Cheetah Mobile Announces Third Quarter 2021 Unaudited Consolidated Financial Results

BEIJING,Nov. 24,2021 -- Cheetah Mobile Inc. (NYSE: CMCM) ("Cheetah Mobile" or the "Company"),a leading internet company,today announced its unaudited consolidated financial results for the third quarter 2021 ended September 30,2021.

Management Commentary

Mr. Sheng Fu,Cheetah Mobile's Chairman and Chief Executive Officer,stated,"Cheetah Mobile's total revenue in the third quarter of 2021 was RMB196.1 million (USD30.4 million),which is consistent with our previous guidance. In this quarter,we successfully consolidated the gains of transforming our internet business from a single advertising model to a diversified model of advertising plus subscription. The numbers of our membership kept a double-digit growth. Additionally,we are delighted to see that revenues from our membership business have increased for more than 5 quarters consecutively. For our AI business,GMV (Gross Merchandise Volume) and revenues from shopping-mall coupon-selling robots have been up for several months in a row,which again verified this business model. We are highly confident in our business strategies and will achieve our goals step by step."

Mr. Thomas Ren,Cheetah Mobile's Chief Financial Officer,commented,"Despite the sales boom on June 18 in the second quarter,we managed to keep our Non-GAAP operating loss flat at RMB58.5 million (US$9.1 million) in this quarter. This result shows that we have been strictly and effectively controlling expenses to operate efficiently. We ended this quarter with RMB1,853 million (US$288 million) in cash and cash equivalents,restricted cash and short-term investments. The adequate cash balance is critical for us to follow our long-term development plans and achieve our strategic goals."

Third Quarter 2021 Consolidated Financial Results

REVENUES

Total revenues were RMB196.1 million (US$30.4 million) in the third quarter of 2021,representing a decrease of 46.3% year over year and 7.4% quarter over quarter.

As a result of the Company's ongoing business streamlining efforts,the Companyrealigned its segments based on the change of the way that the management assessed the Company's segment performance. The Company's overseas advertising agency services,which assists domestic companies to launch advertisement on overseas advertising platforms,are changed from the Internet business into AI and others due to the synergies created between the Company's advertising agency services and global cloud services. Consequently,the Company has retrospectively revised segment information and related revenue presentation to conform to the change in the Company's segments.

Revenues from the Company's internet businessdecreased by 50.8% year over year and 15.5% quarter over quarter to RMB160.5 million (US$24.9 million) in the third quarter of 2021.The year-over-year decrease was due to the Company's strategic efforts to diminish the game-related business in past quarters. The quarter-over-quarter decrease was mainly because revenue in the second quarter of 2021 was temporarily increased due to June 18 promotional events and no such promotional event occurred in the third quarter of 2021.

Revenues from the AI and others were RMB35.6 million (US$5.5 million) in the third quarter of 2021,representing a 8.8% year-over-year decrease and a 62.8% quarter-over-quarter increase. The year-over-year decline was primarily attributable to the drop in sales of AI-related hardware products. The quarter-over-quarter increase was from our shopping-mall coupon-selling robots business as well as our global cloud services.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues decreased by 34.5% year over year and increased by 47.1% quarter over quarter to RMB74.4 million (US$11.5 million) in the third quarter of 2021. The year-over-year decrease was primarily due to the decreased revenue. The quarter-over-quarter increase was due to increased spending over AI related business. Non-GAAP cost of revenues decreased by 34.5% year over year and increased by 47.7% quarter over quarter to RMB74.2 million (US$11.5 million) in the third quarter of 2021.

Gross profit decreased by 51.6% year over year and 24.5% quarter over quarter to RMB121.7 million (US$18.9 million) in the third quarter of 2021. Non-GAAP gross profit decreased by 51.6% year over year and decreased 24.5% quarter over quarter to RMB121.9 million (US$18.9 million) in the third quarter of 2021.

Gross margin was 62.1% in the third quarter of 2021,compared to 68.9% in the third quarter of 2020 and 76.1% in the second quarter of 2021. Non-GAAP gross margin was 62.2% in the third quarter of 2021,compared to 69.0% in the third quarter of 2020 and 76.3% in the second quarter of 2021.

OPERATING INCOME/LOSS AND EXPENSES

Total operating expensesdecreased by 51.0% year over year and by 15.9% quarter over quarter to RMB184.9 million (US$28.7 million) in the third quarter of 2021. Total non-GAAP operating expenses decreased by 51.3% year over year and by 17.2% quarter over quarter to RMB180.4 million (US$28.0 million) in the third quarter of 2021.

Research and development expensesdecreased by 52.9% year over year and increased by 17.2% quarter over quarter to RMB55.4 million (US$8.6 million) in the third quarter of 2021. The year-over-year decrease was mainly due to the deconsolidation of certain mobile game business in prior year. Our investment in research and development has been keeping flat. The quarter-over-quarter change was mainly due to less government grants in this quarter. Non-GAAP research and development expenses decreased by 53.7% year over year and increased 10.5% quarter over quarter to RMB52.0 million (US$8.1 million) in the third quarter of 2021.

Selling and marketing expensesdecreased by 48.3% year over year and 29.8% quarter over quarter to RMB85.6 million (US$13.3 million) in the third quarter of 2021. This year-over-year decrease was attributable to the streamlining of our business and the strategic reduction of our costs. While the quarter-over-quarter decrease was mostly because we incurred incremental promotion expenses for the June 18 promotional events in the second quarter.Non-GAAP selling and marketing expensesdecreased by 49.0% year over year and 30.0% quarter over quarter to RMB85.0 million (US$13.2 million) in the third quarter of 2021.

General and administrative expensesdecreased by 46.5% year over year and 8.1% quarter over quarter to RMB48.7 million (US$7.6 million) in the third quarter of 2021. The decrease was mainly due to the our business operation streamlining and the effective expense control. Non-GAAP general and administrative expenses decreased by 45.5% year over year and 6.7% quarter over quarter to RMB48.1 million (US$7.5 million) in the third quarter of 2021.

Operating losswas RMB63.2 million (US$9.8 million) in the third quarter of 2021,compared to RMB126.0 million in the same period of the last year and RMB58.8 million in the second quarter of 2021. Non-GAAP operating loss was RMB58.5 million (US$9.1 million) in the third quarter of 2021,compared to RMB118.9 million in the same period of the last year and RMB56.4 million in the second quarter of 2021.

Operating profit for the internet businesswas RMB1.8 million in the third quarter of 2021,compared to an operating profit of RMB64.2 million in the same period last year and operating loss of RMB8.2 million in the second quarter of 2021.

Operating loss for AI and others was RMB60.3 million in the third quarter of 2021,compare with an operating loss of RMB183.1 million in the same period last year and an operating loss of RMB48.3 million in the second quarter of 2021.

Share-based compensation expenseswere RMB4.7 million (US$0.7 million) in the third quarter of 2021,compared to RMB7.1 million in the same period of the last year and RMB2.4 million in the second quarter of 2021.

OTHER INCOME,NET

Other income,net was RMB13.5 million (US$2.1 million) in the third quarter of 2021,which was primarily from the disposal of some investments.

NET INCOME/(LOSS)ATTRIBUTABLE TO CHEETAH MOBILE SHAREHOLDERS

Net loss attributable to Cheetah Mobile shareholderswas RMB49.5 million (US$7.7 million) in the third quarter of 2021,compared to a net income attributable to Cheetah Mobile shareholders of RMB259.2 million in the same period of the last year and a net income attributable to Cheetah Mobile shareholders of RMB0.9 million in the second quarter of 2021.

Non-GAAP net loss attributable to Cheetah Mobile shareholderswasRMB44.7 million (US$6.9 million) in the third quarter of 2021,compared to a non-GAAP net income attributable to Cheetah Mobile shareholders of RMB266.3 million in the same period of the last year and non-GAAP net income attributable to Cheetah Mobile shareholders of RMB3.3 million in the second quarter of 2021.

NET INCOME/(LOSS)PER ADS

Diluted loss per ADSwas RMB0.34(US$0.05) in the third quarter of 2021,compared to diluted income per ADS of RMB1.82 in the same period of the last year and diluted income per ADS of RMB0.01 in the second quarter of 2021. Non-GAAP diluted loss per ADS was RMB0.31 (US$0.05) in third quarter of 2021,compared to Non-GAAP diluted income per ADS RMB1.87 in the same period of the last year and RMB0.02 in the second quarter of 2021.

BALANCE SHEET

As of September 30,2021,the Company had cash and cash equivalents,restricted cash and short-term investments of RMB1,853.3 million (US$287.6 million).

SHARES ISSUED AND OUTSTANDING

As of September 30,the Company had a total of 1,408,070,144 Class A and Class B ordinary shares issued and outstanding. One ADS represents 10 Class A ordinary shares.

Business Outlook

For the fourth quarter of 2021,the Company expects its total revenues to be between RMB130 million (US$20.2 million) and RMB180 million (US$27.9 million). This amount reflects the Company's current and preliminary expectations.

Conference Call Information

The Company will hold a conference call on November 24th,at 7:00 a.m. Eastern Time (or 8:00 p.m. Beijing Time) to discuss its financial results. Listeners may access the call by dialing the following numbers:

International: +1-412-902-4272

United States Toll Free: +1-888-346-8982

Mainland China Toll Free: 4001-201-203

Hong Kong Toll Free: 800-905-945

Conference ID: Cheetah Mobile

The replay will be accessible through December 1,2021 by dialing the following numbers:

International: +1-412-317-0088

United States Toll Free: +1-877-344-7529

Access Code: 10162140

A live and archived webcast of the conference call will also be available at the Company's investor relations website at http://ir.cmcm.com.

Exchange Rate

This press release contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted,all translations from Renminbi to U.S. dollars in this press release were made at a rate of RMB6.4434to US$1.00,the exchange rate in effect as of September 30,as set forth in the H.10 statistical release of the Federal Reserve Board. Such translations should not be construed as representations that RMB amounts could be converted into U.S. dollars at that rate or any other rate,or to be the amounts that would have been reported under accounting principles generally accepted in the United States of America ("U.S. GAAP").

About Cheetah Mobile Inc.

Cheetah Mobile is a leading internet company. It has attracted hundreds of millions of monthly active users through an array of internet products such as Clean Master,Security Master and several casual games. The Company provides advertising services to advertisers worldwide as well as value-added services including the sale of premium membership and in-app virtual items to its users. Cheetah Mobile is also committed to leveraging its cutting-edge artificial intelligence technologies to power its products and make the world smarter. It has been listed on the New York Stock Exchange since May 2014.

Safe Harbor Statement

This press release contains forward-looking statements. These statements,including management quotes and business outlook,constitute forward-looking statements under the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Such statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in the forward-looking statements,including but are not limited to the following: Cheetah Mobile's growth strategies; Cheetah Mobile's ability to retain and increase its user base and expand its product and service offerings; Cheetah Mobile's ability to monetize its platform; Cheetah Mobile's future business development,financial condition and results of operations; competition with companies in a number of industries including internet companies that provide online marketing services and internet value-added services; expected changes in Cheetah Mobile's revenues and certain cost or expense items; and general economic and business condition globally and in China. Further information regarding these and other risks is included in Cheetah Mobile's filings with the U.S. Securities and Exchange Commission. Cheetah Mobile does not undertake any obligation to update any forward-looking statement as a result of new information,future events or otherwise,except as required under applicable law.

Use of Non-GAAP Financial Measures

This release contains the following non-GAAP financial measures:

Non-GAAP cost of revenues excludes share-based compensation expenses

Non-GAAP gross profit excludes share-based compensation expenses

Non-GAAP gross margin excludes share-based compensation expense

Total non-GAAP operating expenses exclude share-based compensation expenses

Non-GAAP research and development expenses exclude share-based compensation expenses

Non-GAAP selling and marketing expenses exclude share-based compensation expenses

Non-GAAP general and administrative expenses exclude share-based compensation expenses

Non-GAAP operating profit/loss excludes share-based compensation expenses

Non-GAAP net income/loss attributable to Cheetah Mobile shareholders excludes share-based compensation expenses

Non-GAAP diluted income/loss per ADS excludes share-based compensation expenses

Non-GAAP adjusted EBITDA represents net income/loss attributable to Cheetah Mobile shareholders excluding share-based compensation,interest income,depreciation and amortization,net income attributable to noncontrolling interests,other income,net and income tax expenses

The Company reviews these non-GAAP financial measures together with GAAP financial measures to obtain a better understanding of its operating performance. It uses the non-GAAP financial measures for planning,forecasting and measuring results against the forecast. The Company believes that non-GAAP financial measures are useful supplemental information for investors and analysts to assess its operating performance without the effect of share-based compensation expenses,which have been and will continue to be significant recurring expenses in its business. However,the use of non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of using non-GAAP financial measures is that they do not include all items that impact the Company's net income for the period. In addition,because non-GAAP financial measures are not measured in the same manner by all companies,they may not be comparable to other similarly titled measures used by other companies. In light of the foregoing limitations,you should not consider non-GAAP financial measure in isolation from or as an alternative to the financial measure prepared in accordance with U.S. GAAP. For more information on these non-GAAP financial measures,please see the tables captioned "Cheetah Mobile Inc. Reconciliations of GAAP and Non-GAAP Results".

Investor Relations Contact

Cheetah Mobile Inc.

Tel: +86 10 6292 7779

Email: ir@cmcm.com

CHEETAH MOBILE INC.

Condensed Consolidated Balance Sheets

(Unaudited,amounts in thousands of Renminbi ("RMB") and US dollars ("US$"))

As of

December 31,2020

Septemeber 30,2021

Septemeber 30,2021

RMB

RMB

USD

ASSETS

Current assets:

Cash and cash equivalents

1,299,658

1,580,482

245,287

Restricted cash

797

792

123

Short-term investments

360,803

272,012

42,216

Accounts receivable

225,586

196,478

30,493

Prepayments and other current assets

835,694

527,825

81,917

Due from related parties

224,323

144,107

22,365

Total current assets

2,946,861

2,721,696

422,401

Non-current assets:

Property and equipment,net

101,984

104,947

16,288

Right-of-use assets,net

17,729

40,694

6,316

Intangible assets,net

12,575

11,546

1,792

Investmentinequityinvestees

216,126

279,234

43,336

Otherlongterminvestments

2,193,600

2,144,218

332,777

Due from related parties

3,522

38,264

5,938

Deferred tax assets

15,607

17,929

2,783

Other non-current assets

105,479

94,590

14,677

Total non-current assets

2,666,622

2,731,422

423,907

Total assets

5,613,483

5,453,118

846,308

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

105,832

130,351

20,230

Accrued expenses and other current liabilities

1,390,042

1,178,793

182,944

Due to related parties

48,938

33,178

5,149

Income tax payable

27,505

32,411

5,030

Total current liabilities

1,572,317

1,374,733

213,353

Non-current liabilities:

Deferred tax liabilities

60,502

60,059

9,321

Other non-current liabilities

192,272

219,939

34,134

Total non-current liabilities

252,774

279,998

43,455

Total liabilities

1,825,091

1,654,731

256,808

Shareholders' equity:

Ordinary shares

234

235

36

Additional paid-in capital

2,726,619

2,734,917

424,452

Retained earnings

857,188

882,879

137,021

Accumulated other comprehensive income

163,340

138,132

21,438

Total Cheetah Mobile shareholders' equity

3,747,381

3,756,163

582,947

Noncontrolling interests

41,011

42,224

6,553

Total equity

3,788,392

3,798,387

589,500

Total liabilities and equity

5,308

CHEETAH MOBILE INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited,amounts in thousands of Renminbi ("RMB") and US dollars ("US$"),except for number of shares and per share(or ADS) data)

For The Three Months Ended

Septemeber 30,2020

June 30,2021

RMB

RMB

RMB

USD

Revenues

365,098

211,726

196,107

30,435

Internet business

326,028

189,855

160,492

24,908

AI and others

39,070

21,871

35,615

5,527

Cost of revenues (a)

(113,584)

(50,554)

(74,389)

(11,545)

Gross profit

251,514

161,172

121,718

18,890

Operating income and expenses:

Research and development (a)

(117,627)

(47,284)

(55,402)

(8,598)

Selling and marketing (a)

(165,547)

(121,845)

(85,562)

(13,279)

General and administrative (a)

(91,021)

(53,022)

(48,737)

(7,564)

Other operating income

(3,354)

2,162

4,781

742

Total operating income and expenses

(377,549)

(219,989)

(184,920)

(28,699)

Operating loss

(126,035)

(58,817)

(63,202)

(9,809)

Other income/(expenses):

Interest income,net

7,228

3,644

8,762

1,360

Foreign exchange gain/(loss)

32,690

14,620

(3,230)

(501)

Gain/(loss) from equity method investments,net

3,115

7,606

(13)

(2)

Other income,net

378,297

34,887

13,534

2,100

Income before taxes

295,295

1,940

(44,149)

(6,852)

Income tax expenses

(31,794)

(316)

(5,215)

(809)

Net income/(loss)

263,501

1,624

(49,364)

(7,661)

Less: netincome attributable to noncontrolling interests

4,333

707

89

14

Net income/(loss) attributable to Cheetah Mobile shareholders

259,168

917

(49,453)

(7,675)

Earnings/(losses) per share

Basic

0.18

0.00

(0.03)

(0.01)

Diluted

0.18

0.00

(0.03)

(0.01)

Earnings/(losses) per ADS

Basic

1.83

0.01

(0.34)

(0.05)

Diluted

1.82

0.01

(0.34)

(0.05)

Weighted average number of shares outstanding

Basic

1,416,988,202

1,429,575,967

1,430,379,850

1,850

Diluted

1,421,872,320

1,434,171,737

1,850

Weighted average number of ADSs outstanding

Basic

141,698,820

142,957,597

143,037,985

143,985

Diluted

142,187,232

143,417,174

143,985

Other comprehensive (loss)/income,net of tax of nil

Foreign currency translation adjustments

(106,081)

(51,664)

10,800

1,676

Unrealized gain on available-for-sale securities,net

-

-

-

-

Other comprehensive income/(loss)

(106,081)

(51,664)

10,800

1,676

Total comprehensive income/(loss)

157,420

(50,040)

(38,564)

(5,985)

Less: Total comprehensiveincome/(loss) attributable to noncontrolling

interests

3,563

129

(364)

(56)

Total comprehensive income/(loss) attributable to Cheetah Mobile

shareholders

153,857

(50,169)

(38,200)

(5,929)

CHEETAH MOBILE INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited,2021

(a) Share-based compensation expenses

RMB

RMB

RMB

USD

Cost of revenues

366

307

199

31

Research and development

5,099

186

3,355

521

Selling and marketing

(1,120)

460

539

84

General and administrative

2,782

1,436

628

97

Total

7,127

2,389

4,721

733

CHEETAH MOBILE INC.

Reconciliation of GAAP and Non-GAAP Results

(Unaudited,except for per share data )

For The Three Months Ended September 30,2021

GAAP

Share-based

Non-GAAP

Non-GAAP

Result

Compensation

Result

Result

RMB

RMB

RMB

USD

Revenues

196,107

-

196,107

30,435

Cost of revenues

(74,389)

199

(74,190)

(11,514)

Gross profit

121,718

199

121,917

18,921

Research and development

(55,402)

3,355

(52,047)

(8,077)

Selling and marketing

(85,562)

539

(85,023)

(13,195)

General and administrative

(48,737)

628

(48,109)

(7,467)

Other operating expense

4,781

-

4,781

742

Total operating income and expenses

(184,920)

4,522

(180,398)

(27,997)

Operating loss

(63,202)

4,721

(58,481)

(9,076)

Net loss attributable to Cheetah Mobile shareholders

(49,453)

4,721

(44,732)

(6,942)

Diluted earnings/(losses) per ordinary share (RMB)

(0.03)

0.00

(0.03)

Diluted earnings/(losses)per ADS (RMB)

(0.34)

0.03

(0.31)

Diluted earnings/(losses) per ADS (USD)

(0.05)

0.00

(0.05)

For The Three Months Ended June 30,2021

GAAP

Share-based

Non-GAAP

Result

Compensation

Result

RMB

RMB

RMB

Revenues

211,726

-

211,726

Cost of revenues

(50,554)

307

(50,247)

Gross profit

161,172

307

161,479

Research and development

(47,284)

186

(47,098)

Selling and marketing

(121,845)

460

(121,385)

General and administrative

(53,022)

1,436

(51,586)

Other operating expense

2,162

-

2,162

Total operating income and expenses

(219,989)

2,082

(217,907)

Operating loss

(58,817)

2,389

(56,428)

Net income attributable to Cheetah Mobile shareholders

917

2,389

3,306

Diluted earnings per ordinary share (RMB)

0.00

0.00

0.00

Diluted earnings per ADS (RMB)

0.01

0.02

0.02

For The Three Months Ended September 30,2020

GAAP

Share-based

Non-GAAP

Result

Compensation

Result

RMB

RMB

RMB

Revenues

365,098

-

365,098

Cost of revenues

(113,584)

366

(113,218)

Gross profit

251,514

366

251,880

Research and development

(117,627)

5,099

(112,528)

Selling and marketing

(165,547)

(1,120)

(166,667)

General and administrative

(91,021)

2,782

(88,239)

Other operating income

(3,354)

-

(3,354)

Total operating income and expenses

(377,549)

6,761

(370,788)

Operating loss

(126,035)

7,127

(118,908)

Net income attributable to Cheetah Mobile shareholders

259,168

7,127

266,295

Dilutedearnings per ordinary share (RMB)

0.18

0.01

0.19

Diluted earnings per ADS (RMB)

1.82

0.05

1.87

CHEETAH MOBILE INC.

Information about Segment

(Unaudited,except for percentage)

For The Three Months Ended September 30,2021

Internet Business

AI and others

Unallocated*

Consolidated

RMB

RMB

RMB

RMB

USD

Revenue

160,492

35,615

-

196,435

Operating profit/(loss)

1,797

(60,278)

(4,721)

(63,202)

(9,809)

Operating margin

1.1%

(169.2)%

-

(32.2)%

(32.2)%

For The Three Months Ended June 30,2021

Internet Business

AI and others

Unallocated*

Consolidated

RMB

RMB

RMB

RMB

Revenue

189,855

21,871

-

211,726

Operating loss

(8,162)

(48,266)

(2,389)

(58,817)

Operating margin

(4.3)%

(220.7)%

-

(27.8)%

For The Three Months Ended September 30,2020

Internet Business

AI and others

Unallocated*

Consolidated

RMB

RMB

RMB

RMB

Revenue

326,028

39,070

-

365,098

Operating profit/(loss)

64,226

(183,134)

(7,127)

(126,035)

Operating margin

19.7%

(468.7)%

-

(34.5)%

* Unallocated expenses refer to SBC expenses that are not allocated to individual segments.

CHEETAH MOBILE INC.

Reconciliation from Net Income/(loss) Attributable to Cheetah Mobile Shareholders to Adjusted EBITDA (Non-GAAP)

(Unaudited,amounts in thousands of Renminbi ("RMB") and US dollars ("US$"))

For The Three Months Ended

September 30,

2021

Septemeber 30,

2021

RMB

RMB

RMB

USD

Net income/(loss) attributable to Cheetah Mobile shareholders

259,168

917

(49,453)

(7,675)

Add:

Income tax expenses

31,794

316

5,215

809

Interest income,net

(7,228)

(3,644)

(8,762)

(1,360)

Depreciation and amortization

17,297

8,719

20,942

3,250

Net income attributable to noncontrolling interests

4,333

707

89

14

Other income,net

(414,102)

(57,113)

(10,291)

(1,599)

Share-based compensation

7,127

2,389

4,721

733

Adjusted EBITDA

(101,611)

(47,709)

(37,539)

(5,828)

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