Cheetah Mobile Inc.

Good day and welcome to the Cheetah Mobile first quarter 2024 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Helen, Investor Relations for Cheetah Mobile.

Thank you, operator. Welcome to Cheetah Mobile's fourth quarter 2024 earnings conference call. With us today, our company's chairman and CEO, Mr. Fu Shun, and director and CFO, Mr. Tom Munchen. Following management's prepared remarks, we will conduct the Q&A section. Before we begin, I refer you to the safe harbor statement in our Urgent Treaties, which also applies to our conference call today, as we will make forward-looking statements. At this time, I would now like to turn the conference call over to Chairman and CEO, Mr. Fushun. Please go ahead, Fushun.

Hello, everyone. Thank you for joining us today. This is our first earning course since November 2021. And we are excited to share our progress as we resume our quality updates. Cheta Mobile is making changes. We are moving from focus on 2C to 2B. In Q1, our revenue from AI and others or enterprise focused increased by 62% compared to last year, and 36% from the previous quarter. Now these revenues make up 43% of our total revenue. We expect this to grow to about 50% by the end of the year, making significant steps in our transformation. Our recent acquisition of Beijing Orange Star, an AI service provider, was an important move. It gave us a skilled sales team, strong ties with business customers, and end-to-end capabilities for LMS, including model training, file training, developing LMS-based apps, and enhancing service robots. a new touch for interacting with end users and customers in the AI era. With OrinStar, we are now focusing on making customer enterprise apps with LMS and introducing LMS-powered robots for specific business needs. with the two main reasons for this focus. First, market opportunity. Unlike competitive 2C market, enterprises are increasingly choosing LRM-based apps on private cloud due to data security concerns. However, they face challenges in developing paired apps and presenting substantial opportunities in China's enterprise sector. Second, signatures. Bringing together Cheetah and Orange Star allow us to combine our app enterprise with AI skills. After capturing the market opportunities by sharing By selling robots to business, we can even find new ways to use LLMs to improve efficiency. We are using product-driven approach to enhance our LLM compatibilities. This is why we focus on the 10 parameters, LLM segments, and avoid large upfront investment in GPUs. We believe that a trillion parameters LM is unnecessary. And the enterprise can deploy and use 10B LMs on private clouds at lower cost. Over the past few months, we changed 14B parameters foundation models from scratch, which has been approved by authorities for a large-scale rollout and ranks among the top of various lists. Additionally, we are fighting nearly all the open-source foundation models to offer more options for our customers. all without significantly increasing costs. Furthermore, we have seen positive developments by integrating LRM-based apps into our service robot. In particular, our delivery robot can now interact better with users, leading to increased demands. especially in Japan and South Korea. Currently, our overseas revenue has surpassed domestic revenues and continues to grow steadily. With LMS, we believe the features of our service robot will expand even further. I would also like to highlight how we assist our customers in using LRM-based apps efficiently. For example, we helped Hun Dun University develop LRM-based QA feature for its app, improving user experience. We also developed LRM-powered customer service features for another customer products, including WeChat mini programs, apps, and our service robot. This service is now available in Ningxia, helping local residents apply for housing funds. We are also working with enterprise in China's Branching the industry to improve management professionally with LMS-based apps. In the early stage of LMS-based app development, we closely work with our customers to understand their needs. Identify areas for improvement with LMS. Find the most appropriate LMS. Find it. and develop customer apps. This process helps us standardize some LRM-based apps and capabilities, particularly in customer service, enterprise management, and training, which we can replicate to more customers. As a result, we are monitoring monitoring customer feedback and certification. Additionally, all the applications can be incorporated into our service robot. Our long-term business model in LMS year, we were involved in selling robots and offering value-added service. As we focus on building LRM-based apps for enterprise, we will shift our resource from our agency internet business to AI business. This will improve the operating margin of our internet business, which we use as a financial performance metric. In summary, LRM is a once-in-a-generation opportunity. With Orange Star and our clear strategy, we are now confident in our direction. We would like to emphasize that we don't want to set short-time revenue growth targets, but we are aggressively prioritizing our customer satisfaction and building light-house projects By doing so, we believe we will establish a new growth engine to drive sustainable long-term growth in both revenue and margins over time All we need is a bit of patience We thank you all dedicated employees for their hard work in making this happen. Thank you.