Technology Stock News Buzz: Cheetah Mobile Inc (ADR) (NYSE:CMCM)
On Tuesday, Shares of Cheetah Mobile Inc (ADR) (NYSE:CMCM) lost -0.16% to $12.36. Trading volume recorded for this company was about 3,000 shares as contrast to its average volume of 566,966 shares. The company has the total of 350.40M outstanding shares, while its market capitalization is about $1.76B.
Cheetah Mobile Inc. (CMCM), a leading mobile internet company that aims to provide leading apps for mobile users worldwide and connect users with personalized content on the mobile platform, today declared its unaudited merged financial results for the fourth quarter and fiscal year ended December 31, 2016.
Fourth Quarter 2016 Merged Financial Results:
REVENUES
Total revenues raised by 10.90% year over year and 13.0% quarter over quarter to RMB1,274.70M (US$183.60M) in the fourth quarter of 2016, which was mainly driven by the steady and sustained revenue growth from the Company’s utility apps and the contribution from the Company’s new content-driven apps, namely Live.me and News Republic.
- Revenues from online marketing services remained stable year over year and raised by 4.7% quarter over quarter to RMB1,033.10M (US$148.80M) in the fourth quarter of 2016. Mobile advertising revenues represented about 84% of online marketing revenues in the quarter, as contrast with about 74% in the prior year period and about 82% in the previous quarter. The increase in mobile advertising revenues was driven by higher demand from advertisers and monetization of light causal games through in-game advertising.
- Revenues from internet value added services raised by 133.60% year over year and 88.90% quarter over quarter to RMB208.70M (US$30.10M) in the fourth quarter of 2016, which was mainly driven by the ramp-up in monetization of Live.me in overseas markets.
- Revenues from internet security services and others raised by 36.40% year over year and 4.50% quarter over quarter to RMB32.90M (US$4.70M) in the fourth quarter of 2016. The year-over-year increase was mainly driven by higher internet software licensing revenues.
By platform, revenues generated from mobile business raised by 27.90% year over year and 15.0% quarter over quarter to RMB1,033.30M (US$148.80M) in the fourth quarter of 2016, which was mainly driven by raised popularity of the Company’s mobile marketing services worldwide and the initial monetization of Live.me in overseas markets.
By region, revenues generated from overseas markets raised by 31.30% year over year and 15.70% quarter over quarter to RMB832.60M (US$119.90M) in the fourth quarter of 2016, which was mainly driven by an improvement in overseas monetization.
COST OF REVENUES AND GROSS PROFIT
Cost of revenues raised by 57.30% year over year and 14.90% quarter over quarter to RMB464.20M (US$66.90M) in the fourth quarter of 2016, which was mainly driven by raised investments in content for the Company’s content-driven apps, higher bandwidth and internet data center costs associated with raised user traffic worldwide, and data analytics.
Gross profit reduced by 5.10% year over year, but rose by 11.9% quarter over quarter to RMB810.50M (US$116.70M) in the fourth quarter of 2016.
OPERATING INCOME/LOSS AND EXPENSES
Total operating expenses reduced by 3.4% year over year and 1.3% quarter over quarter to RMB748.3 million (US$107.8 million) in the fourth quarter of 2016. Total non-GAAP operating expenses raised by 3.0% year over year and 1.2% quarter over quarter to RMB694.9 million (US$100.1 million).
- Research and development expenses raised by 11.90% year over year and reduced by 0.10% quarter over quarter to RMB235.40M (US$33.90M) in the fourth quarter of 2016. The year-over-year increase was mainly driven by raised personnel costs associated with the Company’s raised investments in big data analytics and new product development, particularly the development of new content-driven mobile applications and services. The quarter-over-quarter decrease was mainly because of a decrease in share-based compensation expenses. Non-GAAP research and development expenses, which exclude share-based compensation expenses, raised by 31.50% year over year and 6.50% quarter over quarter to RMB212.60M (US$30.60M).
- Selling and marketing expenses reduced by 20.50% year over year, but rose by 4.20% quarter over quarter to RMB408.10M (US$58.80M) in the fourth quarter of 2016. The year-over-year decrease was because of lower expenses on promotional activities as a result of the Company’s strategy to implement cost control for its utility apps, which was partially offset by raised product promotional activities for the Company’s content-driven apps and a boost in direct sales personnel headcount. The quarter-over-quarter increase was mainly because of raised promotional activities for mobile products in the fourth quarter of 2016. Non-GAAP selling and marketing expenses, which exclude share-based compensation expenses, reduced by 19.60% year over year, but rose by 6.0% quarter over quarter to RMB408.10M (US$58.80M).
- General and administrative expenses rose by 28.60% year over year and reduced by 10.10% quarter over quarter to RMB126.80M (US$18.30M) in the fourth quarter of 2016. The year-over-year increase was mainly driven by higher professional service fee and a boost in expenses associated with raised headcount for the general and administration function. The quarter-over-quarter decrease was mainly driven by lower professional service fees. Non-GAAP general and administrative expenses, which exclude share-based compensation expenses, rose by 81.70% year over year and reduced by 13.90% quarter over quarter to RMB96.20M (US$13.90M).
Operating profit was RMB62.20M (US$9.0M), as contrast with an operating profit of RMB79.80M in the prior year period and an operating loss of RMB33.80M in the previous quarter. The year-over-year decline in operating profit was mainly attributable to raised investments in content-driven apps. The quarter-over-quarter improvement was because of higher total revenues in the quarter in addition to the Company’s improved efficiency and cost control measures.
Non-GAAP operating profit reduced by 34.70% year over year, but rose by 205.4% quarter over quarter to RMB116.40M (US$16.80M) in the fourth quarter of 2016.
Share-based compensation expenses reduced by 45.0% year over year and 24.70% quarter over quarter to RMB54.20M (US$7.80M) in the fourth quarter of 2016. The decrease was mainly because of the change in the estimated forfeiture rates of share-based compensation.
OTHER EXPENSES
The Company recognized impairment losses of long-term investments of RMB45.90M (US$6.60M) in the fourth quarter of 2016, mainly driven by one-time non-cash write-downs of certain investment assets, which the Company considered other-than-temporary, to their fair value. These write-downs were because of the underperformance and financial positions of the Company’s investees.
OTHER INCOME, NET
Other income, net was RMB38.70M (US$5.60M) in the fourth quarter of 2016, which was mainly because of gains on disposal of certain investment assets in the fourth quarter of 2016.
NET INCOME ATTRIBUTABLE TO CHEETAH MOBILE SHAREHOLDERS
Net income attributable to Cheetah Mobile shareholders raised by 3.70% year over year and 13,107.9% quarter over quarter to RMB58.80M (US$8.50M) in the fourth quarter of 2016.
Non-GAAP net income attributable to Cheetah Mobile shareholders reduced by 27.20% year over year, but rose by 56.10% quarter over quarter to RMB113.0M (US$16.30M).
NET INCOME PER ADS
Diluted income per ADS in the fourth quarter of 2016 was RMB0.41 (US$0.06), as contrast with RMB0.40 in the prior year period and RMB0.00 in the previous quarter.
Non-GAAP diluted income per ADS in the fourth quarter of 2016 was RMB0.80 (US$0.12), as contrast with RMB1.08 in the prior year period and RMB0.51 in the previous quarter.
ADJUSTED EBITDA
Adjusted EBITDA (Non-GAAP) reduced by 26.70% year over year, but rose by 98.10% quarter over quarter to RMB158.60M (US$22.80M) in the fourth quarter of 2016.
CASH AND CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM INVESTMENTS BALANCE
As of December 31, 2016, the Company had cash and cash equivalents, restricted cash and short-term investments of RMB1,940.30M (US$279.50M).
SHARES ISSUED AND OUTSTANDING
As of December 31, 2016, the Company had a total of 1,425,736,715 Class A and Class B ordinary shares issued and outstanding. One ADS represents 10 Class A ordinary shares.
Fiscal Year 2016 Results:
REVENUES
Total revenues raised by 21.0% year over year to RMB4,564.70M (US$657.40M) in 2016, which was mainly driven by the steady and sustained revenue growth from the Company’s utility apps and the contribution from the Company’s new content-driven apps.
- Revenues from online marketing services raised by 20.30% year over year to RMB3,950.90M (US$569.0M) in 2016. Mobile advertising revenues represented about 80% of online marketing revenues in 2016, as contrast with about 69% in 2015. The increase in mobile advertising revenues was driven by higher demand from advertisers and monetization of light causal games through in-game advertising.
- Revenues from internet value added services raised by 26.70% year over year to RMB501.0M (US$72.20M) in 2016, which was mainly driven by the initial monetization of Live.me in overseas markets.
- Revenues from internet security services and others raised by 18.50% year over year to RMB112.80M (US$16.20M) in 2016, which was mainly driven by higher internet software licensing revenues.
By platform, revenues generated from mobile business raised by 42.70% year over year to RMB3,530.40M (US$508.50M) in 2016, which was mainly driven by raised popularity of the Company’s mobile marketing services worldwide and the initial monetization of Live.me in overseas markets.
By region, revenues generated from overseas markets raised by 42.10% year over year to RMB2,746.80M (US$395.60M) in 2016, which was mainly driven by an improvement in overseas monetization.
COST OF REVENUES AND GROSS PROFIT
Cost of revenues raised by 61.40% year over year to RMB1,543.80M (US$222.40M) in 2016, which was mainly driven by raised investments in content for the Company’s content-driven apps, higher bandwidth and internet data center costs associated with raised user traffic worldwide, and data analytics.
Gross profit raised by 7.20% year over year to RMB3,020.80M (US$435.10M) in 2016.
OPERATING INCOME/LOSS AND EXPENSES
Total operating expenses raised by 16.60% year over year to RMB3,033.30M (US$436.90M) in 2016. Total non-GAAP operating expenses raised by 19.30% year over year to RMB2,728.60M (US$393.0M).
- Research and development expenses raised by 30.30% year over year to RMB905.90M (US$130.50M) in 2016, which was mainly driven by a boost in personnel-related costs associated with the Company’s raised investments in big data analytics and new product development, particularly the development of new content-driven mobile applications and services. Non-GAAP research and development expenses, which exclude share-based compensation expenses, rose by 37.20% year over year to RMB757.60M (US$109.10M).
- Selling and marketing expenses raised by 9.60% year over year to RMB1,650.60M (US$237.70M) in 2016, mainly because of raised product promotional activities for the Company’s content-driven apps, which was partially offset by reduced spending on product activities for utility apps. Non-GAAP selling and marketing expenses, which exclude share-based compensation expenses, raised by 10.0% year over year to RMB1,636.80M (US$235.70M).
- General and administrative expenses rose by 25.40% year over year to RMB561.80M (US$80.90M) in 2016, which was mainly driven by higher professional service fee and a boost in expenses associated with raised headcount for the general and administration function. Non-GAAP general and administrative expenses, which exclude share-based compensation expenses, rose by 42.20% year over year to RMB419.20M (US$60.40M).
Operating loss was RMB12.40M (US$1.80M) in 2016, as contrast with an operating income of RMB216.90M in 2015. This change was mainly attributable to raised investments in the Company’s content-driven apps.
Non-GAAP operating profit reduced by 44.90% year over year to RMB293.70M (US$42.30M) in 2016.
Share-based compensation expenses reduced by 3.0% year over year to RMB306.10M (US$44.10M) in 2016.
NET INCOME/LOSS ATTRIBUTABLE TO CHEETAH MOBILE SHAREHOLDERS
Net loss attributable to Cheetah Mobile shareholders was RMB80.50M (US$11.60M) in 2016, as contrast with a net income attributable to Cheetah Mobile shareholders of RMB176.30M in 2015.
Non-GAAP net income attributable to Cheetah Mobile shareholders reduced by 54.10% year over year to RMB225.60M (US$32.50M) in 2016.
NET INCOME/LOSS PER ADS
Diluted loss per ADS in 2016 was RMB0.58 (US$0.08), as contrast with diluted income per ADS of RMB1.24 in 2015.
Non-GAAP diluted income per ADS in 2016 was RMB1.59 (US$0.23), as contrast with RMB3.45 in 2015.
ADJUSTED EBITDA
Adjusted EBITDA (Non-GAAP) reduced by 32.70% year over year to RMB457.10M (US$65.80M) in 2016.
Recent Development
Cheetah Mobile recently declared that Mr. Ka Wai Andy Yeung has resigned as Chief Financial Officer of the Company, effective March 31, 2017, to pursue other opportunities. Mr. Yeung has no disagreement with the Company that led to his resignation. Pending the appointment of Mr. Yeung’s successor, the Company’s Board of Directors has designated Mr. Yuk Keung Francis Ng, a director and the Chief Financial Officer of Kingsoft, as the interim Chief Financial Officer of the Company. Mr. Yeung will remain as an external advisor to the Company to facilitate a smooth transition.
Update on Share Repurchase Program
On March 16, 2016, the Company’s Board of Directors authorized a share repurchase plan, following which the Company may repurchase its own issued and outstanding ADSs with an aggregate value of up to US$100 million from the open market, in negotiated transactions off the market, or through other legally permissible means in accordance with applicable securities laws from time to time within one year after March 16, 2016. The share repurchase plan does not require the Company to acquire a specific number of ADSs. During the one-year period, the Company repurchased a total of 2,536,808 ADSs, representing 25,368,080 Class A ordinary shares, at an average price of $10.7483 per ADS. The share repurchase program has expired on March 16, 2017.
Business Outlook
For the first quarter of 2017, the Company anticipates its total revenues to be between RMB1,150.0M (US$166.0M) and RMB1,190.0M (US$171.0M), representing a year-over-year increase of 3% to 7% and quarter-over-quarter decrease of 7% to 10%. This estimate represents administration’s preliminary view as of the date of this release, which is subject to change.
Technical Analysis:
The stock price is going up to its 52-week low with 40.93% and lower from its 52-week high with -32.05%. The stock has shown its weekly performance of -2.45% and monthly performance stands at 23.60%. The stock price is moving up from its 200 days moving average with 14.67% and upward from 50 days moving average with 19.72%.
Analyst recommendation for this stock stands at 3.30.