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ChinaCache International Holdings Ltd. Announces Second Quarter 2015 Financial Results

BEIJING, Aug. 20, 2015 (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 second quarter ended June 30, 2015.

Highlights for the Second Quarter of 2015

  • Net revenues in the second quarter were RMB353.3 million (US$57.0 million), a 2.0% increase year-over-year.
  • Gross profit in the second quarter was RMB96.8 million (US$15.6 million), a decrease of 6.8% year-over-year.
  • Adjusted EBITDA (non-GAAP) in the second quarter was RMB41.8 million (US$6.7 million), an increase of 46.6% from RMB28.5 million in the second quarter of 2014.
  • Adjusted net income (non-GAAP) was RMB4.0 million (US$0.6 million) in the second quarter of 2015, compared to RMB11.6 million in the second quarter of 2014.
  • Non-GAAP basic and diluted earnings per ADS in the second quarter of 2015 was RMB0.15 (US$0.02) each.

"During the first half of 2015, we made significant progress on several key fronts, including customer base expansion, infrastructure advancements, and the addition of new mobile capabilities, while further improving our operating efficiency," commented Mr. Song Wang, Founder, Chairman and Chief Executive Officer of ChinaCache. "As our CDN business becomes bigger and continues to grow, we must continue to improve our infrastructure and services to support this growth. Although we are currently experiencing some platform issues, which have impacted our top-line recently, we are confident that our continued strategic investment in delivering innovative solutions will provide a differentiated value proposition to our customers, ensure the highest services standards and bandwidth optimization, and enable us to maintain our leadership position as the premium CDN total solution provider in China. We will work very hard to achieve meaningful improvements, while remaining a trusted partner of our customers, shareholders and employees."

Second Quarter 2015 Financial Results

Net revenues for the second quarter of 2015 were RMB353.3 million (US$57.0 million), a 2.9% decrease from the previous quarter and a 2.0% increase from the corresponding period in 2014.

Cost of revenues for the second quarter of 2015 was RMB256.5 million (US$41.4 million), which remained stable compared with the previous quarter and represented a 5.8% increase from the corresponding period in 2014.

Gross margin for the second quarter of 2015 was 27.4%, compared with 29.5% for the previous quarter and 30.0% for the corresponding period in 2014. Non-GAAP gross margin for the second quarter of 2015, which excludes share-based compensation, was 27.7%, compared with 29.9% in the previous quarter and 30.1% for the corresponding period in 2014. The decrease in gross margin was mainly due to an expense for consumable hardware purchase related to a platform upgrade.

Sales and marketing expenses for the second quarter of 2015 were RMB25.5 million (US$4.1 million), or 7.2% of net revenues, a 19.8% decrease over the previous quarter and a 27.8% decrease from the corresponding period in 2014. The quarter-over-quarter decrease was mainly due to improved operating efficiency and effective cost control.

General and administrative expenses for the second quarter of 2015 were RMB54.5 million (US$8.8 million), or 15.4% of net revenues, a 9.7% increase from the previous quarter and a 45.5% increase over the corresponding period in 2014.

Research and development (R&D) expenses for the second quarter of 2015 were RMB26.8 million (US$4.3 million), or 7.6% of net revenues, which remained stable from the previous quarter and represents a 10.7% decrease from the corresponding period in 2014. The decrease in R&D expenses from the corresponding period in 2014 was mainly due to significant increased investment in ChinaCache's infrastructure development throughout 2014.

Adjusted EBITDA (non-GAAP), defined as EBITDA excluding share-based compensation expense and foreign exchange gain (loss), was RMB41.8 million (US$6.7 million), a quarter-over-quarter decrease of 15.8% compared with RMB49.7 million in the first quarter of 2015, and year-over-year growth of 46.6% from RMB28.5 million in the corresponding period in 2014.

Operating loss was RMB10.0 million (US$1.6 million) in the second quarter of 2015, compared with an operating loss of RMB1.1 million in the previous quarter and an operating income of RMB1.0 million in the corresponding period in 2014. Non-GAAP operating income, which excludes share-based compensation expense, was RMB1.5 million (US$0.2 million), an 89.1% decrease from the previous quarter and a 62.8% decrease from the corresponding period in 2014.

Income tax benefit was RMB3.0 million (US$0.5 million) in the second quarter of 2015, compared with income tax expense of RMB0.5 million in the previous quarter and income tax benefit of RMB3.6 million in the corresponding period in 2014.

Net loss was RMB7.3 million (US$1.2 million) in the second quarter of 2015, compared to a net loss of RMB5.2 million in the previous quarter and a net income of RMB6.9 million in the corresponding period in 2014. Basic and diluted loss per American depositary share ("ADS") for the second quarter of 2015 was RMB0.28 (US$0.05) each. Each ADS represents 16 ordinary shares of the Company.

Adjusted net income (non-GAAP), defined as net income before share-based compensation expense, foreign exchange gain (loss), and penalties on uncertain tax positions, was RMB4.0 million (US$0.6 million), a quarter-over-quarter decrease of 61.3% and a year-over-year decrease of 65.1% from the corresponding period in 2014.

Non-GAAP basic and diluted earnings per ADS in the second quarter of 2015 was RMB0.15 (US$0.02) each.

Balance Sheet

As of June 30, 2015, the Company had cash and cash equivalents of RMB649.5 million (US$104.8 million), compared with RMB375.9 million as of December 31, 2014. Capital expenditures for the second quarter of 2015 were RMB25.2 million (US$4.1 million).

2015 Revenue Guidance

ChinaCache currently expects to generate total net revenues in the range of RMB1.40 billion to RMB1.47 billion for full year 2015.

This forecast reflects ChinaCache's current view, which is subject to change.

Conference Call Information

The Company has scheduled a corresponding conference call and live webcast to discuss these results at 8:00 PM Eastern time on August 20, 2015, which corresponds to 8:00 AM Beijing time on August 21, 2015.

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

  • U.S. dial-in number: +1 (845) 675-0438
  • Hong Kong dial-in number: +852 3018-6776
  • International dial-in number: +65 6713-5440
  • China dial-in number: 400-1200-654
  • Conference ID: 4554880

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 August 26, 2015 by dialing:

  • U.S. dial-in number: +1 (855) 452-5696
  • International dial-in number: +61 (2) 9003-4211
  • China dial-in number: 400-632-2162
  • Conference ID: 4554880

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 ir.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 share-based compensation expense.

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

The Company defines adjusted net income (loss) as net income (loss) before share-based compensation expense, foreign exchange gain (loss) 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 and penalties on uncertain tax positions and depreciation and amortization. The Company defines adjusted EBITDA as EBITDA before share-based compensation expense and foreign exchange gain (loss) 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 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, 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, 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, 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 6.2000 as of June 30, 2015.

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 full year 2015 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.

FINANCIAL TABLES

  • Unaudited Condensed Consolidated Balance Sheets
  • Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
  • Supplementary Metrics
  • Reconciliations of Non-GAAP to GAAP Financial Measures

Condensed Consolidated Balance Sheets
(amounts in thousands)
As of Dec 31 As of Jun 30 As of Jun 30
2014 2015 2015
RMB RMB US$
(Audited) (Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents 375,879 649,488 104,756
Restricted Cash 68,191 248 40
Accounts receivable, net 319,494 344,683 55,594
Prepaid expenses and other current assets 55,374 108,448 17,491
Short term investment 25,219 25,719 4,148
Deferred tax assets 20,658 24,942 4,023
Total current assets 864,815 1,153,528 186,052
Non-current assets
Property and equipment, net 418,886 535,422 86,358
Cloud infrastructure construction in progress 283,475 377,748 60,927
Intangible assets, net 10,321 9,625 1,552
Land use right, net 49,697 49,408 7,969
Long term investments 46,950 47,750 7,702
Deferred tax assets 980 6,380 1,029
Long term deposits and other non-current assets 56,084 76,784 12,385
Total non-current assets 866,393 1,103,117 177,922
Total Assets 1,731,208 2,256,645 363,974
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term loan 60,000 -- --
Accounts payable 255,821 270,215 43,583
Accrued employee benefits 45,016 59,520 9,600
Accrued expenses and other payables 411,803 853,932 137,731
Income tax payable 21,374 19,561 3,155
Liabilities for uncertain tax positions 11,739 11,739 1,893
Amounts due to related parties 18 18 3
Current portion of long term loan 7,180 7,180 1,158
Current portion of capital lease obligations 13,794 55,542 8,958
Deferred government grant 37,360 37,360 6,026
Total current liabilities 864,105 1,315,067 212,107
Non-current liabilities
Long-term loan 11,520 7,930 1,279
Non-current portion of capital lease obligations 20,592 67,709 10,921
Deferred tax liabilities 44 44 7
Total non-current liabilities 32,156 75,683 12,207
Total Liabilities 896,261 1,390,750 224,314
Total Shareholders' equity 834,947 865,895 139,660
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,731,208 2,256,645 363,974
Condensed Consolidated Statements of Comprehensive Income (loss)
(amounts in thousands, except for number of shares, per share and per ADS data)
For the Three Months Ended
June 30, 2014 Mar 31, 2015 Jun 30, 2015 Jun 30, 2015
RMB RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net revenues 346,299 363,745 353,344 56,991
Cost of revenues (242,444) (256,299) (256,524) (41,375)
Gross profit 103,855 107,446 96,820 15,616
Sales & marketing expenses (35,360) (31,833) (25,526) (4,117)
General & administrative expenses (37,466) (49,712) (54,511) (8,792)
Research & development expenses (30,026) (26,962) (26,819) (4,326)
Operating income (loss) 1,003 (1,061) (10,036) (1,619)
Interest income 3,190 992 1,153 186
Interest expense (1,572) (4,129) (3,322) (536)
Other income 2,190 18 1,718 277
Foreign exchange (loss) gain, net (1,509) (475) 188 30
Income (loss) before income taxes 3,302 (4,655) (10,299) (1,662)
Income tax benefit (expense) 3,608 (548) 2,953 476
Net income (loss) attributable to ordinary shareholders 6,910 (5,203) (7,346) (1,186)
Foreign currency translation (121) 266 (148) (24)
Unrealized holding gains arising during the period 147 286 212 34
Total other comprehensive income, net of tax 26 552 64 10
Comprehensive income (loss) 6,936 (4,651) (7,282) (1,176)
Earnings (loss) per ordinary share:
Basic 0.02 (0.01) (0.02) (0.00)
Diluted 0.02 (0.01) (0.02) (0.00)
Earnings (loss) per ADS*:
Basic 0.27 (0.20) (0.28) (0.05)
Diluted 0.26 (0.20) (0.28) (0.05)
Weighted average number of ordinary shares used in earnings per share computation:
Basic 407,486,064 413,501,903 419,437,177 419,437,177
Diluted 419,885,015 413,501,903 419,437,177 419,437,177
* Note 1:1 ADS = 16 shares
Note 2: Non-GAAP Financial Measures
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
Jun 30, 2014 Mar 31, 2015 Jun 30, 2015 Jun 30, 2015
RMB RMB RMB US$
Adjusted EBITDA — defined as EBITDA before share-based compensation expense and foreign exchange loss (gain)
Net income (loss) 6,910 (5,203) (7,346) (1,186)
Depreciation 21,642 34,185 37,737 6,087
Amortization 527 1,349 817 132
Interest expense 1,572 4,129 3,322 536
Interest income (3,190) (992) (1,153) (186)
Income tax (benefit) expense (3,608) 548 (2,953) (476)
Share-based compensation 3,115 15,163 11,569 1,865
Foreign exchange loss (gain) 1,509 475 (188) (30)
Penalties on uncertain tax positions 44 -- -- --
Adjusted EBITDA 28,521 49,654 41,805 6,742
Margin% 8.2% 13.7% 11.8% 11.8%
Adjusted net income — defined as net income (loss) before share-based compensation, foreign exchange loss (gain) and penalties on uncertain tax positions
Net income (loss) 6,910 (5,203) (7,346) (1,186)
Share-based compensation 3,115 15,163 11,569 1,865
Foreign exchange loss (gain) 1,509 475 (188) (30)
Penalties on uncertain tax positions 44 -- -- --
Adjusted net income 11,578 10,435 4,035 649
Margin% 3.3% 2.9% 1.1% 1.1%
Earnings per ordinary share:
Basic 0.03 0.03 0.01 0.00
Diluted 0.03 0.02 0.01 0.00
Earnings per ADS:
Basic 0.45 0.40 0.15 0.02
Diluted 0.44 0.39 0.15 0.02
Non-GAAP gross profit – defined as gross profit before share-based compensation expense
Gross profit 103,855 107,446 96,820 15,616
Plus: Share-based compensation 307 1,307 999 161
Non-GAAP gross profit 104,162 108,753 97,819 15,777
Margin% 30.1% 29.9% 27.7% 27.7%
Non-GAAP operating expense – defined as operating expense before share-based compensation expense
Sales & marketing expenses 35,360 31,833 25,526 4,117
Minus: Share-based compensation (666) (1,103) (824) (133)
Non-GAAP sales & marketing expenses 34,694 30,730 24,702 3,984
% of net revenues 10.0% 8.4% 7.0% 7.0%
General & administrative expenses 37,466 49,712 54,511 8,792
Minus: Share-based compensation (1,503) (11,089) (8,933) (1,440)
Non-GAAP general & administrative expenses 35,963 38,623 45,578 7,352
% of net revenues 10.4% 10.6% 12.9% 12.9%
Research & development expenses 30,026 26,962 26,819 4,326
Minus: Share-based compensation (639) (1,664) (813) (131)
Non-GAAP research & development expenses 29,387 25,298 26,006 4,195
% of net revenues 8.5% 7.0% 7.4% 7.4%
Non-GAAP operating income — defined as GAAP operating income (loss) before share-based compensation expense
Operating income (loss) 1,003 (1,061) (10,036) (1,619)
Plus: Share-based compensation 3,115 15,163 11,569 1,865
Non-GAAP operating income 4,118 14,102 1,533 246
Margin% 1.2% 3.9% 0.4% 0.4%
Supplementary Metrics
(Unaudited)
Jun 30,
2014
Sep 30,
2014
Dec 31,
2014
Mar 31,
2015
Jun 30,
2015
Revenues breakdown by industry verticals
Internet and software 23% 23% 22% 22% 21%
Mobile internet 15% 16% 16% 16% 16%
Media and entertainment 29% 29% 29% 29% 30%
E-commerce 20% 19% 19% 19% 19%
Enterprises 12% 13% 14% 14% 14%
Government agencies 1% 0% 0% 0% 0%
Total 100% 100% 100% 100% 100%
Capital expenditures 58,368 104,588 66,611 56,144 25,150
As a percentage of net revenues 16.9% 27.9% 19.7% 15.4% 7.1%

CONTACT: For investor and media inquiries please contact: Investor Relations Department ChinaCache International Holdings Tel: +86 (10) 6408 5307 Email: ir@chinacache.com Mr. Don Markley The Piacente Group | Investor Relations Tel: +1 212-481 2050 Email: chinacache@tpg-ir.com

Source:ChinaCache International Holdings Ltd.