Q2 2024 Cheetah Mobile Inc Earnings Call

Unknown Executive: Good day, and welcome to the Cheetah Mobile Facking Quarter 2024 earning conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the Starkey followed by zero.

Good day and welcome to the Cheetah Mobile second quarter 2024 earnings Conference call.

All participants will be in a listen only mode.

Speaker Change: Should you need assistance. Please signal a conference specialist by pressing the star keys, followed by zero.

Unknown Executive: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press stars and one on your touchtone phone. Please note, this event is being recorded.

Speaker Change: After todays presentation, there will be an opportunity to ask questions.

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

Speaker Change: Please note this event is being recorded.

Helen Zhu: I would now like to turn the conference over to Helen Zhu. Please go ahead. Before we begin, I refer you to the State of Habersamen, your earnings release, which also applies to our conference call today, as we will make forward-looking statements.

Speaker Change: I would now like to turn the conference over to Helen Xu. Please go ahead.

Speaker Change: Thank you operator, welcome to Cheetah Mobiles second quarter 2024 earnings conference call with US today, our company's chairman and CEO, Mr. Fu Sheng and he was a director and CFO Mr. Thomas Kim following managements prepared remarks, well conduct a Q&A session. Please note that the.

Speaker Change: <unk> Creek will be presented by AI agent before we begin I refer you to the Safe Harbor statements in our earnings release, which also applies to our conference call today as we will make forward looking statements at this time well now.

Unknown Executive: At this time, we will now lack the AIA agent to speak up the household or CEO and chairman to show. Thank you for joining us today. We choose to our total revenue accelerated with a year-over-year growth of 12.3%. AIA, another account of about 40% of our total revenue. This growth was primarily driven by the sales of our real service robotics in both domestic and international markets, showing our progress in becoming an enterprise facing companies. The acquisition of Beijing or Reinstar has made service robotics a key pillar for Cheetah Mobile. Contributing to a solid revenue growth, our service robots hold a dominant position in voice-based use cases and are widely used in exhibition centers, museums, corporate receptions, and other areas.

Speaker Change: Yeah, and just to speak on behalf of our CEO and chairman from Shaw.

Speaker Change: Okay.

Speaker Change: Thank you for joining us today.

And true to our total revenue accelerated with a year over year growth of 12, 3%.

Speaker Change: And others accounted for about 40% of our total revenue.

Speaker Change: This growth was primarily driven by the sales of our wheel service robotics, and both domestic and international markets.

Speaker Change: Our progress in becoming an enterprise facing company.

Speaker Change: The acquisition of occasional Ryan Star has made service robotics, a key pillar for Cheetah mobile.

Speaker Change: Revealing show solid revenue growth.

Speaker Change: Our service robots hold a dominant position invoice base to use cases and are widely used in exhibition centers museums corporate receptions and other areas.

Unknown Executive: Moreover, our delivery service robot ranks among the top three in restaurants and continues to gain market share from competitors. Customers choose us because of our best product experience and have to sell services. The strong core AI capabilities, including far-field voice recognition, our robots have benefited from LLN. Being able to better understand end-to-end customers, inquiries, and smartly respond to their requests versus previously. Customers can easily tailor-make apps within our robots, thanks to our strong software abilities that support customization.

Speaker Change: Moreover, our delivery service robot ranks among the top three in restaurants and continues to gain market share from competitors.

Speaker Change: Customers choose us because of our best product experience and after sales services.

Speaker Change: The strong core AI capabilities.

Speaker Change: Adding far field voice recognition.

Speaker Change: Robots have innovated strong L. L M <unk>.

Speaker Change: Being able to better understand and in customers' inquiries and smartly respond to their requests versus previously.

Speaker Change: <unk> can easily tailor make ups within our robust thanks to our strong software ability about support customization.

Unknown Executive: To further expand the revenue growth of our real service robotics business, we are focusing on two key strategies. Firstly, we enter broadened the use cases of our service robots to continue its product innovations with a focus on our core competencies, including voice interaction, capabilities, and enabling autonomous deliveries. For instance, in the factories and fulfillment centers, we have recently introduced robots designed for autonomous delivery for relatively low payloads. We offer subreddit performance and pricing for customers in both China and overseas. With a focus on providing the most reliable robots in the market, when you already started shipping robots to South Korea and have received the oldest from customers in Japan and Southern Europe.

Speaker Change: Further expand the revenue growth of our wheel service robotics business.

Speaker Change: We are focusing on two key strategies.

Speaker Change: Firstly, we aim to broaden the use cases of our service robots through continuous product innovations.

Speaker Change: With a focus on our core competencies.

Speaker Change: <unk> voice interaction capabilities, and enabling autonomous delivery points.

Speaker Change: For instance.

In the factories and fulfillment centers.

Speaker Change: We have recently introduced robots designed for autonomous delivery for relatively low payloads.

Speaker Change: I'll pass over to its performance and pricing for our customers in both China and overseas with a focus on providing the most reliable robots in the market.

Speaker Change: Well you already started shipping robots to South Korea and have received orders from customers in Japan in Southern Europe in the hotel industry, Our service robots are making progress.

Unknown Executive: In the hotel industry, our service robots are making progress. Hotel is a probably news case for real-to-service robots that we are gaining market to share from existing players. We are also further, again, our robots for the hotel industry to increase our competitiveness. In supermarkets, our service robots have successfully facilitated the sale of low ticket price products by identifying potential buyers, for actively approaching them, providing comprehensive product introduction, and clearly responding to consumer inquiries. Following our collaboration with Sean Wade to sell car sausages in supermarkets, we are now expanding into more local stores and supermarkets.

Speaker Change: So probably use case four wheel to service Rollouts that we are gaining market share from existing players we.

Speaker Change: We are also further okay, and our robots for the hotel industry to increase our competitiveness.

Speaker Change: In supermarkets.

Speaker Change: Our service robots have successfully facilitated the sale of low ticket price products by identifying potential buyers.

Speaker Change: Proactively approaching them, providing comprehensive product introduction.

Speaker Change: And clearly responding to consumer inquiries.

Speaker Change: Following our collaboration with Shockwave to sell cards sausages in supermarket.

Speaker Change: We are now expanding into more local stores and supermarkets.

Unknown Executive: Secondly, we are expanding our service robotics business globally, with overseas revenue already surpassing domestic revenue. Following our success in South Korea and Japan, we are actively building our presence in Southern Europe, Southeast Asia, North America, and Australia, particularly in use cases such as restaurants, factories, and fulfillment centers. Tiny to electronic products have demonstrated their ability to compute globally, and with Cheetah Mobile's extensive experience in international operations, we are confident in our potential to succeed in these overseas markets. We believe that the service robotic industry offers one of the largest market opportunities for AI commercialization. LLM's and generative AI serve as brains for robots, and hands in machine intelligence and accelerating their commercial deployment at scale.

Speaker Change: Secondly, we are expanding our service robotics business globally.

Speaker Change: With overseas revenue already surpassing domestic revenue.

Speaker Change: Following our success at South Korea, and Japan.

Speaker Change: We're actively building our presence in southern Europe, So assistance Asia, North America and Australia.

Speaker Change: Actually in use cases, such as restaurants, five trees and fulfillment centers Chinese.

Speaker Change: Chinese electronic products have demonstrated their ability to compete globally.

Speaker Change: Cheetah mobile has extensive experience in international operations.

Speaker Change: Our confidence in our potential to succeed in these overseas markets.

Speaker Change: We believe that the service robotics industry offers one of the largest market opportunities for AI commercialization.

Speaker Change: L L M and generative a I serve as breakthroughs for robots.

Operator: All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the Starkey followed by zero.

Speaker Change: And has the machine intelligence in accelerating their commercial deployment at scale. However, this industry is still early and will take time to unlock its full potential.

Unknown Executive: However, this industry is still early and will take time to unlock its full potential. Cheetah Mobile is working hard to make service robots more affordable for enterprises across a growing number of years cases, enabling them to reduce labor costs through the use of our robots. We focus on real service robots because we believe they offer the best balance between performance and cost at this stage, making them vocal solutions as the only robotic company in China to have trained in LLM from scratch. And it's LLM approved by local authorities for a larger scale robot. We use the LLM to power our robots, focusing on hardware software, syncing, do serving customers in various use cases.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press stars and one on your touchtone phone. Please note, this event is being recorded.

Mobile: Mobile is working hard to make service robust more affordable for enterprises across a growing number of use cases.

Mobile: Enabling them to reduce labor costs through the use of our robots.

Helen Zhu: I would now like to turn the conference over to Helen Zhu. Please go ahead.

Mobile: We focus on wheels service robots, because we believe they also the best balance between performance and cost at this stage 19 Osaka solutions.

Speaker Change: The only other robotics company in China that you have training L. L M from scratch and it's L. L. M approved by local authorities for a larger scale rollout.

Speaker Change: He views Liao and to power our robots focusing on hardware soft twisting gene.

Helen Zhu: Before we begin, I refer you to the State of Habersamen, your earnings release, which also applies to our conference call today, as we will make forward-looking statements.

Speaker Change: Serving customers in various use cases.

Unknown Executive: We have notably enhanced our voiced based capabilities, in particular for reception-related use cases. And we will continue to use data generated by our robots to enhance our LLM and product experience, creating a positive feedback loop. This approach should allow us to deliver the S products for price and performance in the global market. At the same time, we remain committed to product innovation, lowest driving to balance performance with cost effectiveness during the last earnings call. We discussed how we are helping enterprises build LLM-based applications. Applications are key to making LLMs useful in enterprises. This is because LLM need industry-specific or company-specific knowledge to avoid errors and effectively address enterprise challenges.

Speaker Change: We haven't notably enhance our voice based capabilities.

In particular for assertion related use cases.

Unknown Executive: At this time, we will now lack the AIA agent to speak up the household or CEO and chairman to show.

And we will continue to use data generated by our robots to enhanced R. L M and product experience, creating a positive feedback loop.

Unknown Executive: Thank you for joining us today. We choose to our total revenue accelerated with a year-over-year growth of 12.3%. AIA, another account of about 40% of our total revenue. This growth was primarily driven by the sales of our real service robotics in both domestic and international markets, showing our progress in becoming an enterprise facing companies. The acquisition of Beijing or Reinstar has made service robotics a key pillar for Cheetah Mobile. Contributing to a solid revenue growth, our service robots hold a dominant position in voice-based use cases and are widely used in exhibition centers, museums, corporate receptions, and other areas.

Speaker Change: This approach should allow us to deliver the best products for price and performance in the global market.

Speaker Change: In time, we remained committed to product innovation.

Speaker Change: Always striving to balance performance, so its cost effectiveness.

Speaker Change: The last earnings call.

Speaker Change: We discussed how we are helping enterprises L M based applications.

Speaker Change: Vacations are key to making L M useful in enterprises.

Speaker Change: Because L. L M need industry specific or company specific knowledge to avoid errors and effectively address enterprise challenges cheetah.

Unknown Executive: Tidomoba is developing GNI applications for enterprises. We are encouraging our employees to create GNI tools or apps to improve work efficiency. At the same time, we are working closely with key accounts, helping them develop GNI apps to streamline the data operations. A goal is to identify cases which generally I can enhance efficiency and then standardize tools and features that can be scaled to other companies. For example, Savings Note and LM based cloud management app, both enterprises monitor and optimize cloud usage across platforms. After successfully using it at Cheetah to reduce costs, we've begun offering it to enterprise clients.

Speaker Change: Sito mobile just developing July applications by enterprises.

Speaker Change: We're encouraging our employees to create Jan I choose all apps to improve work efficiency.

Unknown Executive: Moreover, our delivery service robot ranks among the top three in restaurants and continues to gain market share from competitors. Customers choose us because of our best product experience and have to sell services. The strong core AI capabilities, including far-field voice recognition, our robots have benefited from LLN. Being able to better understand end-to-end customers, inquiries, and smartly respond to their requests versus previously. Customers can easily tailor-make apps within our robots, thanks to our strong software abilities that support customization.

Speaker Change: At the same time.

Speaker Change: We are working closely with key accounts.

Speaker Change: Helping them develop John I ask to streamline their daily operations.

Speaker Change: Our goal is to identify cases with general I can't enhance efficiency.

Speaker Change: And then the standardized tools and features that can be scaled to other companies.

Speaker Change: For example savings.

Speaker Change: Savings no.

Speaker Change: And L M based cloud management at.

Speaker Change: Oh enterprises monitor and optimize cloud usage across platforms.

Unknown Executive: To further expand the revenue growth of our real service robotics business, we are focusing on two key strategies. Firstly, we enter broadened the use cases of our service robots to continue its product innovations with a focus on our core competencies, including voice interaction, capabilities, and enabling autonomous deliveries. For instance, in the factories and fulfillment centers, we have recently introduced robots designed for autonomous delivery for relatively low payloads. We offer subreddit performance and pricing for customers in both China and overseas. With a focus on providing the most reliable robots in the market, when you already started shipping robots to South Korea and have received the oldest from customers in Japan and Southern Europe.

Speaker Change: After successfully using it a trader to reduce costs.

We have begun to Australia to enterprise clients.

Unknown Executive: Early customer feedback has been positive. We've also helped a major hotel operator in China to develop a Gemini app for a fully training program. Looking ahead, we will continue working closely with key customers following the Geni product we've developed internally to their business operations. This approach will help us further refine our product experience and gradually build the comprehensive product portfolio.

Speaker Change: Early customer feedback has been positive.

Speaker Change: We've also helped a major hotel operator in China develop H M. I a M for employee training programs.

Speaker Change: Looking ahead we.

Speaker Change: We will continue we're working closely with key customers.

Speaker Change: The Gen <unk> product.

Speaker Change: Develop internally to their business operations.

Speaker Change: This approach will help us further refine our product experience and gradually build a comprehensive product portfolio.

Unknown Executive: Before I turn the call over to Thomas for financial highlights, I want to emphasize the following. First, our enterprise businesses, service robots, and LM-based apps each represent a huge market opportunity and are still in the early stages of development. Second, Cheetah Mobile with a gene that has extensive experience on the TC and mobile errors, along with strong AI capabilities, to invest in developing the best products to capture the opportunities we are focused on achieving high quality, long-term growth rather than pursuing short-term gains.

Speaker Change: Before I turn the call over to Thomas for financial highlights.

Speaker Change: Wanted to emphasize the following.

Thomas: First our enterprise businesses service robots and L. M based apps each represent a huge market opportunity and are still in the early stages of development.

Unknown Executive: In the hotel industry, our service robots are making progress. Hotel is a probably news case for real-to-service robots that we are gaining market to share from existing players. We are also further, again, our robots for the hotel industry to increase our competitiveness. In supermarkets, our service robots have successfully facilitated the sale of low ticket price products by identifying potential buyers, actively approaching them, providing comprehensive product introduction, and clearly responding to consumer inquiries. Following our collaboration with Sean Wade to sell car sausages in supermarkets, we are now expanding into more local stores and supermarkets.

Speaker Change: Got it.

Speaker Change: She's a mobile with a team that has extensive experience from the PC and mobile areas.

Speaker Change: Along with strong AI capabilities.

Speaker Change: Investing and developing the best products to capture these opportunities we.

Speaker Change: We are focused on achieving high quality long term growth rather than pursuing short term gains.

Fudong: Thank you, Fudong.

Speaker Change: Thank you.

Thomas Chong: Hello, everyone, on the call. Please note that unless stated otherwise, all money amounts are in R&B terms. Cheetah Mobile delivered a solid performance this quarter. In Q2, total revenues ruled by 12% year-over-year, reaching 187 million. NGAP growth profit increased by 11%, coming in at 122 million. Our NGAP growth margin remains stable at 65%, compared to the previous year. Despite our ongoing investment in AI, we successfully reduced our operating losses on a sequential basis. In Q2, our NGAP operating loss increased by about 4 million quarter-over-quarter to 62 million. This improvement reflects our strategic decision to reallocate resources from our lack of the Internet business to our AI initiatives.

Speaker Change: Hello, everyone on the call. Please note that unless stated otherwise.

Speaker Change: Any amounts are in RMB terms.

Speaker Change: Cheetah mobile delivered a solid performance this quarter in Q2 total revenue grew by 12% year over year, reaching 108 seven.

Unknown Executive: Secondly, we are expanding our service robotics business globally, with overseas revenue already surpassing domestic revenue. Following our success in South Korea and Japan, we are actively building our presence in Southern Europe, Southeast Asia, North America, and Australia, particularly in use cases such as restaurants, factories, and fulfillment centers. Tiny to electronic products have demonstrated their ability to compute globally, and with Cheetah Mobile's extensive experience in international operations, we are confident in our potential to succeed in these overseas markets. We believe that the service robotic industry offers one of the largest market opportunities for AI commercialization. LLM's and generative AI serve as brains for robots, and hands in machine intelligence and accelerating their commercial deployment at scale.

Speaker Change: 7 million.

Speaker Change: non-GAAP gross profit increased 11% coming in at 122 million.

Speaker Change: Our non-GAAP gross margin remained stable at 65% compared to the previous year.

Speaker Change: Despite our ongoing investments in AI, we successfully reduced our operating losses on a sequential basis.

Speaker Change: Q2, our non-GAAP operating loss decreased by about 4 million quarter over quarter.

Speaker Change: 62 minute.

Speaker Change: This improvement reflects our strategic decision to reallocate resources from our legacy Internet business through our AI initiatives.

Thomas Chong: Looking at our Internet business, excluding share-based compensation expense, the operating margin increased to 12.4%, up from 7.9% in the previous quarter and 5.5% in Q2 of the prior year. Drown use from this segment remains relatively flat year-over-year, with a 4% increase quarter-over-quarter. As we have indicated before, the year-over-year increase in operating losses was driven by our investment in AI, following our acquisition of a controlling stake in Beijing. Specifically, these increased losses are attributable to higher headcounts in R&D, sales, and G&A, as well as increased hardware-related costs for our service robots. As of June 30, 2024, we had approximately 870 employees, compared to around 860 in the previous quarter and 730 years ago.

Looking at our Internet business.

Chris: Excluding share based compensation expense the operating margin you can Chris.

Unknown Executive: However, this industry is still early and will take time to unlock its full potential. Cheetah Mobile is working hard to make service robots more affordable for enterprises across a growing number of years cases, enabling them to reduce labor costs through the use of our robots. We focus on real service robots because we believe they offer the best balance between performance and cost at this stage, making them vocal solutions as the only robotic company in China to have trained in LLM from scratch. And it's LLM approved by local authorities for a larger scale robot. We use the LLM to power our robots, focusing on hardware software, syncing, do serving customers in various use cases.

Chris: 12, 24% up from seven 9% in the pre.

<unk> quarter, and five 5% in Q2 of the prior year.

Chris: Revenues from this segment to remain relatively flat year over year, with a 4% increase quarter over quarter.

Chris: As we have indicated before.

Chris: The year over year increase in operating losses was driven by our investments in AI.

Following our acquisition of a controlling stake in Beijing or in stock.

Chris: It's equally this increased losses are attributable to higher headcount.

Speaker Change: R&D sales and C N V I.

Speaker Change: I smell and increased hardware related costs for our service robots.

Unknown Executive: We have notably enhanced our voiced based capabilities, in particular for reception-related use cases. And we will continue to use data generated by our robots to enhance our LLM and product experience, creating a positive feedback loop. This approach should allow us to deliver the S products for price and performance in the global market. At the same time, we remain committed to product innovation, lowest driving to balance performance with cost effectiveness during the last earnings call. We discussed how we are helping enterprises build LLM-based applications. Applications are key to making LLMs useful in enterprises. This is because LLM need industry-specific or company-specific knowledge to avoid errors and effectively address enterprise challenges.

Speaker Change: As of June 30th 'twenty 'twenty, four we had approximately 870 employees.

Speaker Change: Compared to around 860 in the previous quarter.

Speaker Change: 730, a year ago.

Thomas Chong: We are pleased to report that our AI investments are beginning to bear real service robotics business as we merge as a key revenue driver additionally through collaborations with leading companies on their large-language model initiatives. We began valuable industry insights and currently testing our own based applications for enterprise use.

Speaker Change: We are pleased to report that our investments are beginning to bear.

Field service Robotics business has emerged as a key revenue driver. Additionally, through collaborations with leading companies on their lot language model initiatives.

Speaker Change: Skin valuable industry use that and are currently testing our are unsafe applications for enterprise view.

Thomas Chong: One of the broader standout achievements is our cash generation capability. This fact, continuing to incur losses, we generated almost 220 million in cash from operating activities in Q2, highlighting our strong cash management generation capabilities. Finally, our balance sheet remains robot. As of June 30, 2024, we have approximately US dollar 270 million in cash and cash equivalent, along with short-term investment, and about US dollar 119 million in long-term investments. This includes steps in well-known entities such as Meet our source of demand, Meet our AI source.

Speaker Change: One of the called her standoff achievements.

Speaker Change: Our cash generation capability.

Unknown Executive: Tidomoba is developing GNI applications for enterprises. We are encouraging our employees to create GNI tools or apps to improve work efficiency. At the same time, we are working closely with key accounts, helping them develop GNI apps to streamline the data operations. A goal is to identify cases which generally I can enhance efficiency and then standardize tools and features that can be scaled to other companies. For example, Savings Note and LM based cloud management app, both enterprises monitor and optimize cloud usage across platforms. After successfully using it at Cheetah to reduce costs, we've begun offering it to enterprise clients.

Speaker Change: But continuing to incur losses, you generated almost $220 million in cash from operating activities in Q2.

Speaker Change: Highlighting our strong cash management generation capabilities.

Speaker Change: Finally, our balance sheet remains robust.

Speaker Change: All June 30th 'twenty 'twenty, four we held approximately U S dollar $217 million in cash and cash equivalents, along with short term investments.

Speaker Change: And above U S dollar $119 million in long term investments.

Speaker Change: These include stake in well known entities.

Speaker Change: I mean, how philadelphian meet high social.

Unknown Executive: With that, we open the call for questions. Everyone for today's call, many will answer questions in Chinese, and the AI agent will translate management comments into English in another line. Please know that translation is for convenience for resilience in the case of any discrepancies on our management statement in Chinese. Work well.

Speaker Change: Is that.

Speaker Change: Open the call for questions everyone.

Unknown Executive: Early customer feedback has been positive. We've also helped a major hotel operator in China to develop a Gemini app for a fully training program. Looking ahead, we will continue working closely with key customers following the Geni product we've developed internally to their business operations. This approach will help us further refine our product experience and gradually build the comprehensive product portfolio.

Speaker Change: Everyone for todays call.

Speaker Change: Ask your question in Chinese.

Speaker Change: And we're trying to do and managements comments interest English and they never mind. Please know that translation for convenient for her soundly in the <unk>.

Speaker Change: And any each pregnancy Chung our management naming Chinese like Wow. If you are unable to hear the Chinese translation and transferred English will be available on our backside Livingston working day, operator, we are now ready to take questions in China. Thank you.

Unknown Executive: If you are unable to hear the Chinese translation, a transfer to the English will be available on our right side within seven working days. Offer, there we are now ready to take questions in Chinese.

Unknown Executive: Before I turn the call over to Thomas for financial highlights, I want to emphasize the following. First, our enterprise businesses, service robots, and LM-based apps each represent a huge market opportunity and are still in the early stages of development. Second, Cheetah Mobile with a gene that has extensive experience on the TC and mobile errors, along with strong AI capabilities, to invest in developing the best products to capture the opportunities we are focused on achieving high quality, long-term growth rather than pursuing short-term gains.

Unknown Executive: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the key. To withdraw your question, please press star, then two.

Speaker Change: Thank you.

Speaker Change: Now begin the question and answer session.

To ask a question you May press Star then one on you touched on time.

Speaker Change: If you are using a speakerphone please pick up your handset before pressing the key.

Speaker Change: To withdraw your question. Please press Star then two.

Unknown Executive: At this time, we will pause momentarily to assemble our roster. Ladies and gentlemen, please stand by for the English translation of the Q&A session.

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

Speaker Change: Ladies and gentlemen, please standby for the English translation of the Q&A session.

Speaker Change: Yeah.

Thomas Chong: Hello, everyone, on the call. Please note that unless stated otherwise, all money amounts are in R&B terms. Cheetah Mobile delivered a solid performance this quarter. In Q2, total revenues ruled by 12% year-over-year, reaching 187 million. NGAP growth profit increased by 11%, coming in at 122 million. Our NGAP growth margin remains stable at 65%, compared to the previous year. Despite our ongoing investment in AI, we successfully reduced our operating losses on a sequential basis. In Q2, our NGAP operating loss increased by about 4 million quarter-over-quarter to 62 million. This improvement reflects our strategic decision to reallocate resources from our lack of the Internet business to our AI initiatives.

Unknown Executive: You One, my question is about the product forms of robots. Nowadays, humanoid robots and embodied intelligence have been discussed a lot. Many people also define 2024 as the first year of the industrialization of humanoid robots.

Speaker Change: One my question is about the product form that robot.

Speaker Change: Nowadays humanoid robots and embody the intelligence have been discussed a lot. Many people also defined 2024 as the first year of the industrialization of humanoid robot Cheetah focuses more on traditional wheeled robot how.

Unknown Executive: Keeda focuses more on traditional wheeled robots. How do you think about the similarities, differences, and obstacles of the implementation of wheeled robots in humanoid robots in different scenarios? How do you plan the forms of Cheetah's future robot product?

Speaker Change: How do you think about the similarity differences an obstacle self implementation of wheeled robot in humanoid robots in different scenarios.

Thomas Chong: Looking at our Internet business, excluding share-based compensation expense, the operating margin increased to 12.4%, up from 7.9% in the previous quarter and 5.5% in Q2 of the prior year. Drown use from this segment remains relatively flat year-over-year, with a 4% increase quarter-over-quarter. As we have indicated before, the year-over-year increase in operating losses was driven by our investment in AI, following our acquisition of a controlling stake in Beijing at the start. But particularly, these increased losses are attributable to higher headcounts in R&D, sales, and G&A, as well as increased hardware-related costs for our service robots.

Speaker Change: How do you plan the forms of cheetos future robot products.

Thomas Chong: As of June 30, 2024, we had approximately 870 employees compared to around 860 in the 730 years ago.

Thomas Chong: We are pleased to report that our AI investments are beginning to bear. Our real service robotics business has emerged as a key revenue driver additionally. So, collaborations with leading companies on their large language model initiatives begin valuable industry insights, and currently testing our own based applications for enterprise deals.

Thomas Chong: One of the call to stand out achievement is our cash generation capability. This fact, continuing to incur losses, we generated almost 220 million in cash from operating activities in Q2, highlighting our strong cash management and generation capabilities. Finally, our balance sheet remains robot. As of June 30, 2024, we have approximately US dollars 270 million in cash and cash equivalents, along with short-term investments, and about US dollars 119 million in long-term investments. This includes steps in well-known entities such as Meet our source of demand, Meet our AI source.

Operator: With that, we open the call for questions. Everyone for today's call, many will answer questions in Chinese, and the AI agent will translate and manage those comments into English in another line.

Operator: Please note that, a translation for convenience for resoundless in the case of any of its current system, our management statement in Chinese word for well.

Operator: If you are unable to hear, the Chinese translation of translated English will be available on our website within seven working days. Offer there, we are now ready to take questions. In Chinese, thank you. Thank you.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then one, on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the key. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster.

Operator: Ladies and gentlemen, please stand by for the English translation of the Q&A session.

Unknown Executive: One, my question is about the product forms of robots. Nowadays, humanoid robots and embodied intelligence have been discussed a lot. Many people also define 2024 as the first year of the industrialization of humanoid robots.

Unknown Executive: KIDA focuses more on traditional wild robots. How do you think about the similarities, differences, and obstacles of the implementation of wild robots? In humanoid robots, in different scenarios.

Unknown Executive: How do you plan the forms of Cheetah's future robot product?