Cheetah Mobile Inc. reports 279% EBITDA decline in 2019 and 38.3 pp EBITDA Margin decline from 11.0% to -27.3%
03/24/2020 • About Cheetah Mobile Inc. (
$CMCM) • By InTwits
Cheetah Mobile Inc. reported 2019 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is quite volatile: -27.3% in 2019, 11.0% in 2018, 11.7% in 2017, 3.3% in 2016, 9.6% in 2015
- Cheetah Mobile Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.6%. At the same time it's a lot of higher than industry average of 9.5%.
- CAPEX is quite volatile: $102m in 2019, $65m in 2018, $19m in 2017, $74m in 2016, $62m in 2015
- The company has unprofitable business model: ROIC is -19.0%
- It operates with medium-size leverage: Net Debt/EBITDA is 3.5x while industry average is -2.1x
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 dropped on 28.0%. Revenue decline showed acceleration in 19Q4 - it was 55.7% YoY. Revenue decline was accelerating on average at -30.5 pp per annum in 2015-2019. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 38.3 pp from 11.0% to -27.3% in 2019.
Gross Margin decreased on 3.7 pp from 69.1% to 65.4% in 2019. SG&A as a % of Revenue surged on 12.8 pp from 47.0% to 59.8% in 2019. During 2015-2019 SG&A as a % of Revenue bottomed in 2017 at 41.5% and was growing since that time.
Net Income margin dropped on 32.2 pp from 23.4% to -8.8% in 2019.
Investments (CAPEX, working capital and M&A)
In 2019 Cheetah Mobile Inc. had CAPEX/Revenue of 2.8%. The company's CAPEX/Revenue increased slightly on 1.2 pp from 1.6% in 2016 to 2.8% in 2019. Average CAPEX/Revenue for the last three years was 1.5%. During the last 5 years CAPEX as a % of Revenue bottomed in 2017 at 0.39% and was growing since that time.
Return on investment
The company operates at negative ROIC (-19.0%) and ROE (-6.0%). ROIC dropped on 26.7 pp from 7.7% to -19.0% in 2019. ROE dropped on 29.9 pp from 23.9% to -6.0% in 2019.
Leverage (Debt)
The company has no debt. Cash dropped on 64.7%.
Management team
Insider ownership is 1.3%.
The company has 2,209 employees. Average revenue per employee in 2019 was
$1,624,126.
Financial and operational results
FY ended 12/31/2019
Cheetah Mobile Inc. ($CMCM) key annual financial indicators| mln. $ | 2015 | 2016 | 2017 | 2018 | 2019 | 2019/2018 |
|---|
P&L
|
|---|
| Revenue | 3,774 | 4,565 | 4,975 | 4,982 | 3,588 | -28.0% |
| Gross Profit | 2,818 | 3,021 | 3,195 | 3,441 | 2,346 | -31.8% |
| SG&A | 1,954 | 2,212 | 2,064 | 2,341 | 2,146 | -8.3% |
| EBITDA | 364 | 151 | 583 | 547 | -979 | -278.8% |
| EBIT | | | | | -1,044 | |
| Net Income | 176 | -81 | 1,348 | 1,167 | -314 | -126.9% |
| Stock Based Compensation | | | | | 127 | |
Balance Sheet
|
|---|
| Cash | 1,843 | 1,411 | 2,317 | 2,784 | 983 | -64.7% |
| Accounts Receivable | | | | | 469 | |
| Accounts Payable | | | | | 88 | |
| Short Term Debt | 130 | 380 | 336 | 0 | 0 | |
| Long Term Debt | 11 | 119 | 0 | 0 | 0 | |
Cash flow
|
|---|
| Capex | 62 | 74 | 19 | 65 | 102 | 56.2% |
Ratios
|
|---|
| Revenue growth | 114.0% | 21.0% | 9.0% | 0.1% | -28.0% | |
| EBITDA growth | 125.3% | -58.5% | 286.4% | -6.1% | -278.8% | |
|
|---|
| Gross Margin | 74.7% | 66.2% | 64.2% | 69.1% | 65.4% | -3.7% |
| EBITDA Margin | 9.6% | 3.3% | 11.7% | 11.0% | -27.3% | -38.3% |
| EBIT Margin | | | | | -29.1% |
| SG&A, % of revenue | 51.8% | 48.5% | 41.5% | 47.0% | 59.8% | 12.8% |
| SBC, % of revenue | | | | | 3.6% |
| Net Income Margin | 4.7% | -1.8% | 27.1% | 23.4% | -8.8% | -32.2% |
| CAPEX, % of revenue | 1.6% | 1.6% | 0.4% | 1.3% | 2.8% | 1.5% |
|
|---|
| ROIC | 7.7% | -0.4% | 9.5% | 7.7% | -19.0% | -26.7% |
| ROE | 7.0% | -2.7% | 36.9% | 23.9% | -6.0% | -29.9% |
| Net Debt/EBITDA | -4.7x | -6.0x | -3.4x | -5.1x | |
People
|
|---|
| Insider ownership | | | | | 1.3% | |
| Employees | | | | | 2,209 | |
| Revenue/Employee, th. $ | | | | | 1,624 | |
Cheetah Mobile Inc. ($CMCM) key quoterly financial indicators
| mln. $ | 19Q1 | 19Q2 | 19Q3 | 19Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,086 | 970 | 920 | 612 | | -5.2% | -12.1% | -32.0% | -55.7% |
| EBITDA | -1 | -39 | -241 | -764 | | | | | -927.8% |
| Net Income | 7 | 49 | 452 | -821 | | -90.0% | -75.1% | 170.6% | -206.6% |
Balance Sheet
|
|---|
| Cash | 2,049 | 1,928 | 1,001 | 983 | | 29.6% | 5.9% | -64.4% | -64.7% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 66.0% | 66.0% | 60.0% | 70.0% | | 0.2% | -2.2% | -11.8% | 0.1% |
| EBITDA Margin | -0.1% | -4.0% | -26.2% | -124.8% | | -0.1% | -4.0% | -26.2% | -131.5% |
| Net Income Margin | 0.6% | 5.1% | 49.1% | -134.2% | | -5.5% | -12.8% | 36.8% | -189.9% |
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 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| 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 ($INS) | 14.2% | 71.0% | 12.2% | 119.0% | |
| |
|---|
| Median (152 companies) | 13.9% | 14.3% | 15.7% | 15.2% | 10.5% |
|---|
| Cheetah Mobile Inc. ($CMCM) | | 21.0% | 9.0% | 0.1% | -28.0% |
Top companies by Gross margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 97.4% | 98.0% | 97.6% | 96.5% | |
| hopTo Inc ($HPTO) | 87.8% | 95.9% | 98.2% | 95.4% | |
| Aware, Inc. ($AWRE) | 87.2% | 90.3% | 94.6% | 92.3% | |
| Alteryx, Inc. ($AYX) | 80.5% | 81.3% | 83.4% | 91.0% | |
| Aspen Technology, Inc. ($AZPN) | 88.7% | 89.7% | 90.2% | 89.9% | |
| |
|---|
| Median (151 companies) | 63.0% | 63.8% | 64.6% | 65.3% | 47.7% |
|---|
| Cheetah Mobile Inc. ($CMCM) | 74.7% | 66.2% | 64.2% | 69.1% | 65.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Aspen Technology, Inc. ($AZPN) | 42.2% | 46.0% | 45.2% | 43.3% | |
| ANSYS, Inc. ($ANSS) | 45.8% | 45.1% | 41.9% | 41.4% | |
| Paycom Software, Inc. ($PAYC) | 19.5% | 35.1% | 34.4% | 35.9% | |
| j2 Global, Inc. ($JCOM) | 40.6% | 41.7% | 36.5% | 35.7% | |
| Adobe Inc. ($ADBE) | 25.9% | 31.2% | 34.2% | 35.3% | |
| |
|---|
| Median (153 companies) | -11.3% | -5.3% | -4.2% | -3.3% | 15.6% |
|---|
| Cheetah Mobile Inc. ($CMCM) | 9.6% | 3.3% | 11.7% | 11.0% | -27.3% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| TimefireVR Inc ($TFVR) | 350.5% | 4.3% | | 1,021.9% | |
| MGT Capital Investments Inc ($MGTI) | 36.5% | 221.4% | 129.8% | 344.5% | |
| Integrated Ventures Inc ($INTV) | | | | 199.9% | 15.2% |
| ShotSpotter, Inc. ($SSTI) | 18.3% | 28.9% | 27.1% | 24.3% | |
| Ellie Mae, Inc. ($ELLI) | 20.6% | 16.7% | 21.1% | 19.4% | |
| |
|---|
| Median (154 companies) | 2.8% | 3.0% | 2.3% | 2.4% | 3.3% |
|---|
| Cheetah Mobile Inc. ($CMCM) | 1.6% | 1.6% | 0.4% | 1.3% | 2.8% |
Top companies by ROIC, %
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| InsPro Technologies Corp ($ITCC) | | | | 127.4% | |
| Manhattan Associates, Inc. ($MANH) | 78.7% | 99.3% | 102.5% | 80.9% | |
| Intuit Inc. ($INTU) | 23.7% | 52.1% | 72.6% | 66.8% | |
| Aspen Technology, Inc. ($AZPN) | | | | 58.1% | |
| Paycom Software, Inc. ($PAYC) | 30.5% | 75.4% | 51.1% | 47.5% | |
| |
|---|
| Median (180 companies) | -13.1% | -9.8% | -11.8% | -10.6% | 10.4% |
|---|
| Cheetah Mobile Inc. ($CMCM) | 7.7% | -0.4% | 9.5% | 7.7% | -19.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2015 | FY2016 | FY2017 | FY2018 | FY2019 |
|---|
| Upland Software, Inc. ($UPLD) | | 16.4x | 115.6x | 16.7x | |
| Nuance Communications, Inc. ($NUAN) | 5.7x | 5.3x | 7.1x | 15.2x | |
| Asure Software Inc ($ASUR) | 4.5x | 3.6x | 9.5x | 14.5x | |
| SS&C Technologies Holdings, Inc. ($SSNC) | 7.3x | 4.6x | 3.1x | 8.5x | |
| Avaya Holdings Corp. ($AVYA) | | | | 7.4x | |
| |
|---|
| Median (69 companies) | -0.8x | -0.9x | -0.8x | -0.6x | -0.1x |
|---|
| Cheetah Mobile Inc. ($CMCM) | -4.7x | -6.0x | -3.4x | -5.1x | |
