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Cheetah Mobile Announces Third Quarter

The following excerpt is from the company's SEC filing.

2015 Unaudited Financial Results

Beijing, China, Nov. 17, 2015 Cheetah Mobile Inc. (NYSE: CMCM) (Cheetah Mobile or the Company), a leading mobile internet company that provides mission critical applications to help make the internet and mobile experience speedier, simpler, and safer for users worldwide, today announced its unaudited financial results for the quarter ended September 30, 2015.

Quarter 2015 Financial Highlights

Total revenues

increased by 110.7% year-over-year and 15.9% quarter-over-quarter to RMB1,008.7 million (US$158.7 million).

Mobile revenues

i ncreased by 522.0% year-over-year and 25.6% quarter-over-quarter to RMB702.7 million (US$110.6 million), which was primarily driven by robust growth in mobile advertising revenues in both overseas and domestic markets. Mobile revenues accounted for 69.7% of total revenues.

Overseas revenues

increased by 891.6% year-over-year and 24.7% quarter-over-quarter to RMB537.7 million (US$84.6 million), which was driven by a continued increase in mobile advertising revenues in overseas markets. Overseas revenues accounted for 53.3% of total revenues and 76.5% of mobile revenues.

Non-GAAP operating profit

increased by 153.5% year-over-year and 40.4% quarter-over-quarter to RMB131.4 million (US$20.7 million).

Non-GAAP net income attributable to Cheetah Mobile shareholders

increased by 138.1% year-over-year and 23.7% quarter-over-quarter to RMB143.4 million (US$22.6 million).

Third Quarter 2015 Key Operating Metrics

Mobile monthly active users (Mobile MAUs) increased by 73 million quarter-over-quarter to 567 million in September 2015. Mobile MAUs from overseas markets were 74% of total mobile MAUs in September 2015.

Total global mobile user installations increased by 346 million quarter-over-quarter to 1,942 million as of September 30, 2015.

Mr. Sheng Fu, Cheetah Mobiles Chief Executive Officer, stated, We are pleased to report another solid quarter

. Mobile MAUs reached 567 million in September. Our total revenues also exceeded RMB 1 billion for the first time, reaching RMB 1.01 billion in the quarter. The strong result was driven by our continued success in the overseas mobile advertising business. In addition to expanding our direct sales team globally, we continue to work closely with key internet players to further enhance our monetization capability. We are delighted that weve recently reached a global strategic partnership with Yahoo, including the integration of our products with Yahoos Gemini native advertising platform. Furthermore, Cheetah is a user- and product-focused company, first and foremost. So, it is particularly encouraging that our content-driven products, through both organic means and strategic investments, achieved some notable successes in the quarter. For example, Piano Tiles 2, a light, casual mobile game that we developed, reached the No. 1 spot in the United States and the No. 5 spot globally as the most downloaded free game on Google Play in September. Looking forward, we remain firmly committed to strengthening our foundation through high-quality content and user engagement, as well as partnerships as we continue to focus on becoming one of the leading mobile internet companies globally.

Overseas revenues refers to revenues generated by our operating legal entities incorporated outside China. Such revenues are primarily attributable to customers located outside China

Mr. Andy Yeung, Cheetah Mobiles Chief Financial Officer, commented, The third quarter is another record-setting quarter for Cheetah Mobile, both financially and operationally. Total revenues grew 111

% year-over-year and 16% quarter-over-quarter to RMB1,009 million, driven by growing user traffic and strong demand for our mobile advertising services. Non-GAAP operating profit grew 154% year-over-year and 40% quarter-over-quarter to RMB131 million, demonstrating the operating leverage inherent in our business model. Looking ahead, we remain focused on expanding our mobile platform throughout the global markets and building a solid foundation for long-term, sustainable growth.

Third Quarter 2015 Financial Results

REVENUES

for the third quarter of 2015 increased by 110.7% to RMB1,008.7 million (US$158.7 million) from RMB478.7 million in the prior year period. This increase was mainly driven by the Companys organic business growth, which was attributable to the Companys growing global mobile user base and substantial improvements in mobile monetization, especially in overseas markets.

Revenues from online marketing services

increased by 149.5% to RMB900.5 million (US$141.7 million) in the third quarter of 2015 from RMB360.9 million in the prior year period. Mobile advertising revenues represented approximately 72% of online marketing revenues in the quarter, which increased from approximately 21% of online marketing revenues in the prior year period. The increase in mobile advertising revenues was driven by the Companys growing global mobile user base, and strong demand from advertisers for the Companys mobile advertising services worldwide.

internet value added services (IVAS)

decreased by 7.3% to RMB99.5 million (US$15.7 million) in the third quarter of 2015 from RMB107.3 million in the prior year period. The year-over-year decrease was primarily due to the suspension of our online lottery operation in response to regulatory changes in China.

Revenues from internet security services and others

decreased by 16.0% to RMB8.7 million (US$1.4 million) in the third quarter of 2015 from RMB10.4 million in the prior year period. This decrease was primarily due to the Company ceasing to promote subscriptions services to paying users in a strategic reorientation which started in 2011, resulting in a decrease in the number of paying customers.

By platform, r

evenues generated from mobile business

increased by 522.0% to RMB702.7 million (US$110.6 million) from RMB113.0 million in the prior year period. This increase was primarily driven by the Companys growing global mobile user base, and the increasing popularity of the Companys mobile marketing services in overseas and domestic markets.

By region, revenues generated from overseas markets

increased by 891.6% to RMB537.7 million (US$84.6 million) from RMB54.2 million in the prior year period. This increase was primarily due to continued growth of the Companys overseas mobile user base, and rapid growth of the Companys mobile advertising revenues in overseas markets.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues increased by 145.2% to RMB270.4 million (US$42.5 million) in the third quarter of 2015 from RMB110.3 million in

the prior year period. The increase in cost of revenues was mainly due to higher traffic acquisition costs associated with the Cheetah Mobile ad platform business, higher bandwidth and internet data center (IDC) costs associated with increased user traffic worldwide and data analytics, in addition to higher amortization costs from intangible assets...


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