Cheetah Mobile, Inc. Fourth Quarter and Full Year 2018 Results March 25, 2019 1
Disclaimer This presentation contains forward-looking statements. These statements are made under the “safe harbor” provisions of 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. Among other things, the business outlook and quotations from management in this presentation, as well as Cheetah Mobile’s strategic and operational plans, contain forward-looking statements. Cheetah Mobile may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (“SEC”), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Cheetah Mobile’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Cheetah Mobile’s goals and 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 from 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; fluctuations in general economic and business conditions in China and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in Cheetah Mobile’s filings with the SEC. All information provided in this presentation is as of the date of this presentation, and Cheetah Mobile does not undertake any obligation to update any forward-looking statement, except as required under applicable law. 2
01 Overview Business Highlights Financial Highlights Revenue Guidance Share Repurchase 3
FY2018 Financial Results Were in Line w/ Our Expectations Our Core Business Continued As A % of to Generate Strong Cash Total YoY RMB, million FY2018 Revenues million, RMB Total Revenues 4,982 2% Mobile Entertainment 1,779 36% 19% Content-driven Product 854 17% -2% 342 Mobile Game 925 19% 48% 277 Others 83 2% 123% Gross Profit 3,441 69% 8% Operating Profit 467 9% 5% Non-GAAP* Gross Profit 3,441 69% 8% Operating Profit 552 11% 6% Net Cash Generated from Free Cash Flow *Non-GAAP = GAAP + share-based compensation expenses Operating Activities 4
3 Driving Forces for Our Revenue Growth in 2018 Mobile Games Operation Mobile Utility Products In China AI-Powered Business 5
02 Overview Business Highlights Financial Highlights Revenue Guidance Share Repurchase 6
Mobile Games: Revenues from Our Mobile Games Operation Mobile Games Revenue RMB million 1,000 925 800 623 600 400 200 - 2017 2018 Mobile Games 7
Mobile Games: Contined to Introduced New Games Launched Bricks n Balls, a casual elimination game Remained a top mobile casual games in the US on Google Play, and a top board games on Apple’s App Store in terms of user downloads Discovered the right combination of tactics to grow our average revenue per mobile gamer Bricks n Ball’s ARPU was much higher than those of Piano Tiles 2, Rolling Sky and Dancing Line, respectively in 2H18 Almost half of the revenues from Bricks n Balls were generated through sales of in-game virtual items 8
Mobile Games: Increased Operating Profits for Gaming Business Combined Operating Profits For Non-GAAP Operating Margin Our 3 Flagship Titles For Our 3 Flagship Titles 25% 10% 2017 2018 2017 2018 9
Mobile Utility Products in China: Introduced New Utility Products Personalized AI-Driven Experience 10
We Continued to Enrich Our Utility Product Portfolio by Introducing New Utility Apps • An AI-powered keyboard app • A personalized ring tone app to appeal young users in designed to appeal to generation China Z in China • Offering smart prediction, • Added premium content to voice input, and thousands of induce users subscription themes CM Many users are happy to Qu • Introducing a gamified user pay a small amount to gain Show Keyboard loyalty program access to the premium content 11
Our Utility Product Business Continued to Earn Healthy Revenue and Profits in 2018 RMB, million Utility Product Business 3,500 3,119 3,000 2,500 2,000 1,500 1,035 1,000 500 - Revenues Non-GAAP Operating Profits 12
We Began Offering AI-Powered Hardware in China Offering AI-powered hardware allows us to serve more users and customers in the era of human-computer interaction Our hardware business is a joint effort with Beijing OrionStar. As of today, Cheetah Mobile holds about ~40% of equity in Beijing OrionStar 13
Cheetah Translator: An AI-based Interpretation Device – Developed by Cheetah Mobile • The sales of Cheetah Translator drove the growth of our revenues from other business segment in 2018 • Enrich use cases: VIPKid, an online educational company, purchased a large quantity of Cheetah Translators to help its young students learn English Uroaming, an overseas WiFi service rental platform, also bought a number of Cheetah Translators to enrich its product offerings. Cheetah Translator marks an important milestone of our expansion into AI-based products and solutions • The success of Cheetah Translator helps us further improve our AI technologies and our capabilities to deliver AI-based solutions to customers and businesses 14
GreetBot: A Commercially Launched Receptionist Robot Focusing on the Business to Business Market - Developed by OrionStar • Developed by OrionStar, Cheetah GreetBot is a human-sized reception robot that focuses on the business-to-business market • Cheetah Mobile has exclusive distribution rights and is responsible for implementation in various work locations • We have also found more use cases for Cheetah GreetBot to serve customers in diverse verticals in China, including as guides in museums, receptionists in hospitals or schools, and salespersons in convenience stores 15
03 Overview Business Highlights Financial Highlights Revenue Guidance Share Repurchase 16
Revenues from Mobile Entertainment Business Revenues from Mobile Entertainment Business 556 RMB, million 498 399 • The revenue growths were mainly driven by Bricks n Balls, a casual elimination game that started ramping up in the middle of July 2018 4Q17 3Q18 4Q18 • Mobile game revenue Increased by 91% YoY and 14% QoQ Revenues from Mobile to RMB326 million in 4Q18; Entertainment Business accounted for 24% of total revenues in 4Q18 1,779 RMB, million Increased by 48% to RMB925 million in FY2018; accounted for 19% of total revenues in FY2018 1,495 2017 2018 17
Revenues from Utility Products and Related Services Revenues from Utility Products and Related Services RMB, million 938 • The YoY decrease in 4Q18 were mainly due to the discontinuation of 836 certain ad formats, i.e. ads on mobile phone lock screens, by the Company’s 783 overseas third-party advertising partners 4Q17 3Q18 4Q18 • The QoQ decrease in 4Q18 were mainly due to the disruption of our Revenues from Utility Products and business as a result of certain Related Services RMB, million allegations made by a third-party in November 2018, about which the 3,343 company made a number of public statements to clarify 3,119 2017 2018 18
Gross Profit and Gross Margin Increased Year Over Year 4Q18 Gross Margin Gross Profit 70% 965 RMB, million 926 68% 4Q17 4Q18 4Q17 4Q18 FY2018 RMB, million Gross Profit Gross Margin 69% 3,441 66% 3,195 2017 2018 2017 2018 19
We Grew Our Operating Profit in 2018 Despite Our Continued Investments in New Initiatives RMB, million Operating Profit 467 447 2017 2018 20
Our Mobile Entertainment Business Continued to Narrow Its Loss RMB, million Losses for the Mobile Entertainment Business The reduced losses were a result of: 2017 2018 • Increased revenues from the mobile game operation • Reduced expenses from the News Republic business -313 -417 21
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