on.

And for US as we mentioned we are we have been transforming our single advertising business model to a dime.

<unk> diversified business model of both advertising and the subscription. So currently we can for some of our utility products that you can see.

More than half of our daily.

Cash revenue received this.

From membership are.

User subscription so and also as we mentioned the renewal rate is up and more and more members are choosing longer term membership. So this will be our.

Continuing.

Strategy in the long run.

And at the same time you also mentioned that we also launched some new utility products for this product revenue.

Mostly from the user paying models.

Hope this answers your first question.

David I hope when the shoemaker by AI teacher Huh.

To go see the agenda take up more so a woman.

<unk>.

Are you like Azure and should I'll, just use that shelf how need Congress kitchen, okay cool. Okay. So <unk> could you go into some window existing hydro shampoo since you're the fool well Michelle Qi.

Uh huh.

You couldn't go shoot sourcing or shutting in Washington.

Okay, Let me translate this part so.

Based on our recent exploration.

Yeah.

<unk>.

We realize that are in the shopping mall.

Sure.

B, our robots can provide that.

To the customers about the.

Like in.

Inquiries about the location and also the information about the local merchants.

We think there is a great chance we can.

We can.

To.

Very successful business model on the shopping mall.

Yeah.

Yeah, you may see that says.

Some kind of annual guidance.

So of course, using azure put on it from China.

Yeah.

The local traffic in the shopping malls are increasing.

In recent years.

Now, let's see the sometimes you have usually a time.

Can do it again put a little juice she does cause a penchant publish a whole.

I was unable to sushi chef how you got that.

Okay. So what she does shop.

Yeah and the.

The size of the local sharp and more it's becoming a bigger and bigger so it will be difficult for a customer when entering the the shop floor there.

Its lack of China too often merchant information.

And David I'm, a woman or somehow would you shouldn't take that say hey, take a sound houses on cloud cyber Clenching Shah.

Go check on P. J O J B, just how does one vendor for shadow, who couldn't uncle has showed a dodgy or somehow the team pushing chi.

Our robots in the shopping malls.

Especially at the noisy environment in the shopping malls.

Our robots can provide.

Good voice interaction with our customers so that they can quickly obtain a merchant's information.

This shopping mall.

It's a bunch of households.

All teachers.

This also helped the shopping more to improve service quality.

Oh, sorry shall I say don't push chassis Shan Shan Shan.

<unk> ZIP code, the Shanghai intelligence or somehow as you can see there's a whole meal created a preacher you shouldn't see the Shanghai shampoo the youll creature.

But a customer inquiry.

Information regarding our.

Certain merchants, but you can also.

We commend the.

Some coupons for the merchant he is asking.

They say Oh wait T shirt somehow needed because again for the locum daughter and deals.

This can bring a more attracted to the local.

Local merchants in the shopping mall.

No.

Youll see the Samsung in the uptake.

Take your time.

Yeah. This is no TV solution for the three parties I E.

Nothing more than a merchant.

And our customers.

Okay.

Just wondered pseudology handoff endorses IDM, who hold corroded homeboy Ishares is a battle for the option I calculate it really at all our movies ADM put chipotle either see the can.

Hi, so the Yoshida for the Drillships are local.

Yesterday engine does somebody industrial with that.

Yeah.

Yeah as we all know.

No.

Local merchants nowadays they are their user acquisition is mostly from the internet.

Internet platforms and the cost base.

Becoming a more.

Heavier for the local merchants so.

The COVID-19 provide.

Quick channel for the merchants to often local traffic.

So you take it all will need you can say I can especially the tungsten how will you change as our pool. So Matt is how will you change limitation, Chad I actually I'd say the main may tender there still made out using Susanna she's ordered some time too so for quite some time.

Transaction sale.

So far our robots are selling more than.

Southern kind of coupons com all of them.

Merchants in nearly 40 cities all over the country.

Weekly average CMV has increased la carte effective 11 weeks. These are kung fu compounded growth rate of about 20%.

Well, what I'm really thinking more seriously.

So she's done some pension and cold symptoms as all of you.

<unk>, Shanghai, Shanghai to say on the ERP.

It's an unfortunate teva.

Yeah. We believe this kind of this kind of business model.

Can be kind of an increase or a girl.

And also you can create.

Service platform based on the shopping more.

Environment.

Uh Huh Tyler County here.

So that's our answer something about by your second question. Thank you.

Okay.

Okay.

Okay.

As there are no further questions at this time I'd like to hand, the conference back over to the management team for closing remarks.

Thank you Andrea Thank you all for joining US today, if you have any further questions. Please don't hesitate to contact us. Thank you.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

Okay.

Okay.

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