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Cheetah Mobile Inc. Reports First Quarter 2014 Unaudited Financial Results

  Cheetah Mobile Inc. Reports First Quarter 2014 Unaudited Financial Results

1Q14 Total Revenues Up 131.6% YoY and 17.3% QoQ to RMB315.7 Million

1Q14 Online Marketing Services Revenues Up 97.2% YoY and 9.3% QoQ to RMB232.2
Million

1Q14 IVAS Revenues Up 1533.9% YoY and 71.0% QoQ to RMB71.8 million

PR Newswire

BEIJING, June 2, 2014

BEIJING, June 2, 2014 /PRNewswire/ -- 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 first quarter ended March 31, 2014.
The Company will hold a conference call at 8:00 p.m. Eastern Time on June 2,
2014. Dial-in details are provided at the end of the release.

First Quarter 2014 Highlights

  oTotal revenues increased by 131.6% year-over-year and 17.3%
    quarter-over-quarter toRMB315.7 million ($50.8 million) from RMB136.3
    million in the prior year period and RMB269.2 million in the prior
    quarter.
  oOnline marketing services revenues grew 97.2% year-over-year and 9.3%
    quarter-over-quarter to RMB232.2 million (US$37.4 million) from RMB117.8
    million in the prior year period and RMB212.5 million in the prior
    quarter.
  oInternet value-added services ("IVAS") revenues increased by 1,533.9%
    year-over-year and 71.0% quarter-over-quarter toRMB71.8 million (US$11.6
    million) from RMB4.4 million in the prior year period and RMB42.0 million
    in the prior quarter.

Key Operating Metrics

  oTotal mobile user installations globally increased by 44.9%
    quarter-over-quarter to 502.1 million as of March 31, 2014 from 346.6
    million as of the prior quarter end.
  oMobile monthly active users ("Mobile MAUs") increased by 385.6%
    year-over-year and 33.9% quarter-over-quarter to 222.5 million as of March
    2014 from 45.8 million in the prior year period and 166.2 million in the
    prior quarter.
  oMobile MAUs from overseas markets were 63.0% of total mobile MAUs in March
    2014, compared with 53.0% in the prior quarter.
  oMonthly active users of Duba.com Personal Start Page increased by 43.0% to
    54.3 million in March 2014 from 38.0 million in the prior year period and
    46.8 million in the prior quarter.

Mr. Sheng Fu, Cheetah Mobile's Chief Executive Officer, stated, "We are
pleased to see an exciting start in 2014 and to report solid operating and
financial results for our first quarter of the year. We are also very proud
that as of March 2014, we were again the publisher of the #1 mobile
application in the Tools category on Google Play worldwide and the #2 internet
security software provider in China. Our mobile applications continued to gain
popularity worldwide, adding new users at a rapid pace. Mobile MAUs increased
385.6% year-over-year to 222.5 million with approximately 63.0% of mobile MAUs
coming from overseas markets, mostly the US and Europe. Looking forward, we
plan to further solidify our global market position, and capitalize on the
increasingly global and mobile-centric internet market by further growing our
mobile user base, deepening our global penetration, enhancing our mobile
monetization capability and pursuing strategic investments and acquisitions to
expand our product portfolio and global service capabilities."

Mr. Andy Yeung, Cheetah Mobile's Chief Financial Officer, commented, "Despite
weak seasonality, we delivered the eighth consecutive quarter of revenue
growth, with revenues having grown 17.3% sequentially and 131.6%
year-over-year to RMB315.7 million. In addition to strong top-line growth, in
the first quarter, we are also seeing encouraging results in our mobile
business. While mobile monetization is still in its early stage, mobile
already accounted for 17.0% of our revenues in the quarter, up from 1.6% a
year ago and 11.6% in the fourth quarter of 2013. In 2014, we will continue to
invest in our mobile businessand step-up our efforts to capture exciting
growth opportunities in the global mobile internet market."

First Quarter 2014 Financial Results

REVENUES

Total revenues for the first quarter of 2014 increased by 131.6% to RMB315.7
million (US$50.8 million) from RMB136.3 million in the prior year period. This
increase was primarily due to the increase in revenues from online marketing
services and IVAS. Revenues generated from our mobile business increased to
RMB53.7 million (US$8.6 million) from RMB2.1 million resulting from the
increased acceptance of the Company's mobile marketing services and the growth
of its mobile gaming services. Mobile revenues as a percentage of total
revenues for the first quarter was 17.0% compared to 1.6% in the prior year
period.

  oRevenues from online marketing services increased by 97.2% to RMB232.2
    million (US$37.4 million) in the first quarter of 2014 from RMB117.8
    million in the prior year period. This increase was due to growth in
    marketing revenues from key online marketing customers driven by
    significant growth in our user traffic on the Company's online marketing
    platforms.
  oRevenues from internet value added services ("IVAS") increased
    significantly by 1,533.9% to RMB71.8 million (US$11.6  million) in the
    first quarter of 2014 from RMB4.4 million in the prior year period. This
    increase was primarily driven by the increase in the number of PC and
    mobile games the Company published and the increase in the number of
    monthly paying users.
  oRevenues from internet security services and others decreased by 17.2% to
    RMB11.7 million (US$1.9  million) in the first quarter of 2014 from
    RMB14.1 million in the prior year. 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.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues increased by 203.8% to RMB70.4 million (US$11.3 million) in
the first quarter of 2014 from RMB23.2 million in the prior year period. The
increase in cost of revenues was mainly driven by higher bandwidth and IDC
costs as well as sharing and content costs. Bandwidth and IDC costs increased
as a result of the growing user base and user traffic. The increase in sharing
and content costs was primarily associated with the strong performance of
licensed mobile game titles.

Gross profit increased by 116.8% to RMB245.3 million (US$39.5 million) in the
first quarter of 2014 from RMB113.1 million in the prior year period. Gross
margin was 77.7% in the first quarter of 2014 compared with 83.0% in the prior
year period.

OPERATING INCOME AND EXPENSES

Total operating expenses for the first quarter of 2014 increased by 148.8% to
RMB226.0 million (US$36.4 million) from RMB90.9 million in the prior year
period primarily due to an increase in research and development expenses,
selling and marketing expenses, and general and administrative expenses.

  oResearch and development expenses increased by 101.0% to RMB77.8 million
    (US$12.5 million) from RMB38.7 million in the prior year period. This
    increase was primarily due to the expansion of research and development
    personnel, mainly to further develop the Company's mobile business and
    cloud-based analytics engines.
  oSelling and marketing expenses increased by 187.0% to RMB111.6 million
    (US$18.0 million) from RMB38.9 million in the prior year period. The
    increase was primarily due to expenses incurred in further promoting
    Cheetah's mobile applications, in particular Clean Master.
  oGeneral and administrative expenses increased by 176.3% to RMB36.6 million
    (US$5.9 million) from RMB13.3 million in the prior year period. This
    increase was primarily due to an increase in staff costs and professional
    service fees.

Operating profit in the first quarter of 2014 was RMB19.3 million (US$3.1
million) compared with RMB22.3 million in the prior year period. Operating
margin was 6.1% compared with 16.4% in the prior year period.

Adjusted operating profit[1] increased by 20.9% to RMB33.3 million (US$5.4
million) in the first quarter of 2014 from RMB27.6 million in the prior year
period. For the first quarter of 2014, share-based compensation expenses were
RMB 14.1 million ($2.3 million) compared with RMB 5.3 million in the first
quarter of 2013. Adjusted operating margin[2] decreased to 10.6% in the first
quarter of 2014 from 20.2% in the prior year period.

NET INCOME

Net income decreased by 35.9% to RMB18.7 million (US$3.0 million) in the first
quarter of 2014 from RMB29.2 million in the prior year period. Net margin
decreased to 5.9% from 21.4% in the prior year period.

Adjusted net income[3] decreased by 4.8% to RMB32.8 million (US$5.3 million)
from RMB34.4 million in the prior year period. Adjusted net margin[4]
decreased to 10.4% in the first quarter of 2014 from 25.3% in the prior year
period.

NET INCOME PER ADS

Diluted earnings per ADS[5] in the first quarter of 2014 decreased to RMB0.16
(US$0.02) from RMB0.27 in the prior year period.

Adjusted diluted earnings per ADS[6] in the first quarter of 2014 decreased to
RMB0.27 (US$0.04) from RMB0.32 in the prior year period.

INITIAL PUBLIC OFFERING

On May 13, 2014, the Company completed its initial public offering ("IPO") of
12,000,000 American depositary shares ("ADSs"), representing 120,000,000
ClassA ordinary shares, at $14.00 per ADS. Concurrently with the IPO,
Kingsoft Corporation Limited, Xiaomi Ventures Limited and Baidu Holdings
Limited subscribed for 7,142,857, 14,285,714 and 14,285,714 ClassA ordinary
shares of the Company, respectively, at a price of US$1.40 per share, for a
total of $50 million. On May 30, 2014, the Company was notified that the
underwriters for the IPO had elected to exercise the over-allotment option to
purchase an additional 1,800,000 ADSs, representing 18,000,000 Class A
ordinary shares, from the Company in full.

CASH AND TIME DEPOSITS BALANCE

As of March 31, 2014, the Company had cash, cash equivalents, and short-term
investments of RMB496.1 million (US$79.6 million).

SHARES OUTSTANDING

As of March 31, 2014, the Company had a total of 1,225,456,652 ordinary shares
and preferred shares outstanding.

Immediately after the closing of the over-allotment option, the Company will
have a total of 1,399,170,937 ordinary shares outstanding, comprised of
173,714,285 Class A ordinary shares and 1,225,456,652 Class B ordinary shares.

BUSINESS OUTLOOK

For the second quarter of 2014, the Company expects its total revenues to be
between RMB335 million and RMB345 million, representing a year-over-year
growth of approximately 111% to 117%. The forecast reflects the Company's
current and preliminary view, which is subject to change.

Conference Call Information

Company will hold a conference call on Monday, June 2, 2014 at 8:00 pm Eastern
Time or Tuesday, June 3, 2014 at 8:00 am Beijing Time to discuss the financial
results. Listeners may access the call by dialing the following numbers:

United States:           +1-877-870-4263
International Toll Free: +1-412-317-0790
China Domestic:          4001-201203
Hong Kong:               +800-905945
Conference ID:         #10047298

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 RMB6.2164 to US$1.00, the noon buying rate in
effect on March 31, 2014 in the City of New York for cable transfers in
Renminbi per U.S. dollar as certified for customs purposes by the Federal
Reserve Bank of New York. 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 mobile internet company with approximately 362
million monthly active users in March 2014. Its mission critical applications,
including Clean Master, CM Security, Battery Doctor and Duba Anti-virus, help
make the internet and mobile experience speedier, simpler, and safer for users
worldwide. Cheetah Mobile is the second largest internet security software
provider in China by monthly active users as of March 2014, according to
iUserTracker of iResearch, and the publisher of Clean Master, the #1 mobile
app in the Google Play Tools category worldwide by monthly downloads in March
2014, according to App Annie.

The Company also provides various platform products such as Duba.com, Cheetah
browser, game centers, and mobile app stores to provide multiple user traffic
entry points and global content distribution channels for its business
partners.

Safe Harbor Statements

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 certain risks and
uncertainties that could cause actual results to differ materially from those
expressed or implied in the forward-looking statements. These forward-looking
statements include, but are not limited to, statements about: 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 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; 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

To supplement Cheetah Mobile's consolidated financial information presented in
accordance with U.S. GAAP, Cheetah Mobile uses adjusted operating profit,
adjusted operating margin, adjusted net income, adjusted net margin and
adjusted diluted earnings per ADS, which are non-GAAP financial measures.

Adjusted operating profit and adjusted operating margin reflects operating
profit excluding share-based compensation costs. Adjusted net income is net
income excluding share-based compensation costs. Adjusted net margin is
adjusted net income as a percentage of total revenues. Adjusted diluted
earnings per ADS is adjusted net income or loss attributable to ordinary
shareholders divided by weighted average number of diluted ADS.

The Company believes that separate analysis and exclusion of the non-cash
impact of share-based compensation costs adds clarity to the constituent parts
of its performance from the cash perspective. 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 measure for planning, forecasting and measuring results against the
forecast. The Company believes that non-GAAP financial measure is useful
supplemental information for investors and analysts to assess its operating
performance without the effect of non-cash share-based compensation costs,
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 similar 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 table captioned "Cheetah Mobile Limited
Unaudited Reconciliations of GAAP and Non-GAAP Results" at the end of this
release.

[1] Adjusted operating profit is a non-GAAP financial measure, which is
    defined as adjusted operating profit excluding share-based compensation.
[2] Adjusted operating margin is a non-GAAP financial measure, which is
    defined as adjusted operating profit as a percentage of total revenues.
[3] Adjusted net income is a non-GAAP financial measure, which is defined as
    net income excluding share-based compensation costs.
[4] Adjusted net margin is a non-GAAP financial measure, which is defined as
    adjusted net income as a percentage of total revenues.
    ADS is American Depositary Share. Each ADS represents 10 Class A ordinary
[5] shares of the Company. Diluted earnings per ADS is net income attributable
    to ordinary shareholders divided by weighted average number of diluted
    ADS.
    Adjusted diluted earnings per ADS is a non-GAAP financial measure, which
[6] is defined as adjusted net income attributable to ordinary shareholders
    divided by weighted average number of diluted ADS.



Cheetah Mobile Inc.
Condensed Consolidated Balance Sheet
(in '000, except for per share data)
                                 As of
                                 December 31, March 31, 2014 March 31, 2014
                                 2013
                                 RMB           RMB             US$
                                 (Audited)    (Unaudited)    (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents        530,536       438,789         70,401
Short-term investments           55,780        57,326          9,198
Accounts receivable              100,428       143,568         23,034
Prepayments and other current    63,037        52,536          8,429
assets
Due from related parities        12,868        12,909          2,071
Deferred tax assets              1,913         896             144
Total current assets             764,562       706,024         113,277
Non-current assets:
Property and equipment , net     31,326        32,834          5,268
Intangible assets, net           32,850        32,340          5,189
Goodwill                         52,819        53,176          8,532
Long-term investments            12,054        68,958          11,063
Due from related parities        -             37,177          5,965
Deferred tax assets              7,178         6,947           1,115
Other non-current assets         8,804         9,436           1,514
Total non-current assets         145,031       240,868         38,646
Total assets                     909,593       946,892         151,923
LIABILITIES, MEZZANINE EQUITY AND
SHAREHOLDERS' EQUITY
Accounts payable                 23,439        39,711          6,371
Accrued expenses and other       181,551       178,580         28,652
current liabilities
Redemption right liabilities     5,711         1,439           231
Deferred revenue                 7,840         21,928          3,518
Due to related parties           31,893        6,103           979
Income tax payable               13,534        22,118          3,549
Total current liabilities        263,968       269,879         43,300
Non-current liabilities:
Deferred revenue                 2,866         2,254           362
Deferred tax liability           39,206        32,489          5,213
Other non-current liabilities    9,485         9,823           1,576
Total non-current liabilities    51,557        44,566          7,151
Total liabilities                315,525       314,445         50,451
Commitments and contingencies
Mezzanine equity:
Series A convertible preferred   119,976       119,976         19,249
shares
Series B convertible preferred   321,965       321,965         51,658
shares
Total mezzanine equity           441,941       441,941         70,907
Shareholders' equity:
Ordinary shares                  150           150             24
Additional paid-in capital       63,919        79,117          12,694
Retained earnings                74,819        93,518          15,004
Accumulated other comprehensive  13,239        17,721          2,843
income
Total shareholders' equity       152,127       190,506         30,565
Total liabilities, mezzanine     909,593       946,892         151,923
equity and shareholders' equity





Cheetah Mobile Inc.
Condensed Consolidated Statements of Comprehensive Income
(in '000, except for per share data and number of shares and ADSs)
                      For the three months ended
                      March 31,    December 31,  March 31,    March 31,
                      2013          2013           2014          2014
                      RMB           RMB            RMB           US$
                      (Unaudited)  (Unaudited)   (Unaudited)  (Unaudited)
Revenues              136,311       269,179        315,712       50,787
Online marketing      117,767       212,532        232,192       37,351
services
Internet value-added  4,395         42,004         71,810        11,552
services
Internet security     14,149        14,643         11,710        1,884
services and others
Cost of revenues (a)  (23,179)      (50,630)       (70,417)      (11,328)
Gross profit          113,132       218,549        245,295       39,459
Operating expenses:
Research and          (38,684)      (58,214)       (77,760)      (12,509)
development (a)
Selling and marketing (38,891)      (87,012)       (111,636)     (17,958)
(a)
General and           (13,266)      (23,095)       (36,649)      (5,896)
administrative (a)
Total operating       (90,841)      (168,321)      (226,045)     (36,363)
expenses
Operating profit      22,291        50,228         19,250        3,096
Other income
(expenses):
Interest income       1,111         2,549          1,980         319
Changes in fair value
of redemption right
granted to a          -             6,593          3,488         561
non-controlling
shareholder
Changes in fair value
of contingent         (94)          (425)          (437)         (70)
consideration
Changes in fair value
of put options        -             -              332           53
granted to employees
Foreign exchange gain 154           (402)          (40)          (6)
(loss), net
Other income, net     2,270         220            269           43
Gains (losses) from
equity method         -             721            (1,547)       (249)
investments
Income before tax     25,732        59,484         23,295        3,747
Income tax benefit    3,421         (33,490)       (4,596)       (739)
(expense)
Net income            29,153        25,994         18,699        3,008
Earnings per share
Basic                 0.03          0.02           0.02          0.00
Diluted               0.03          0.02           0.02          0.00
Earnings per ADS
Basic                 0.29          0.22           0.16          0.03
Diluted               0.27          0.21           0.16          0.02
Weighted average
number of shares
outstanding
Basic                 919,980,149   937,219,852    944,224,593   944,224,593
Diluted               1,068,062,460 1,203,409,240  1,208,937,986 1,208,937,986
Weighted average
number of ADSs used
in computation
Basic                 91,998,015    93,721,985     94,422,459    94,422,459
Diluted               106,806,246   120,340,924    120,893,799   120,893,799
Other comprehensive
income (loss), net of
tax
Foreign currency
translation           (407)         (3,087)        3,513         565
adjustments
Unrealized gains on
available-for-sale    -             20,960         969           156
securities, net
Other comprehensive   (407)         17,873         4,482         721
income (loss)
Comprehensive income  28,746        43,867         23,181        3,729
(a) Share-based
compensation expenses
('000)               For the three months ended
                      March 31,    December 31,  March 31,    March 31,
                      2013          2014           2014          2014
                      RMB          RMB           RMB          USD
                      (Unaudited)  (Unaudited)   (Unaudited)  (Unaudited)
Cost of revenues      4             2              -2            0
Research and          2,030         4,432          6,029         970
development
Selling and marketing 122           2,399          817           131
General and           3,128         2,775          7,237         1,164
administrative
Total                 5,284         9,608          14,081        2,265

Cheetah Mobile Inc.
Reconciliation of GAAP to Non-GAAP Results
(in '000, except for per share data)
          Three Months Ended March 31, 2013      Three Months Ended December 31, 2013   Three Months Ended March 31, 2014
          GAAP        Adjustment*  Non-GAAP      GAAP        Adjustment*  Non-GAAP      GAAP        Adjustment*  Non-GAAP     Non-GAAP
          RMB         RMB          RMB           RMB         RMB          RMB           RMB         RMB          RMB          US$
          (Unaudited) (Unaudited) (Unaudited)  (Unaudited) (Unaudited) (Unaudited)  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Operating (90,841)    (5,284)      (96,125)      (168,321)   (9,608)      (177,929)     (226,045)   (14,081)     (240,126)    34,098
expenses
Operation 22,291      5,284        27,575        50,228      9,608        59,836        19,250      14,081       33,331       5,361
Profit
Net       29,153      5,284        34,437        25,994      9,608        35,602        18,699      14,081       32,780       5,273
income
Diluted
earnings  0.27        0.05         0.32          0.21        0.08         0.29          0.16        0.12         0.27         0.04
per ADS
Note: *Adjustment to exclude the share-based compensation expense of each period.

Cheetah Mobile Inc.
Revenues Generated from PC-based and Mobile-based Applications
(Unaudited, in '000, except for per share data)
       For the three months ended
       March 31, 2013 December 31, 2014 March 31, 2014 March 31, 2014
       RMB            RMB               RMB            USD
       (Unaudited)    (Unaudited)       (Unaudited)    (Unaudited)
PC     134,175         237,906            262,009         42,148
Mobile 2,136           31,273             53,703          8,639
Total  136,311         269,179            315,712         50,787



SOURCE Cheetah Mobile Inc.

Website: http://ir.cmcm.com
Contact: Investor Relations Contact: ICR, Inc., Calvin Jiang, +1 (646)
417-5395, IR@cmcm.com
 
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