August 22, Beijing time, the world's leading mobile Internet content providerCheetah Mobile Inc(NYSE:CMCM) reported results for the second quarter ended June 30, 2017. According to the financial report, Cheetah Mobile Inc's total income in the second quarter rose 14.8% year-on-year to 1.2016 billion yuan, mainly due to the growth of mobile revenue, which rose 34.5% to 1.0388 billion yuan this quarter, an all-time high. The revenue of mobile entertainment business, represented by Live.me and mobile games, increased by 270.5% year-on-year to 371 million yuan, which has become a new engine of growth.
Meanwhile, the operating profit of Non-GAAP in the second quarter increased by 254.3% to 90.4 million yuan compared with the same period last year, while the operating profit of tool products and related services increased by 50.6% to 212.8 million yuan. It can be seen that Cheetah's core tools business continues to be sound, building a solid moat, and the mobile entertainment business represented by content and mobile games has achieved dazzling results and shines brilliantly in the global market. With the accelerated expansion and deepening of Cheetah's global business, after becoming the benchmark and leader of tools to go to sea, Cheetah Mobile Inc is leading a new wave of content and entertainment for Chinese companies.
Cheetah Mobile Inc CEO Fu Sheng said: "in the second quarter, we continue to enhance the tools product experience and optimize the tools business cost structure to keep the tools business operating profit and cash flow strong. The revenue and profits of the mobile game business increased significantly in the quarter, mainly due to the rich game product portfolio and the diversification of business models. In addition, Live.me 's user activity and stickiness continued to grow during the quarter by continuously improving product features and enriching live content. Therefore, we firmly believe that Cheetah has the ability to build a long-term and sustainable growth business model. "
In June 2017, Cheetah Mobile Inc Global Mobile had 581.3 million monthly active users. Of these, 77.3% came from overseas markets, mainly Europe and the United States.
Starting from the second quarter of 2017, Cheetah Mobile Inc merged content products, mobile games and other businesses into mobile entertainment business lines, disclosing revenue and profits according to the two major business lines of tools business and mobile entertainment business.
As the core business of Cheetah, the tools business performed well in the second quarter, firmly maintained a leading position in the world, and provided the company with strong cash flow. According to the financial report, the operating profit of the tools business increased by 50.6% to 212.8 million yuan in the second quarter of 2017 compared with the same period last year, and the operating profit margin of the tools business has reached 26%, an increase of 11% over the same period last year. Cheetah Mobile Inc continues to meet the needs of users at the same time, launched a more imaginative space of products, forming a strong competitive advantage and matrix layout.
Traditional tool products such as CM continue to dig deep into clean-up features to help users efficiently clean up popular applications and improve the smartphone experience. Security Master, the upgraded version of CM Security, also introduces the SafeConnect function to provide users with a secure Internet environment.
Other tool products such as CM Launcher are beginning to show off in the global market with great success. Desktop product CM Launcher, through cool 3D animation, massive personalized themes, omni-directional security and efficiency optimization, to create a unique, secure and intelligent Android phone experience, has attracted young users from many countries, user activity has increased rapidly, and MAU and DAU have also grown significantly. In the long run, CM Launcher has a broad prospect of commercialization.
According to App Annie, CM Launcher dominates the global rankings and has been the No. 1 personalized download list in the United States since the beginning of May this year. As of August 2017, CM Launcher covers more than 200 countries and regions, ranking first in the personalized list of 94 countries in the Google Play Store, and has won the first place in the UK, the top three in the United States and Canada, more thanFacebook Inc, Instagram and other popular applications.
The tools business continues to play a cornerstone role, and the mobile entertainment business represented by Live.me and mobile games has also achieved good results.
According to the financial report, Cheetah Mobile Inc's many games shine brilliantly in the global market, becoming the most frequent manufacturer who landed on the global iOS&Google Play monthly mobile game download list Top10. At present, cheetah global mobile game MAU has exceeded 100 million, building a 'matrix' + 'popular style' game product layout. In commercialization, the products adopt the internal purchase mode of in-depth operation of props and skin, which brings the rapid growth of paying users. The rich product portfolio and the diversification of business models drive the high growth of mobile game revenue and profits.
"Piano Block 2" and "Rolling Sky" are still popular with users. Over the past year, Piano Block 2 and Rolling Sky have been in the top three downloads of music and desktop games in the United States, according to App Annie. Cheetah has also launched "Dance Line", "Archer Battle", "Deep Sea Aquarium" and other new games, long-term stable in the iOS global mobile game download list TOP10.
It is worth mentioning that in the Chinese iOS game market, four mobile games such as Cheetah "Dancing Line", "Piano Block 2", "Rolling Sky" and "Arrow Battle" entered the download list TOP10 in July.
Content revenue in the second quarter was mainly contributed by Live.me. Live.me is still one of the most popular social products for American fashionable young people. Since the second quarter, Live.me has been at the top of Google Play's US social product bestseller list and the top four on the iOS store's US social product bestseller list. Live.me 's remarkable achievements have also been recognized by the market. On May 2, 2017, Live.me completed an independent financing of US $60 million.
During the quarter, Live.me continued to innovate in product features and operations. For example, in order to improve user activity, the platform focuses on building a Starlight system, encouraging users to earn Starlight coins and experience rewards by sharing live broadcasts and inviting friends. Although Starlight coins cannot be withdrawn, users who use Starlight coins to reward can get special responses from anchors, and the anchors who get more Starlight coins have higher popularity rankings and will be recommended by the home page.
In order to enrich the content on the platform, Live.me has launched live games and talent shows, which cover many popular mobile games such as Hearthstone, Minecraft and Clash Royale, while talent shows include singing, dancing, funny, art, sports events, talk shows and more than 10 types. The platform is also actively training the community's own grass-roots stars and creating a moat of content. Live.me is offering regular training courses for anchors both online and offline. For some anchors who have achieved excellent results in training, the platform will be skewed in terms of traffic distribution. Recently, Live.me has also launched a multi-person live broadcast feature, which encourages head anchors to do live broadcasts together with new anchors.
Of course, the rapid growth of tools and mobile entertainment products is inseparable from the support of artificial intelligence technology. Cheetah is applying artificial intelligence to its product line. Taking tool products as an example, deep learning and natural language processing (NLP) technology are applied to the input method product Cheetah Keyboard. Cheetah Mobile Inc also uses artificial intelligence technology in Live.me more and more. It includes anti-spam (spam) and personalized recommendation based on deep neural network. In the future, Cheetah will continue to build AI technology platform, link all products with artificial intelligence and explore new product opportunities.
In terms of revenue composition, revenue from tools products and related services mainly includes revenue from the company's mobile tool applications, web browsers and PC security software, which was flat to 820.3 million yuan in the second quarter of 2017.
Mobile entertainment business, which includes Live.me, News Republic and mobile games, increased by 270.5% year-on-year to 371 million yuan. Mainly due to the rapid growth of Live.me live streaming revenue, and the company continued to launch new mobile games earlier this year, enriching the product portfolio of mobile games.
In addition, in the quarter, Non-GAAP 's operating profit increased by 254.3% year-on-year to 90.4 million yuan, while the net profit of Non-GAAP belonging to Cheetah Mobile Inc shareholders was 94.4 million yuan. In the quarter, the company generated a net cash flow of 194.7 million yuan from operating activities and a free cash flow of 185.1 million yuan.
Cheetah Mobile Inc estimates that total revenue in the third quarter of 2017 will be between 1.15 billion yuan and 1.21 billion yuan, up 2% from a year earlier. This guideline only represents the company's current and preliminary expectations and may change in the future.