Q3 2021 Cheetah Mobile Inc Earnings Call

Good day and welcome to the Cheetah Mobile third 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 would now like to turn the conference over to Charles song Investor Relations Director of Cheetah mobile.

Go ahead ma'am.

Thank you operator, welcome to Cheetah Mobile's third quarter 2021 earnings conference call with US today are Mr. Sheng Fu Chairman and the CEO and Mr. Thomas Yes C. F O. 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 will also apply 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. Shang pool, just go ahead with them.

Sure Hello, everybody and just set of quarter of 2000 and Joanne.

With our progress guidance Cheetah mobile is the revenue.

D J.

96 media.

Our Internet business, we continue to transform our business from single antibody titer modal but hubertus.

The worst nights modal.

But the way it hides impart subscription it's a number of our members keep it to Apple.

Net revenue from our membership business.

Increased for more than five quarters consecutively.

Oh, you say platform.

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Yeah.

Well it turns out.

Our service and our membership privilege.

Yeah overall members such as <unk>.

So despite a fiction.

States are higher lower.

Oh, a mobile platform, we improved the user experience through protons.

Optimizing optimization and a more vigilant when do you need the service.

As a person present page of our paying users as a way of advertising.

And your reach both increased in general.

Huge no challenges.

Challenges, our ease of neat Internet business has it been snack foods, a great check absolutely page.

However, now globally advertising is facing some uncertainty in China sectors, such as education very stage childbirth.

Has slowed due to Covid COVID-19.

Yeah.

Supervision and.

Regulation and.

As I read this.

Has it been costs.

Onto advertising business.

Company, including Baidu and Tencent.

Not very.

But to me.

Mystic.

About it's about pricing in the coming quarters.

Outlook for the first quarter.

So it reflects this back a few factors.

Oh, I see elevated advertising business of big companies, such as Facebook also faced headwinds from Chi Tsang change of Io.

14.

MACRA MACRA MACRA.

Okay.

The economy and the.

Kobe degree relate to you the factors.

Our overseas advertising agency business is.

And that would inevitably either way.

The modestly affected.

And this might be might be quoting in package. This also has it been.

Factored in our fourth quarter guidance.

Good news is the revenues from our global Cloud service has it been there already in bedroom layout due to expanding service categories and the client base in this quarter and the price reached try tweaks to overseas markets and the real demand for this service we are very.

Oh mystique about about this future growth.

Well, our AI business, Jeremy and their revenue from shopping more coupon savings robots has been up for several months.

No.

We have tried both offline and online marketing.

<unk> Star teachers.

Jackie just police bench.

Business offline, we have brought in more than 10000 robots and more than 40 cities like we use our oh, we try to mini programs try and do a dog.

Some other co network community as well as some Mays James third party platforms.

Customers can be just.

Great Richard.

Can also use <unk> professional platform could reveal that paid out over there a coupon sale and analyzed.

Currently our robot sale more than.

<unk> hundred 5000 patents of coupons.

For more than 1000 by chance in more then.

700 is choppy mall.

The country at the end of October Jim, We put Nate and its a big cash has achieved another milestone.

But this business we have gradually thet competition batteries. It has been widely welcomed by more and more matches and our customers.

Generally speaking revenue from our new business such as the membership business, It's a global cloud service business and the shopping mall cop coupon saving robots business, but he believed.

While our revenues from advertising related business faced some challenges in the coming quarter for costs and expand our operational efficiency has has been greatly improved in the posture in past quarters.

Founded Liberty continued.

Jake Concho Street Street, Concho, well costs in the U S.

To maximize our operational in fashion.

In fact, you can see and there's a interest of our shareholders additional adult for September.

30th 2021, our cash position was around USD 200 or 208.

A T H medium and the long term equity investments was about U S. Dollar at 376 medium.

By the time, a cold rig.

We source.

Nishu asked to folks on our stated strategies and the gorilla.

So stay.

They too late.

With that I will now turn the call to our CFO Thomas a guy who goes through the detail of our therapy. So to put her financial results. Thank.

Thank you Shaun and Hello, everybody. Thank you for granting US today no IV will walk you through our key financial highlights.

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

A chunk just mentioned.

It's called her of 'twenty 'twenty by our total revenues or 196 million, representing a year over year decrease of 46% and a quarter over quarter decrease of 7% the revenue what's been seen with the rich of our previous guidance.

To explain the reasons behind the changes no let me breakdown our revenues into Internet.

And in other sectors.

As a result of the company's ongoing piece is streamlining efforts, we realigned our business segments based on the change of debates at the Amendment the company segment performance.

Overseas advertising agency services, which this company to launch the attachment of overseas advertising flight firms have changed from the Internet It is into AI and others.

As our synergies created between the company's advertising agency services and below bulk class services. Consequently, the company has as Rachel actively revised segment information and the related revenue presentation on call the change in the companies segments.

Revenues from the company's Internet E.

<unk>.

51% year over year.

And the 16% alter who want a culture to $161 million in this quarter.

The year over year decrease was due to the company's strategic efforts to diminish the payment related pieces.

Cultures.

Alternately increase was mainly because revenue in the second quarter of 2021 was temporarily increased due to <unk> 18.

Emotional events and no such promotional event occurred in this quarter.

Revenues from AI and others.

As the reclassification of segment from this quarter. This segment now includes our shopping more coupon selling business overseas or the most housing agency Pcs global clock is under some other business.

Revenues from this segment was 36 million in the third quarter of 2021.

Representing a 9% year over year decrease.

Ah 63% quarter over quarter increase.

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

The quarter over quarter increase was from our global cloud services as well as shopping more coupon selling robust species.

Turning to costs and expenses.

The following discussion of results there will be on a non-GAAP basis, which excludes stock based compensation expenses.

The use of non-GAAP measures in this context.

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.

Okay.

Our operating loss was.

15 9 million in the third.

Third quarter of <unk> 25, compared with 119 million in the same period of last year.

And 56 million in the previous quarter.

Oh Wow.

Adjusted EBITA was negative $38 million in the third quarter of 2020.

Compared with negative 101 6 million.

Same period last year, a negative $47 7 million in the previous quarter.

Cost of revenues decreased by 34% year over year, and increased 48% quarter over quarter to $74 million in the third quarter upfront you're talking about.

The year over year decrease was primarily due to the decreased revenue.

Her over called her inquiries was from input ending over AI related business.

Research and development expenses decreased.

At 54% year over year and increased by 11% quarter over quarter.

52 million in the third quarter of turnkey piggyback.

The decrease was due to the deconsolidation of certain gaming related pythias.

In past quarters.

Our investment in research and development has been keeping flat quarter over quarter change was mainly due to less government grants in this quarter.

Selling and marketing expenses decreased by 49% year over year, and 30% quarter over quarter.

85 million in the third quarter of 2025.

This year over year decrease was attributable to the streamlining of our business.

The strategic reduction of our costs well.

Well the quarter over quarter decrease was mostly the cost we incurred incremental promotion expenses for the June 18th promotional events in the second court.

General and.

Dominik <unk> expenses decreased.

46% year over year, and 7% quarter over quarter.

248 million in the third quarter 2021.

The decrease was mainly due to the streamlining of our business and our effective expense control.

Now, let me turn to our balance sheet.

As of September 32021.

We had cash and cash equivalents restricted cash and short term investments.

U S dollar $288 million and long term equity investments of the U S dollar 300 and.

76 million.

This strong balance sheet ensures path to follow our long term development plans and achieve our strategic goals.

And for our fourth quarter revenue guidance.

We currently expect total revenues to be between.

100, under 30 million and 180 million.

Jim just mentioned our guidance.

As reflected on.

Certainty, we faced in the fourth quarter due to the headwinds in global advertising business.

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

This concludes our prepared remarks, operator, we are now ready to take questions.

Okay.

Thank you.

Well now begin the question and answer session.

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

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

My question has already been addressed and you'd like to remove yourself from queue. Please press Star then two.

When asking a question. Please state your question in Chinese first then.

Peter a question in English version of opinions of everyone on the call.

Remember as we poll for questions.

And today's first question comes from multi journey of Jefferies. Please go ahead.

Okay.

Okay.

That's helpful.

The one bcf.

Uh huh.

Yes.

Hi.

Uh huh.

Hello, Josh.

Oh, Oh Oh.

Uh huh.

Oh.

<unk>.

Hum.

Sure.

Yeah.

The woman.

Hi.

Yeah.

Thank you Mel.

Oh Samsung.

Oh sure no problem.

Thank you.

Hum.

Let me translate my question.

My first question.

So how should we think about that.

Okay.

And the macro right.

And also it's a reclamation.

And my second question.

Yeah.

How should we think about that.

Thank you.

Thank you.

Okay.

You didn't tell me now okay. Thank you melody.

To answer your first question.

Mr. Shun deal I'll answer your second question and I will translate for him. So your question I think it's Rick.

Regarding the advertising business.

First firstly.

I would.

Briefly on.

Third the impact our Kobe uncertainty and some also.

Mark of weakness.

Yes, we think COVID-19 uncertainty in the market they can steal a pack.

All of our business.

And we can see now globally under the typing is facing some uncertainty.

In China sectors, such as education travel.

It has slowed down due to COVID-19, and those songs of government supervision recreation. Some other reasons so.

The impact has been passed down through advertising business. So some eager.

Like from companies are not very optimistic about the tightening in the coming quarters.

So our all of our outlook for the fourth quarter also reflect these negative factors in that.

The overseas and the overseas market advertising business as we mentioned.

This loss was a peak tight formed company like Facebook.

From the Xinjiang <unk> 14, Marco economy, and Covid related factors. So our overseas advertising agency business is also adversely affected and this might be.

Impacted.

Multi quarters. This also has been factored in our fourth quarter guidance.

And also for our shopping more coupon selling golf or Pcs.

There were also some negative impact.

Certain cities.

Some shops in these cities are.

Claude or some restaurant stopped it.

It is controllable.

The impact was only in limited arris, so b they didn't see a significant impact on our AR.

Shopping more drawn part in this.

And also I think your question also in Boston.

The regulation impact.

Personal information protection law.

Yeah, we also see.

The strict government supervision and regulation, who the wholesale slowdown the accounting Pcs This has already.

Reflected in some Chinese internet companies financial resource and as we mentioned earlier, we also expect some negative impact on our advertising related species.

For us.

He internally our AR related departments have been starting in following the regulations and law seriously. We also adjusted how we display.

The attachment on our platforms and how we can collect your Thursday information, we come back at some internal.

Restructure to better comply with.

Updated <unk> document regulations.

Wholesale as we mention now we are focusing on new pieces, such as membership shopping more coupon selling.

The global cloud service via our confidence about the growth of this new business. So generally speaking.

About the speculation video strictly comply.

At the same time, we also have made this is strategic strategies to ensure that graph of our overall business.

Hope this answers your question.

The hydrogel somehow whatever it is shallow.

A woman to let's say change in blood.

So you should assume should total our total event. He does he therefore the teacher in one.

One touch and gesture shelf this aging Johnson alert. So does your food you shouldn't do hot she she and win more share.

Somehow needles in challenging Paul for this <expletive>, you said, Danny Chu from Florida Chicago.

Okay.

Let me translate this part so we have deployed over 10000 service drawbacks.

Others are cities across China.

Recently reorganized that all the customers.

He used to.

Talking to the robots in the shopping malls.

That is requiring.

The information of merchants in that shopping more.

The service.

Provided Idaho some workshops.

000 yourself as anything else unless you were assuming in fact, yeah. Okay. So if there's a one little quick.

The change of judicial Michelle's have P. J and she has somehow need Asia, Shanghai, So called Yeah sure.

Okay.

Because the AR.

We found the customer a variety of used to.

No.

Communication communicating with our service drawbacks.

We found that.

Ben.

Customers is asking the location or interaction with our service robarts.

Uh huh.

Yes.

We recommend.

For the customers could be acceptable.

Our home and fashion Seychelles Haneda Sanjaya Ashish is hanging later, Shanghai Tamia Hsiaolin, John that somehow he pohanka Yoko Egencia machines.

Could you.

And Oh, the merchant in the shopping Morris, especially in restaurants.

Also need that.

Two.

Deploy some.

The sudden off their coupons in these shopping more will attract is traffic.

Okay, now I wish all visa pensions I punctuate how to show.

Especially male is a curb naming ceremony. So you finish the whole tie up Lee you may issue.

She shares either 10 glad she chose have put this.

So my assumption.

And then the customers.

All being in the more so.

For most of the patents.

And have a.

Clear targeted restaurant so sometimes.

It might be.

They might go in towards the recommend grass around the cost of the coupons do you recommend.

So you won't give us a sense of Ashish holger peacefully usage I would trend towards watershed sushi.

So combining the three parties.

Moms via promoting the mini program cost trend wardlaw.

Oh, you don't push.

So change outflows showed actual households is how long does the shelves from should the see the.

Uh-huh shelves, who should have cooled a whole chi chow.

Okay.

Choose choose chigger, Jeff will say, a gourmet cheese yogurt check a whole another neupogen, but any chi Chow you'll play.

Uh huh.

And the customers.

Hi.

On the customer interacts with our Robert So firstly they need to register.

Our mini program to become a member of our mini program.

And then the.

Pay to pay the coupons.

Through our program and then they can bring.

Electronic coupons to the restaurant at the merchants who enjoy the discounts.

She is a woman she wishes she I'll take the Fujian John Shan Shan.

And so I'm glad someone they shall Chandos Bush house home Shuda coaching a change out the liquid charger on claims Holman.

Cash on trend, although they're not pushing.

Goodbye.

Promoting our service robots around the shopping wars, we can successfully convert.

The offline traffic.

Into the online traffic our online user base of our.

Mini program.

As usual well it sounds almost sure I wouldn't be ashamed Honda civic Modelo does as well.

Digital anvil down more shabaab.

Claude Shannon Sharpe G Chatillon, Cushing chocolate chill out.

Well I this is model.

We can.

He can.

Apply our advantage of the Internet traffic business model too.

These the offline traffic.

Traffic and user base.

Well I'll tell you a shallow woman side, some good <unk>, Tata, which handles all the Roku channel.

Yeah, we have Bob provided over 5000 coupons in our meaningful breadth.

Well remember when he took them washers El Paso comes out that you may have.

Just as a total initial social central show they can place though.

We believe this business model could be a grower.

Because as you just mentioned it.

A combination of three parties demand.

I would say it should all women the Chico putting them all yet okay.

I talk what should a chunk of them how are you watching taper Chelsea hurtful frontier.

This could also convert our traditional internet business.

From the premiers of pure advertisement model into the consuming and payment.

Yes.

Uh huh.

Procedures.

I will mention that to somebody else's y'all have haynesville there Tony mentioned nice yeah. It's all his home a say a schulman will either selling yes sure there is a lag.

Yeah.

Yeah.

You can know solar and our commissions are selling the coupons this could be.

Another source of our future.

Commercial income.

Okay. So just not available.

Of <unk>, Shanghai, Fuji Shnaika Shyam Moshe.

This is basically a.

Where are shopping more service Robert business model.

Hum.

Yeah.

Hmm partnership.

Melody.

Ladies and gentlemen, as a reminder, if you would like to ask a question. Please press Star then one.

Yeah.

[noise].

And that's where for US there are no further questions at this time I'd like to hand, the conference back to our management for closing remarks.

Thank you operator, and thank you all for joining US today. If you have any questions. Please don't hesitate to contact us. Thank you.

Ladies and gentlemen. This concludes today's conference call. Thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.