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Cheetah Mobile Inc. , a leading internet company, today announced its unaudited consolidated financial results for the third quarter 2021 endedSeptember 30, 2021.

Third Quarter 2021 Consolidated Financial Results

REVENUES

Total revenues wereRMB196.1 million(US$30.4 million) in the third quarter of 2021, representing a decrease of 46.3% year over year and 7.4% quarter over quarter.

As a result of the Company's ongoing business streamlining efforts, the Company realignedits segments based on the change of the way that the managementassessedthe Company's segment performance. The Company's overseas advertising agency services, which assists domestic companies to launch advertisement on overseas advertising platforms, are changed from the Internet business into AI and others due to the synergies created between the Company's advertising agency services and global cloud services. Consequently, the Company has retrospectively revised segment information and related revenue presentation to conform to the change in the Company's segments.

Revenues from the Company's internet business decreased by 50.8% year over year and 15.5% quarter over quarter toRMB160.5 million(US$24.9 million) in the third quarter of 2021. The year-over-year decrease was due to the Company's strategic efforts to diminish the game-related business in past quarters. The quarter-over-quarter decrease was mainly because revenue in the second quarter of 2021 was temporarily increased due toJune 18promotional events and no such promotional event occurred in the third quarter of 2021.

Revenues from the AI and others were RMB35.6 million(US$5.5 million) in the third quarter of 2021, representing a 8.8% year-over-year decrease and a 62.8% quarter-over-quarter increase. The year-over-year decline was primarily attributable to the drop in sales of AI-related hardware products. The quarter-over-quarter increase was from our shopping-mall coupon-selling robots business as well as our global cloud services.

COST OF REVENUES AND GROSS PROFIT

Cost of revenuesdecreased by 34.5% year over year and increased by 47.1% quarter over quarter toRMB74.4 million(US$11.5 million) in the third quarter of 2021. The year-over-year decrease was primarily due to the decreased revenue. The quarter-over-quarter increase was due to increased spending over AI related business.Non-GAAP cost of revenuesdecreased by 34.5% year over year and increased by 47.7% quarter over quarter toRMB74.2 million(US$11.5 million) in the third quarter of 2021.

Gross profitdecreased by 51.6% year over year and 24.5% quarter over quarter toRMB121.7 million(US$18.9 million) in the third quarter of 2021.Non-GAAP gross profitdecreased by 51.6% year over year and decreased 24.5% quarter over quarter toRMB121.9 million(US$18.9 million) in the third quarter of 2021.

Gross marginwas 62.1% in the third quarter of 2021, compared to 68.9% in the third quarter of 2020 and 76.1% in the second quarter of 2021.Non-GAAP gross marginwas 62.2% in the third quarter of 2021, compared to 69.0% in the third quarter of 2020 and 76.3% in the second quarter of 2021.

OPERATING INCOME/LOSS AND EXPENSES

Total operating expenses decreased by 51.0% year over year and by 15.9% quarter over quarter toRMB184.9 million(US$28.7 million) in the third quarter of 2021.Total non-GAAP operating expensesdecreased by 51.3% year over year and by 17.2% quarter over quarter toRMB180.4 million(US$28.0 million) in the third quarter of 2021.

• Research and developmentexpenses decreased by 52.9% year over year and increased by 17.2% quarter over quarter toRMB55.4 million(US$8.6 million) in the third quarter of 2021. The year-over-year decrease was mainly due to the deconsolidation of certain mobile game business in prior year. Our investment in research and development has been keeping flat. The quarter-over-quarter change was mainly due to less government grants in this quarter.  Non-GAAP research and development expensesdecreased by 53.7% year over year and increased 10.5% quarter over quarter toRMB52.0 million(US$8.1 million) in the third quarter of 2021.
• Selling and marketing expenses decreased by 48.3% year over year and 29.8% quarter over quarter toRMB85.6 million(US$13.3 million) in the third quarter of 2021. This year-over-year decrease was attributable to the streamlining of our business and the strategic reduction of our costs. While the quarter-over-quarter decrease was mostly because we incurred incremental promotion expenses for theJune 18promotional events in the second quarter. Non-GAAP selling and marketing expenses decreased by 49.0% year over year and 30.0% quarter over quarter toRMB85.0 million(US$13.2 million) in the third quarter of 2021.
• General and administrative expenses decreased by 46.5% year over year and 8.1% quarter over quarter toRMB48.7 million(US$7.6 million) in the third quarter of 2021. The decrease was mainly due to the our business operation streamlining and the effective expense control.Non-GAAP general and administrative expensesdecreased by 45.5% year over year and 6.7% quarter over quarter toRMB48.1 million(US$7.5 million) in the third quarter of 2021.

Operating loss wasRMB63.2 million(US$9.8 million) in the third quarter of 2021, compared toRMB126.0 millionin the same period of the last year andRMB58.8 millionin the second quarter of 2021.Non-GAAP operating losswasRMB58.5 million(US$9.1 million) in the third quarter of 2021, compared toRMB118.9 millionin the same period of the last year andRMB56.4 millionin the second quarter of 2021.

• Operating profit for the internet business wasRMB1.8 millionin the third quarter of 2021, compared to an operating profit ofRMB64.2 millionin the same period last year and operating loss ofRMB8.2 millionin the second quarter of 2021.
• Operating loss for AI and otherswasRMB60.3 millionin the third quarter of 2021, compare with an operating loss ofRMB183.1 millionin the same period last year and an operating loss ofRMB48.3 millionin the second quarter of 2021.

Share-based compensation expenses wereRMB4.7 million(US$0.7 million) in the third quarter of 2021, compared toRMB7.1 millionin the same period of the last year andRMB2.4 millionin the second quarter of 2021.