Cheetah Mobile Inc. Net Income dropped on 13.4% and Revenue showed almost no change
03/25/2019 • About Cheetah Mobile Inc. (
$CMCM) • By InTwits
Cheetah Mobile Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is quite volatile: 11.0% in 2018, 11.7% in 2017, 3.3% in 2016, 9.6% in 2015, 9.2% in 2014
- Cheetah Mobile Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.4%. At the same time it's in pair with industry average of 3.6%
- CAPEX is quite volatile: $65m in 2018, $19m in 2017, $74m in 2016, $62m in 2015, $36m in 2014
- The company has business model with low profitability: ROIC is 7.7%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue showed almost no change in 2018. Revenue growth showed slowdown in 18Q4 - it was -0.5% YoY. Revenue decline was accelerating on average at -37.5 pp per annum in the last 5 years. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.71 pp from 2.2% to 2.9% in 2018.
Gross Margin increased on 4.9 pp from 64.2% to 69.1% in 2018. During the last 5 years Gross Margin bottomed in 2017 at 64.2%. SG&A as a % of Revenue increased on 5.5 pp from 41.5% to 47.0% in 2018.
Net Income margin decreased on 3.7 pp from 27.1% to 23.4% in 2018.
Investments (CAPEX, working capital and M&A)
Cheetah Mobile Inc.'s CAPEX/Revenue was 1.3% in 2018. The company showed almost no change in CAPEX/Revenue from 2015 to 2018. It's average CAPEX/Revenue for the last three years was 1.1%. During 2014-2018 CAPEX as a % of Revenue bottomed in 2017 at 0.39%.
Return on investment
The company operates at good ROE (23.9%) while ROIC is low (7.7%). ROIC decreased slightly on 1.8 pp from 9.5% to 7.7% in 2018. ROE dropped on 13.0 pp from 36.9% to 23.9% in 2018.
Leverage (Debt)
The company paid down all the debt in 2018. Cash jumped on 20.1%.
Financial and operational results
FY ended 12/31/2018
Cheetah Mobile Inc. ($CMCM) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 1,764 | 3,774 | 4,565 | 4,975 | 4,982 | 0.1% |
| Gross Profit | 1,360 | 2,818 | 3,021 | 3,195 | 3,441 | 7.7% |
| SG&A | 841 | 1,954 | 2,212 | 2,064 | 2,341 | 13.4% |
| EBITDA | 161 | 364 | 151 | 583 | 547 | -6.1% |
| Net Income | 68 | 176 | -81 | 1,348 | 1,167 | -13.4% |
Balance Sheet
|
|---|
| Cash | 1,093 | 1,843 | 1,411 | 2,317 | 2,784 | 20.1% |
| Short Term Debt | 0 | 130 | 380 | 336 | 0 | -100.0% |
| Long Term Debt | 0 | 11 | 119 | 0 | 0 | |
Cash flow
|
|---|
| Capex | 36 | 62 | 74 | 19 | 65 | 237.4% |
Ratios
|
|---|
| Revenue growth | 135.2% | 114.0% | 21.0% | 9.0% | 0.1% | |
| EBITDA growth | 36.7% | 125.3% | -58.5% | 286.4% | -6.1% | |
|
|---|
| Gross Margin | 77.1% | 74.7% | 66.2% | 64.2% | 69.1% | 4.9% |
| EBITDA Margin | 9.2% | 9.6% | 3.3% | 11.7% | 11.0% | -0.7% |
| SG&A, % of revenue | 47.7% | 51.8% | 48.5% | 41.5% | 47.0% | 5.5% |
| Net Income Margin | 3.9% | 4.7% | -1.8% | 27.1% | 23.4% | -3.7% |
| CAPEX, % of revenue | 2.1% | 1.6% | 1.6% | 0.4% | 1.3% | 0.9% |
|
|---|
| ROIC | 5.6% | 7.7% | -0.4% | 9.5% | 7.7% | -1.8% |
| ROE | 5.8% | 7.0% | -2.7% | 36.9% | 23.9% | -13.0% |
| Net Debt/EBITDA | -6.8x | -4.7x | -6.0x | -3.4x | -5.1x | -1.7x |
Cheetah Mobile Inc. ($CMCM) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,145 | 1,103 | 1,352 | 1,381 | | -3.8% | -8.2% | 13.2% | -0.5% |
| Net Income | 70 | 197 | 167 | 770 | | -23.3% | 180.0% | 19.6% | -26.4% |
Balance Sheet
|
|---|
| Cash | 1,581 | 1,820 | 2,809 | 2,784 | | 19.1% | -1.6% | 69.9% | 20.1% |
| Short Term Debt | 0 | 0 | 0 | 0 | | -100.0% | -100.0% | -100.0% | -100.0% |
| Long Term Debt | 0 | 0 | 0 | 0 | | -100.0% | -100.0% | -100.0% | |
Ratios
|
|---|
| Gross Margin | 65.8% | 68.2% | 71.8% | 69.9% | | 4.3% | 6.5% | 5.2% | 3.1% |
| Net Income Margin | 6.1% | 17.8% | 12.4% | 55.8% | | -1.5% | 12.0% | 0.7% | -19.7% |
Peers in Application Software
Below we provide Cheetah Mobile Inc. benchmarking against other companies in Application Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (151 companies) | -43.3% | 13.5% | 13.6% | 15.7% | 15.2% |
|---|
| Cheetah Mobile Inc. ($CMCM) | | 114.0% | 21.0% | 9.0% | 0.1% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (150 companies) | 62.8% | 61.7% | 63.8% | 64.6% | 65.7% |
|---|
| Cheetah Mobile Inc. ($CMCM) | 77.1% | 74.7% | 66.2% | 64.2% | 69.1% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (152 companies) | -10.3% | -10.7% | -5.3% | -4.2% | -3.3% |
|---|
| Cheetah Mobile Inc. ($CMCM) | 9.2% | 9.6% | 3.3% | 11.7% | 11.0% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (153 companies) | 2.8% | 2.7% | 3.0% | 2.3% | 2.4% |
|---|
| Cheetah Mobile Inc. ($CMCM) | 2.1% | 1.6% | 1.6% | 0.4% | 1.3% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (179 companies) | -14.4% | -13.1% | -9.8% | -11.8% | -10.4% |
|---|
| Cheetah Mobile Inc. ($CMCM) | 5.6% | 7.7% | -0.4% | 9.5% | 7.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (69 companies) | -1.2x | -0.9x | -0.9x | -0.8x | -0.6x |
|---|
| Cheetah Mobile Inc. ($CMCM) | -6.8x | -4.7x | -6.0x | -3.4x | -5.1x |
