May 29, 2013

ChinaCache International Holdings Ltd. Announces First Quarter 2013 Financial Results

BEIJING, May 29, 2013 (GLOBE NEWSWIRE) -- ChinaCache International Holdings Ltd. ("ChinaCache" or the "Company") (Nasdaq:CCIH), the leading total solutions provider of Internet content and application delivery services in China, today announced its unaudited condensed consolidated financial results for the first quarter ended March 31, 2013.

Highlights for the First Quarter of 2013

  • Net revenues in the first quarter were RMB230.7 million (US$37.2 million), representing a 2.5% increase from the previous quarter and a 26.8% increase year-over-year.
  • Gross profit in the first quarter was RMB71.2 million (US$11.5 million), an increase of 5.3% from the previous quarter and 26.6% year-over-year.
  • Gross margin in the first quarter was 30.9%, compared to 30.1% in the fourth quarter of 2012 and 30.9% in the corresponding quarter in 2012. Adjusted gross margin (non-GAAP) in the first quarter was 35.5%.    
  • Adjusted net loss (non-GAAP) was RMB7.5 million (US$1.2 million) in the first quarter, compared to adjusted net loss of RMB19.9 million in the fourth quarter of 2012.

"We are pleased to report that net revenues in the first quarter exceeded the high end of our guidance, reaching RMB 231 million. Gross margin in the first quarter improved to 30.9%, up 80 basis points quarter-over-quarter. We delivered sequential improvements across many of our key operating metrics in the first quarter, which speaks to the effectiveness of our enhanced business development and efficiency optimization initiatives," said Mr. Song Wang, Founder, Chairman and Chief Executive Officer of ChinaCache. "Our company-wide efforts to grow ChinaCache's presence in the enterprise segment are continuing to generate results through increases in customer count and revenue contribution, as well as through the ongoing expansion of our footprint in the enterprise market. Over the longer-term, we believe that mobile Internet is going to become a major driver of demand for services such as ours, as the rapid increase in mobile data traffic is severely straining China's wireless networks. ChinaCache will seize these opportunities and further lead the Chinese market to transition from traditional CDN market to the new generation of CDN."

First Quarter 2013 Financial Results

Net revenues for the first quarter of 2013 were RMB230.7 million (US$37.2 million), a 2.5% increase from the fourth quarter of 2012 and a 26.8% increase from the corresponding period in 2012. Net revenue growth was primarily driven by the enterprise vertical which grew 36.7% quarter over quarter and contributed 8% of total net revenues in the first quarter of 2013.

Cost of revenues for the first quarter increased 1.4% quarter-over-quarter and 26.9% year-over-year to RMB159.5 million (US$25.7 million). Gross margin was 30.9%, compared to 30.1% in the previous quarter and 30.9% in the corresponding period in 2012. Non-GAAP gross margin, which excludes share-based compensation and depreciation and amortization expenses, was 35.5%, compared to 35.1% in the fourth quarter of 2012 and 39.5% in the corresponding period in 2012. 

Sales and marketing expenses for the first quarter decreased 2.4% from the previous quarter to RMB26.7 million (US$4.3 million) as the Company undertook fewer promotional activities than in the fourth quarter of 2012. Sales and marketing expenses increased 32.2% year-over-year and accounted for 11.6% of net revenues in the first quarter of 2013.

General and administrative expenses for the first quarter declined 29.9% from the previous quarter to RMB30.3 million (US$4.9 million) and increased 78.0% year-over-year, accounting for 13.1% of net revenues in the first quarter of 2013.  General and administrative expenses in the fourth quarter of 2012 included a bad debt provision of RMB17.1 million.

Research and development expenses for the first quarter increased 1.4% over the previous quarter to RMB21.1million (US$3.4 million) and increased 49.9% year-over-year, accounting for 9.2% of net revenues in the first quarter of 2013. The increases were mainly due to the Company's ongoing product development initiatives.

Operating loss was RMB6.9 million (US$1.1 million) in the first quarter of 2013, compared to an operating loss of RMB23.8 million in the previous quarter and an operating income of RMB4.9 million in the corresponding period in 2012. Non-GAAP operating loss, which excludes share-based compensation expense was RMB5.3 million (US$0.8 million), compared to a Non-GAAP operating loss of RMB20.8 million in the fourth quarter of 2012 and a Non-GAAP operating income of RMB11.2 million in the corresponding period in 2012. 

Income tax expense was RMB3.1 million (US$0.5 million) in the first quarter of 2013, compared to an income tax benefit of RMB0.3 million in the fourth quarter of 2012 and an income tax expense of RMB2.8 million in the first quarter of 2012.

Net loss was RMB8.5 million (US$1.4 million) in the first quarter of 2013, compared to a net loss of RMB26.7 million in the fourth quarter of 2012 and a net profit of RMB2.5 million in the corresponding period in 2012. Basic and diluted loss per American depositary share ("ADS") for the first quarter of 2013 were RMB0.37 (US$0.06) and RMB0.37 (US$0.06), respectively. Each ADS represents 16 ordinary shares of the Company.

Adjusted net loss (non-GAAP), defined as net loss before share-based compensation expense, foreign exchange loss or gain and penalties on uncertain tax positions, was RMB7.5 million (US$1.2 million), compared to an adjusted net loss (non-GAAP) of RMB19.9 million in the fourth quarter of 2012 and an adjusted net income (non-GAAP) of RMB8.9 million in the corresponding period in 2012. Non-GAAP basic and diluted loss per ADS for the first quarter of 2013 were RMB0.33 (US$0.05) and RMB0.33 (US$0.05), respectively.

Adjusted EBITDA (non-GAAP), defined as EBITDA excluding share-based compensation expense and foreign exchange loss or gain, was RMB9.8 million (US$1.6 million) compared to negative RMB5.9 million in the fourth quarter of 2012 and RMB27.0 million in the corresponding period in 2012.

Capital Resources

As of March 31, 2013, the Company had cash and cash equivalents of RMB240.5 million (US$38.7 million).  In addition, the Company had an available-for-sale investment amounting to RMB82.9 million (US$13.3 million) in an RMB denominated short-term fixed income fund which is presented as non-current assets. Capital expenditures for the first quarter of 2013 were RMB55.6 million (US$8.9 million).

Share Repurchases

In May 2012, the Company's Board authorized a share repurchase program to repurchase up to US$10 million of the Company's ADSs from May 18, 2012 to May 17, 2013 through open market transactions or in block trades.

As of May 17, 2013, the Company had repurchased a total of 319,827 ADSs for approximately US$1.5 million at an average price of US$4.65 per ADS under this buyback program on the open market. The Company currently has approximately 22.6 million ADSs outstanding.

Outlook for the Company's Second Quarter of 2013

ChinaCache currently expects to generate total net revenues in the range of RMB250 million (US$40.3 million) to RMB255 million (US$41.1 million) for the second quarter of 2013, representing an increase of 8.3% to 10.5% from the first quarter of 2013, and an increase of 26.6% to 29.1% year-over-year. This forecast reflects ChinaCache's current view, which is subject to change.

Conference Call Information

The Company has scheduled a conference call to discuss these results at 8:00 PM Eastern Daylight Time on May 29, 2013, which corresponds to 8:00 AM Beijing time on May 30, 2012.

The dial-in details for the live conference call are as follows:

  • U.S. dial-in number:  +1 (646) 254-3515
  • Hong Kong dial-in number:  +852 3051-2745
  • International dial-in number:  +65 6723-9385
  • China dial-in number:  400-1200-654
  • Conference ID:  7500-2674

A live and archived webcast of the conference call will be available on the Investor Relations section of ChinaCache's website at en.chinacache.com.

A replay of the conference call will also be available until June 5, 2013 by dialing:

  • U.S. dial-in number:  +1 (855) 452-5696
  • International dial-in number:  +61 (2) 8199 0299
  • China dial-in number:  400-1200-932  
  • Conference ID:  7500-2674

About ChinaCache International Holdings Ltd.

ChinaCache International Holdings Ltd. (Nasdaq:CCIH) is the leading total solutions provider of Internet content and application delivery services in China. As a carrier-neutral service provider, ChinaCache's network in China is interconnected with networks operated by all telecom carriers, major non-carriers and local Internet service providers. With more than a decade of experience in developing solutions tailored to China's complex internet infrastructure, ChinaCache is a partner of choice for businesses, government agencies and other enterprises to enhance the reliability and scalability of online services and applications and improve end-user experience. For more information on ChinaCache, please visit en.chinacache.com.

*Use of Non-GAAP Financial Measures

In evaluating its business, ChinaCache considers and uses the following non-GAAP measures defined as non-GAAP financial measures by the SEC as supplemental measures to review and assess its operating performance: non-GAAP gross profit, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses, non-GAAP research and development expenses, non-GAAP operating income/(loss), adjusted net income/(loss) (non-GAAP), EBITDA and adjusted EBITDA (non-GAAP).  The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of Non-GAAP to GAAP Financial Measures" set forth at the end of this press release.

To present non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses and non-GAAP research and development expenses, the Company excludes share-based compensation expense.

To present non-GAAP gross profit, the Company excludes depreciation and amortization expenses and share-based compensation expense.

To present non-GAAP operating income/(loss), the Company excludes share-based compensation expense.

The Company defines adjusted net income as net income/(loss) before share-based compensation expense, foreign exchange loss or gain and penalties on uncertain tax positions.

The Company uses EBITDA to assist in reconciliation to adjusted EBITDA.  The Company defines EBITDA as net income (loss) before interest expense, interest income, income tax expense, penalties on uncertain tax positions and depreciation and amortization.  The Company defines adjusted EBITDA as EBITDA before share-based compensation expense and foreign exchange loss or gain that the Company does not consider reflective of its ongoing operations.  The Company believes that the use of adjusted EBITDA facilitates investors' use of operating performance comparisons from period to period and company to company by backing out potential differences caused by variations in items such as capital structure (affecting relative interest expense and share-based compensation expense), the book amortization of intangibles (affecting relative amortization expense), the age and book value of facilities and equipment (affecting relative depreciation expense) and other non-cash expenses.  The Company also presents adjusted EBITDA because it believes it is frequently used by securities analysts, investors and other interested parties as a measure of the financial performance of companies in its industry.

Those non-GAAP financial measures are not defined under U.S. GAAP and are not measures presented in accordance with U.S. GAAP.  Those non-GAAP financial measures have limitations as analytical tools, and when assessing the Company's operating performance, investors should not consider them in isolation, or as a substitute for net income (loss) or other consolidated income statement data prepared in accordance with U.S. GAAP.  Some of these limitations include, but are not limited to:

  • Adjusted net income/(loss), EBITDA and adjusted EBITDA do not reflect the Company's cash expenditures or future requirements for capital expenditures or contractual commitments;
  • They do not reflect changes in, or cash requirements for, the Company's working capital needs;
  • They do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on the Company's debt;
  • They do not reflect income taxes or the cash requirements for any tax payments;
  • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and adjusted net income/(loss), EBITDA and adjusted EBITDA do not reflect any cash requirements for such replacements;
  • While share-based compensation is a component of cost of revenues and operating expenses, the impact on the Company's financial statements compared to other companies can vary significantly due to such factors as assumed life of the options and assumed volatility of the Company's ordinary shares; and
  • Other companies may calculate adjusted net income/(loss), EBITDA and adjusted EBITDA differently than the Company does, limiting their usefulness as comparative measures.

Exchange Rate Information

This announcement contains translations of certain RMB amounts into U.S. dollars at a specified rate solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are based on the effective exchange rate of 6.2108 as of March 31, 2013.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the outlook for the second quarter of 2013 and quotations from management in this announcement, as well as ChinaCache's strategic and operational plans, contain forward-looking statements. ChinaCache may also make written or oral forward-looking statements in its reports filed or furnished to the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statements, including but not limited to the following: the Company's goals and strategies, expansion plans, the expected growth of the content and application delivery services market, the Company's expectations regarding keeping and strengthening its relationships with its customers, and the general economic and business conditions in the regions where the Company provides its solutions and services. Further information regarding these and other risks is included in the Company's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is as of the date of this press release, and ChinaCache undertakes no duty to update such information, except as required under applicable law.

Condensed Consolidated Balance Sheets
(amounts in thousands)
       
  As of Dec
31
As of Mar
31
As of Mar
31
  2012 2013 2013
   RMB   RMB   US$ 
  (Audited) (Unaudited) (Unaudited)
 ASSETS       
 Current assets       
 Cash and cash equivalents  317,137 240,537 38,729
 Accounts receivable, net  230,199 311,937 50,225
 Prepaid expenses and other current assets  31,240 43,432 6,993
 Deferred tax assets  13,626 9,416 1,516
 Amount due from a related party  8,640 3,840 618
 Total current assets  600,842 609,162 98,081
       
 Non-current assets       
 Property, plant and equipment, net  179,239 195,119 31,416
 Intangible assets, net  3,368 5,109 823
 Land use right   --  51,505 8,293
 Long term investments  15,136 15,136 2,437
 Available-for-sale investments  82,292 82,850 13,340
 Deferred tax assets  6,166 10,307 1,660
 Long-term deposits  13,847 3,738 602
 Total non-current assets  300,048 363,764 58,571
       
 Total Assets  900,890 972,926 156,652
       
 LIABILITIES AND SHAREHOLDERS' EQUITY       
 Current Liabilities       
 Accounts payable  106,399 141,607 22,800
 Accrued employee benefits  36,084 45,113 7,264
 Accrued expenses and other payables  57,773 88,341 14,224
 Income tax payable  22,537 25,965 4,181
 Liabilities for uncertain tax positions  11,786 11,786 1,898
 Amounts due to related parties  1,062 1,100 177
 Total current liabilities  235,641 313,912 50,544
       
 Non-current liabilities       
 Deferred government grant  3,360 3,360 541
 Total non-current liabilities  3,360 3,360 541
       
 Total Liabilities  239,001 317,272 51,085
       
 Total Shareholders' equity  661,889 655,654 105,567
       
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  900,890 972,926 156,652
 
Condensed Consolidated Statements of Comprehensive Income
(amounts in thousands, except for number of shares, per share and per ADS data)
         
  For the Three Months Ended
  Mar 31, 2012 Dec 31, 2012 Mar 31, 2013 Mar 31, 2013
  RMB RMB RMB US$
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
         
Net revenues  181,975  225,019  230,748  37,153
Cost of revenues  (125,708)  (157,372)  (159,538)  (25,687)
         
Gross profit  56,267  67,647  71,210  11,466
Sales & marketing expenses  (20,207)  (27,376)  (26,711)  (4,301)
General & administrative expenses  (17,019)  (43,225)  (30,297)  (4,878)
Research & development expenses  (14,103)  (20,856)  (21,139)  (3,404)
         
Operating income/(loss)  4,938  (23,810)  (6,937)  (1,117)
Interest income  696  309  446  72
Interest expense  (311)  (575)  (411)  (66)
Other income /(expense)  138  (1,867)  878  141
Foreign exchange (loss)/gain, net  (139)  (994)  643  104
         
Income/(loss) before income taxes  5,322  (26,937)  (5,381)  (866)
Income tax (expense)/benefit  (2,804)  266  (3,098)  (499)
         
Net income/(loss) attributable to ordinary shareholders  2,518  (26,671)  (8,479)  (1,365)
         
Foreign currency translation  --   77  28  5
Unrealized gain from available-for-sale investments  314  311  557  90
         
Total other comprehensive income, net of tax  314  388  585  95
         
Comprehensive income/(loss)  2,832  (26,283)  (7,894)  (1,270)
         
Earnings/(loss) per ordinary share:        
Basic 0.01 (0.07) (0.02) (0.00)
Diluted 0.01 (0.07) (0.02) (0.00)
         
Earnings/(loss) per ADS:        
Basic 0.11 (1.17) (0.37) (0.06)
Diluted 0.11 (1.17) (0.37) (0.06)
         
Weighted average number of ordinary shares used in earnings/(loss) per share computation:        
Basic  364,839,393  363,282,183  362,102,972  362,102,972
Diluted  373,548,975  363,282,183  362,102,972  362,102,972
 
Supplementary Financial Data
(amounts in thousands, except for percentages)
         
  For the Three Months Ended
  Mar 31, 2012 Dec 31, 2012 Mar 31, 2013 Mar 31, 2013
  RMB RMB RMB US$
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
         
Cost of revenues breakdown:        
Bandwidth, co-location and storage fees  100,803  137,313  135,859  21,875
Depreciation and amortization expenses  14,398  10,880  10,292  1,657
Payroll and other compensation costs of network operations personnel  5,514  7,673  8,728  1,405
Other cost of revenues  4,993  1,506  4,659  750
Total cost of revenues  125,708  157,372  159,538  25,687
         
Allocation of share-based compensation expenses:        
Cost of revenues  1,127  545  527  85
Sales and marketing expenses  2,691  1,300  1,259  203
General and administrative expenses  1,252  605  (686)  (110)
Research and development expenses  1,189  574  556  90
Total share-based compensation expenses  6,259  3,024  1,656  268
         
Depreciation and amortization expenses:        
Cost of revenues  14,398  10,880  10,292  1,657
Sales and marketing expenses  99  262  24  4
General and administrative expenses  375  414  1,779  286
Research and development expenses  802  2,464  2,098  338
Total depreciation and amortization expenses  15,674  14,020  14,193  2,285
         
Capital expenditures  11,964  15,977  55,584  8,950
As a percentage of net revenues 6.6% 7.1% 24.1% 24.1%
   
Supplementary Operating Metrics  
(Unaudited)  
           
  For The Three Months Ended
  Mar 31,
2012
Jun 30,
2012
Sept 30,
2012
Dec 31,
2012
Mar 31,
2013
           
Revenues breakdown by industry verticals        
           
Internet and software 20% 20% 20% 21% 20%
Mobile internet 17% 18% 18% 17% 17%
Media and entertainment 32% 30% 29% 30% 30%
E-commerce 23% 24% 24% 23% 22%
Enterprises 4% 4% 5% 6% 8%
Government agencies 4% 4% 4% 3% 3%
Total 100% 100% 100% 100% 100%
           
Revenue contributed by Top 5 customers as a percentage of revenues 24% 29% 22% 27% 28%
           
Number of active customers 895 1,013 1,138 1,265 1,363
           
Number of employees  690 751 758 900 1,060
 
Supplementary Metrics - Reconciliations of Non-GAAP to GAAP Financial Measures
         
(amounts in thousands, except for percentages, number of shares, per share and per ADS data)
(Unaudited)
         
  For the Three Months Ended
  Mar 31, 2012 Dec 31, 2012 Mar 31, 2013 Mar 31, 2013
  RMB RMB RMB US$
Adjusted EBITDA — defined as EBITDA before share-based compensation expense and foreign exchange loss or gain        
         
Net income/(loss)  2,518  (26,671)  (8,479)  (1,365)
Depreciation  15,674  14,020  13,832  2,227
Amortization  --   --   361  58
Interest expense  311  575  411  66
Interest income  (696)  (309)  (446)  (72)
Income tax expense  2,804  (266)  3,098  499
Share-based compensation  6,259  3,024  1,656  268
Foreign exchange loss/(gain)  139  994  (643)  (104)
Penalties on uncertain tax positions  --   2,775  --   -- 
Adjusted EBITDA  27,009  (5,858)  9,790  1,577
Margin% 14.8% (2.6%) 4.2% 4.2%
         
         
Adjusted net income — defined as net income/(loss) before share-based compensation, foreign exchange loss or gain and penalties on uncertain tax positions        
         
Net income/(loss)  2,518  (26,671)  (8,479)  (1,365)
Share-based compensation  6,259  3,024  1,656  268
Foreign exchange loss/(gain)  139  994  (643)  (104)
Penalties on uncertain tax positions  --   2,775  --   -- 
Adjusted net income/(loss)  8,916  (19,878)  (7,466)  (1,201)
Margin% 4.9% (8.8%) (3.2%) (3.2%)
Earnings/(loss) per ordinary share:        
Basic 0.02 (0.05) (0.02) (0.00)
Diluted 0.02 (0.05) (0.02) (0.00)
Earnings/(loss) per ADS:        
Basic 0.39 (0.88) (0.33) (0.05)
Diluted 0.38 (0.88) (0.33) (0.05)
         
     
Non-GAAP gross profit — defined as gross profit before share-based compensation expense and depreciation and amortization        
         
Gross profit  56,267  67,647  71,210  11,466
Plus: depreciation and amortization  14,398  10,880  10,292  1,657
Plus: Share-based compensation  1,127  545  527  85
Non-GAAP gross profit  71,792  79,072  82,029  13,208
Margin% 39.5% 35.1% 35.5% 35.5%
         
         
Non-GAAP operating expense — defined as operating expense before share-based compensation expense        
         
Sales & marketing expenses  20,207  27,376  26,711  4,301
Minus: Share-based compensation  (2,691)  (1,300)  (1,259)  (203)
Non-GAAP sales & marketing expenses  17,516  26,076  25,452  4,098
% of net revenues 9.6% 11.6% 11.0% 11.0%
         
General & administrative expenses  17,019  43,225  30,297  4,878
Minus: Share-based compensation  (1,252)  (605)  686  110
Non-GAAP general & administrative expenses  15,767  42,620  30,983  4,988
% of net revenues 8.7% 18.9% 13.4% 13.4%
         
Research & development expenses  14,103  20,856  21,139  3,404
Minus: Share-based compensation  (1,189)  (574)  (556)  (90)
Non-GAAP research & development expenses  12,914  20,282  20,583  3,314
% of net revenues 7.1% 9.0% 8.9% 8.9%
         
         
Non-GAAP operating income — defined as GAAP operating income/(loss) before share-based compensation expense        
         
Operating income/(loss)  4,938  (23,810)  (6,937)  (1,117)
Plus: Share-based compensation  6,259  3,024  1,656  268
Non-GAAP operating income/(loss)  11,197  (20,786)  (5,281)  (849)
Margin% 6.2% (9.2%) (2.3%) (2.3%)
CONTACT: For investor and media inquiries please contact:



         Ms. Yujie Li

         Investor Relations

         ChinaCache International Holdings

         Tel: +86 (10) 6408 5305

         Email: ir@chinacache.com



         Mr. Lee Roth

         The Piacente Group | Investor Relations

         Tel: +1 212-481-2050

         Email: chinacache@tpg-ir.com
Source: ChinaCache International Holdings Ltd.

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