Cheetah Mobile Inc. — FY2021 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing; the supplied filing does not provide a clear set of Q4-only results. Financial statements are prepared under U.S. GAAP. Unless otherwise noted, amounts below are RMB.
Business context
Cheetah Mobile is a Cayman Islands holding company whose businesses include mobile and PC internet products and advertising, AI-related services and hardware, multi-cloud management, and overseas advertising agency services. China operations include variable interest entities (VIEs) controlled through contracts rather than equity ownership. The VIEs contributed 33.1% of consolidated revenue in 2021.
FY2021 financial results and liquidity
| Metric | FY2021 | Comparison |
|---|---|---|
| Revenue | RMB784.6 million (US$123.1 million) | Down 49.5% from RMB1,552.6 million in 2020 |
| Internet business revenue | RMB653.8 million | Down 52.7% year over year; 83.3% of total revenue |
| AI and other revenue | RMB130.9 million | Down from RMB171.7 million; 16.7% of total revenue |
| Gross profit / gross margin | RMB527.0 million / 67.2% | Gross profit down 51.1%; margin was 69.4% in 2020 |
| Operating loss | RMB229.6 million | Improved from a RMB531.1 million loss; operating loss margin 29.3% versus 34.2% |
| Net loss attributable to Cheetah Mobile | RMB351.1 million (US$55.1 million); basic loss per share RMB0.2469, or RMB2.4694 per ADS | Compared with attributable net income of RMB416.7 million in 2020 |
| Operating cash flow | RMB102.8 million provided | Compared with RMB46.1 million used in 2020 |
| Investing / financing cash flow | RMB220.8 million provided / RMB9.6 million used | Investing cash flow was RMB1,880.4 million provided and financing cash flow RMB1,450.7 million used in 2020 |
| Cash, cash equivalents and restricted cash | RMB1,584.7 million at year-end | Short-term investments were RMB262.8 million; total including restricted cash was RMB1,847.5 million |
| Current assets / current liabilities | RMB2,598.5 million / RMB1,353.9 million | Current ratio approximately 1.9 |
| Total assets / total liabilities | RMB4,978.3 million / RMB1,618.2 million | Total assets declined from RMB5,613.5 million in 2020 |
The summarized balance-sheet data do not provide a separate year-end borrowings figure. The cash-flow statement reports no bank-loan proceeds or repayments in 2021; investors should consult the full notes for the composition of liabilities and any debt obligations.
Material changes and unusual items
- Revenue fell sharply amid the 2020 disposal of major gaming-related businesses, the continuing loss of Google Play, AdMob and AdManager accounts disabled in February 2020, and weaker advertising activity. Management also cited its shift away from overseas markets and broader macroeconomic and COVID-19 effects.
- Operating expenses declined 53.0% to RMB756.5 million as the company streamlined operations and reduced headcount from 1,044 at year-end 2020 to 851 at year-end 2021. R&D, selling and marketing, and general and administrative expenses each fell substantially.
- Investment impairment was a significant drag: the company reported RMB395.0 million of impairment of assets in its cash-flow reconciliation and RMB412.7 million of other expense, primarily associated with long-term investment impairment. Other income was RMB253.0 million, including gains from certain investment disposals and equity-method investments.
- Operating cash flow turned positive despite the net loss, with noncash impairment and changes in operating assets and liabilities contributing. Cash from investing was also affected by large, offsetting short-term investment purchases and maturities.
- The company began a shopping-mall coupon-selling robot model in 2021, but said it remained early-stage, generated immaterial revenue, and was not expected to produce significant near-term revenue inflows. Multi-cloud management revenue rose to RMB41.4 million from RMB3.5 million.
Outlook, risks and contingencies
- Management stated that cash and anticipated operating cash flow were expected to cover anticipated needs for the next 12 months, while noting that changing conditions or investments and acquisitions could require additional resources. No specific revenue or earnings guidance was provided.
- The company intends to retain most available funds and future earnings and said it had no plan to pay dividends in the near future. It paid substantial special dividends in 2019 and 2020.
- Major risks include declining users and monetization, dependence on a limited number of customers and advertising partners, competitive pressure, data privacy and cybersecurity regulation, and the continued uncertainty around PRC oversight and the enforceability of the VIE contracts. The five largest customers contributed 35.6% of 2021 revenue.
- The filing says the company believed it was a PFIC for U.S. tax purposes in 2021, potentially creating adverse tax consequences for U.S. investors. It also described the PCAOB’s inability at that time to inspect its China-based auditor and possible HFCAA trading restrictions.
- Internal control over financial reporting was ineffective at December 31, 2021 because of a material weakness in controls over projected financial information used to assess an equity investment. The auditor issued an adverse opinion on internal controls but an unqualified opinion on the financial statements. Management described remediation steps; effectiveness had not yet been established in this filing.
- The SEC investigation concerning 2015 disclosures and certain officer and director trading plans remained unresolved; the company said it could not estimate a possible loss. A previously accrued US$1.5 million contingency was reversed in 2021. The putative U.S. securities class action was dismissed and closed in May 2022. The filing also describes a separate long-running lawsuit involving CEO Sheng Fu.
- After year-end, the company disclosed receiving an NYSE notice dated April 15, 2022 that its share price was below the exchange’s continued-listing threshold; it said it was considering options, with no assurance it would regain compliance.
Investor facts to verify
- Whether recent revenue and user trends, including the effects of Google account suspensions and gaming disposals, have stabilized.
- The nature, valuation assumptions and further impairment exposure of the company’s investment portfolio, including the significant 2021 impairment and Live.me valuation.
- Progress in remediating the internal-control material weakness and the implications of the adverse internal-control audit opinion.
- Current status and potential financial impact of the SEC investigation, the CEO-related litigation, and NYSE listing compliance.
- Whether cash and short-term investments are accessible across the group, given PRC restrictions on asset transfers and dividend remittances, and whether debt or other obligations exist beyond the summarized figures.