Cheetah Mobile Q4 2024 Earnings Call Transcript

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Provided by Quartr
March 26, 2025

There are 5 speakers on the call.

Operator

Good day, and welcome to the TDOT Mobile Fourth Quarter twenty twenty four Earnings Conference Call. All participants will be in listen only mode. Please note today's event is being recorded. I would now like to turn the conference over to Helen Jing Xu, Investor Relations for Cheetah Mobile. Please go ahead.

Speaker 1

Thank you, operator. Welcome to Cheetah Mobile's fourth quarter twenty twenty four earnings conference call. With us today are our company's Chairman and CEO, Mr. Fu Sheng and our company's Director and CFO, Mr. Thomas Zheng.

Speaker 1

Following management's prepared remarks, we will conduct a Q and A session. Please note that the CEO's script will be presented by an AI agent. Before we begin, I refer you to the Safe Harbor statement in our earnings release, which also applies to our earnings conference call today as we will make forward looking statements. At this time, I would like to turn the conference call over to our CEO and Chairman, Mr. Fu Sheng.

Speaker 1

Please go ahead, Fuzhou.

Speaker 2

Hello, everyone. Thank you for joining us today. In Q4, our total revenue accelerated robustly growing 42% year over year and 23% quarter over quarter. We continue to make progress by consistently reducing non GAAP operating losses quarter over quarter and we expect our first quarter's non GAAP operating losses to further decrease both year over year and quarter over quarter. For the full year 2024, total revenue increased by 21% to RMB807 million and our non GAAP net loss attributable to shareholders narrowed year over year.

Speaker 2

This performance highlights our commitment to high quality growth and positions us strongly for a continued business turnaround in 2025. Our growth is driven not only by our enterprise facing AI and robotic businesses, but also by our legacy Internet business, which continues to deliver strong year over year revenue growth and margin expansion. Our apps for PC and mobile users continue to address pain points effectively, delivering excellent product experience even in a mature market. We believe that this positive trajectory will continue into 2025 benefiting from the momentum of LMS to enter 2025 with tremendous opportunities for our robotics business. LMS are playing a key role in transforming the service robotics industry, spanning its total addressable market and laying the groundwork for service robots to evolve into general purpose physical AI, at J Curve, we are taking a measured strategic approach to growing our robotics business, focusing on product types that can generate seasonal revenue and profits, aiming to become a top three service robot provider globally within three years.

Speaker 2

Our wheelbase robots are designed to serve real world business environment, enabling a data flywheel that will further drive product innovation and LLM advancement. At the same time, we continue to enhance our general purpose robotic capabilities by leveraging the most advanced ILLMs available in the market, such as DeepSeq, Chat, GPT and etcetera alongside our self developed ILLMS. Appabilities such as voice interaction capability and indoor autonomous are facing nations to the integration of physical AI over the long term. Speaking of voice interaction capability, building upon our success in voice enabled robots, we will be launching AgentOS in the coming days, being the first to make our robots agenting. AgentOS is our next generation voice interaction system for service robots backed by our self developed AI agent technology.

Speaker 2

It powers robots to reason, autonomously verify information and call additional tools to complete tasks. AgentOS will expand our total addressable market. We build tailor made AI agents to help ourselves or distributors sell robots and to assist restaurant and supermarket owners in greeting customer and introduce promotions. You can also easily customize your robot by uploading your company's data making the Cheetah robot especially adaptable to your needs. For example, our reception robot can greet visitors and even help visitors find nearby coffee shops all by using voice commands.

Speaker 2

One of our distributors in China has already used AgentOS to sell Cheetah robots. They uploaded product details, images and videos into the system. And now the robots act as smart sales representatives giving clear and detailed answers that sometimes surpass those of human sales staff. This easy to customize solution has led to higher sales and improved efficiency. We believe AgentOS will strengthen our lead in voice enabled robots.

Speaker 2

This improved product experience not only positions us to attract new customers, but should also drive repeat purchases from our existing customer base, particularly in corporate receptions, exhibition centers, public sector departments, schools and universities regarding our indoor autonomous driving capability. As I stated in the past, we are gradually transitioning to vision based solutions for our service robots. Vision will help our robots better understand and navigate real world environments, further influencing the data flying real for further product innovation and LLM advancement. In addition, we are continuing to leverage AI to enable smoother collaboration between robots as well as between robots and humans. Specifically, we use multimodal models to allow robots to follow users even in crowded spaces.

Speaker 2

And we're using enhanced AI algorithms for route planning to ensuring that multiple robots can work seamlessly together in a factory. Our ongoing product innovations and enhancements combined with a strong focus on high quality after sales service and Traders' established brand recognition have consistently helped us capture market share from peers and drive sustained sales growth. Going forward, we will continue expanding globally by building local sales teams and distribution channels, leveraging Q2's growing experience operating outside China. Following our success in South Korea and Japan, we have made solid progress in Europe. After about twelve months in Italy, we became the country's largest service robot provider.

Speaker 2

We are planning to open our European headquarters in Germany, aiming to solidify our presence in the region. It's important to note that the adoption of service robots in developed markets significantly lags behind China, presenting substantial opportunities, particularly in restaurants and fulfillment centers, moving our AI application initiatives. AI DS, our AI based data service platform has been well received by enterprises, including some well known companies. We also continue to leverage the most advanced LMS to rapidly find product market fit, while building app applications with a small focus team. For example, since DeepSeek became available, our team quickly used it to transform My WeChat official account into an AI agent, a virtual Fushan to enter users' inquiries.

Speaker 2

We have seen a significant increase in user engagement and new followers as a result. Additionally, we have integrated DeepSeek to support our voice enabled robots, allowing businesses to easily upgrade their robots and gain access to the DeepSig model through our devices. Our strategy for the AI application business is to build a product portfolio of focusing on building killer apps in selected areas. By leveraging the most advanced ALMS and our experience in developing apps, we are making limited investments with a smaller team to drive innovations. Overall, we achieved solid growth in 2024, but it is just the beginning of Cheetah's a turn down.

Speaker 2

With animal spirit and the valuable lessons from operating as a public listed company serving users and business globally, I am confident in our team's ability to bring Cheetah to even greater success.

Speaker 3

Thank you, Fushiong. Hello, everyone on the call. Please note that unless stated otherwise, all money amounts are in RMB terms. In Q4, we once again accelerated year over year revenue growth and achieved quarter over quarter reductions in non GAAP operating losses. Also, it represented the first quarter that we reduced our non GAAP operating losses on a year over year basis since Q4 twenty twenty two.

Speaker 3

Our strong performance in both top line and bottom line demonstrates Cheetah's continued business improvement since Q1 twenty twenty four. In Q4, total revenue increased by 42% year over year and 23% quarter over quarter to RMB237 million. Revenues from our Internet business increased by 49% year over year and 19% quarter over quarter, accounting for 68% of total revenue. This segment remains a strong cash cow, supporting our initiatives in AI and robotics. Revenues from AI and others increased by 29 year over year and 33% quarter over quarter.

Speaker 3

Within this segment, our robotics business contributed about one third of AI and other revenues or about 10% of total revenues. Notably, in the quarter, revenue from our robotics business outgrew other business in this segment, including our advertising agency business and multi cloud management services. On the profitability side, we continue to manage our costs and expenses, while strategically investing in top R and D talent and leading sales professionals to drive our robotics business forward. As of 12/31/2024, we had nine thirty five employees, an increase from eight forty five in 2023. About 40% of our employees are R and D talent and about 30% are in sales.

Speaker 3

From a business perspective, we continue to optimize our costs and expenses and focus our resources on AI and robotics. On a corporate level, our non GAAP gross profit increased by 74% year over year and 32% quarter over quarter to RMB172 million in Q4. Non GAAP gross margin increased to 73% in the quarter from 59% in the same period last year and 68% in the previous quarter. NAND GAAP operating loss reduced by about $18,000,000 quarter over quarter and about $7,000,000 year over year to $42,000,000 as we entered the anniversary of consolidating Beijing Aurestar and our investments in AI and robotics business, we expect our operating losses to continue reducing on both year over year and quarter over quarter basis. As segment, operating margin for our Internet business increased to 16% in Q4, up from 9% in the year ago quarter and 10% in the previous quarter.

Speaker 3

Another highlight of the quarter is our strong cash flow generation. We generated about $39,000,000 in operating cash flow, closing Q4 with a net cash position of about US250 million dollars Additionally, we hold about US100 million dollars in long term investments on our balance sheet. We are confident in keeping our balance sheet strong, in particular, maintaining our strong net cash position going forward. Before opening the call for questions, I want to emphasize our clear objective to drive revenue growth while achieving breakeven and generating operating profit as soon as possible. Furthermore, we continue to carefully manage our net cash position as we have recognized that earnings and cash position are the two key metrics that we measure our progress, both operationally and financially.

Speaker 1

Everyone, for today's conference call, now we will start the Q and A section. As of today's call, management will answer the question in Chinese. I think all the analysts on the line will answer the question in Chinese. And we'll have an AI agent who will translate the analyst's questions and also management's comments into English in another line. Please note the translation is for convenience purpose only in the case of any discrepancy or management statement in Chinese as well.

Speaker 1

If you are unable to hear the Chinese translation, I think a transcript in English will be available on our IR website within seven working days. Operator, now we are ready to take questions. Thank you so much.

Operator

Thank you. We will now begin the question and answer session. And today's first question comes from Thomas Chong at Jefferies. Please go ahead.

Speaker 1

Operator, please move to the next question. Thank you.

Operator

Our next question comes from Zeping Zhao at ICBC International. Please go ahead.

Speaker 1

Operator, please move to the next question. Thank you.

Operator

Thank you. Our next question comes from Securities. Please go

Speaker 4

ahead. My question is about the deep sea has driven the development of global large model industry this year. Do you think AI already possesses a condition to achieve scalability and lower costs or do we still need to wait for some critical turning points? Thank you.

Speaker 1

Operator, please move to the next question. Thank you.

Operator

Thank you. Our next question comes from Yi Zhu with Founders Securities. Please go ahead.

Speaker 1

Operator, please move to the next question. Thank you.

Operator

Thank you. Our next question comes from Joanna Ma with CMBI. Please go ahead.

Speaker 1

Operator, please move to the next question. Thank

Operator

you. Thank you. Our next question comes from Min Son at UOB. Please go ahead.

Speaker 1

Operator, please move to the next question. Thank you.

Operator

Absolutely. Our next question comes from Ben Kai Hsiao with CICC. Please go ahead.

Speaker 1

Operator, please move to the next question. Thank you.

Operator

Of course. Our next question comes from Chengdu Li with Guoyuan Securities. Please go ahead.

Speaker 1

Thank you. Operator, please move to the next question.

Operator

Our next question comes from Ben Shenng Wu with TF Global. Please go ahead.

Speaker 1

Thank you. Operator, please move to the next question. Thank you.

Operator

Of course. Our next question comes from Yanteng Diao with Guita Junan. Please go ahead.

Speaker 1

Operator, please move to the next question. Thank you.

Operator

Thank you. Our next question comes from Yandlong Chen with CITIC Securities. Please go ahead.

Speaker 1

Okay. Thank you. Operator, please move to the next question.

Operator

That does conclude our question and answer session, ma'am. So, I'll turn it back over for any closing remarks.

Speaker 1

Okay. So, thank you so much for joining our earnings conference call today. If you have any further questions, please let us know and you can either give us a call or send us e mail for your questions. Thank you so much.

Operator

Thank you. Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

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Earnings Conference Call
Cheetah Mobile Q4 2024
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