Cheetah Mobile Shares Sink 11% on Weak Revenue
In the third quarter, Cheetah's revenue slipped 32% year-over-year, attributed in part to the alleged ad fraud that halted its apps on Google Play Store.
The stock in Cheetah Mobile Inc. (NYSE: CMCM) plummeted nearly 11% to $3.82 per American depositary share on Wednesday afternoon after the company reported disappointing third quarter financials.
The Beijing-based mobile internet company said its revenue in the three months through September was $128.7 million, down 32% year-over-year. Net income was $62.8 million, or 45 cents per ADS, compared with $20.3 million, or 16 cents per ADS, a year ago.
Cheetah attributed the revenue drop to a decline in utility products and related services, which declined 58% year-over-year to $49.4 million. The decrease was factored by the slowdown of activity in overseas markets for Cheetah's mobile utility product business, the report said.
"In the quarter, our utility products business continue to fit headwinds due to favorable macro environment in both overseas and the domestic market. In overseas market, the recent global business environment had brought some difficult to Chinese enterprise in the process of going abroad," Sheng Fu, the chairman and chief executive officer of Cheetah, said in a conference call following the release of the results.
Fu also noted that Cheetah still has not resumed its business relations with Facebook Inc. (Nasdaq: FB). Along with a number of other Chinese companies, Cheetah was forced to halt ads for utility apps on Facebook in 2017.
The company is also facing allegations from multiple law firms regarding ad fraud on eight apps in the Google Play Store since December 2018.
Going forward, Cheetah said it expects to generate revenue in the range of $85 million to $91 million in the fourth quarter. The company also said its utility products and games business will continue to drop, as noted by Vincent Jiang, the chief financial officer of Cheetah.
"We are taking a conservative stance because, in our earlier call we mentioned that the overseas revenues and overseas business partners still having resumed his relationship with us. And the impact is actually much more significant than we originally expected. That is why, we are trying to be more conservative in our guidance," Jiang said in the conference call today.