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ChinaCache International Holdings Ltd. Announces Third Quarter 2015 Financial Results

BEIJING, Dec. 2, 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 third quarter ended September 30, 2015.

Highlights for the Third Quarter of 2015

  • Net revenues in the third quarter were RMB325.1 million (US$51.2 million), a decrease of 13.4% year-over-year.
  • Gross profit in the third quarter was RMB63.8 million (US$10.0 million), a decrease of 43.9% year-over-year.
  • Adjusted EBITDA (non-GAAP) in the third quarter was RMB2.5 million (US$0.4 million), compared with RMB36.9 million in the third quarter of 2014.
  • Net loss attributable to ordinary shareholders was RMB39.4 million (US$6.2 million) in the third quarter of 2015, compared with net income of RMB0.6 million in the third quarter of 2014.

"During the third quarter, we continued to focus on optimizing our platforms and the company-wide performance improvement for our CDN business. We are seeing tangible results including providing full-course acceleration services for the Beijing military parade on September 3, offering differentiated services to several automotive enterprises and establishing the cooperation with Youku Router," commented Mr. Song Wang, Founder, Chairman and Chief Executive Officer of ChinaCache. "In addition, subsequent to the close of the quarter, we officially introduced our Atecsys Data Center, which is expected to be the largest in Beijing, and our Internet Exchange, which we believe to be the first of its kind in China. As our business continues to grow, we will continue to improve our infrastructure and services to support future expansion. With a keen focus on strengthened execution, our team is working diligently to drive operational enhancements that we believe will yield both revenue growth and long-term shareholder value."

Third Quarter 2015 Financial Results

Net revenues for the third quarter of 2015 were RMB325.1 million (US$51.2 million), an 8.0% decrease from the previous quarter and a 13.4% decrease from the corresponding period in 2014. The decrease in net revenues was mainly due to reduced customer traffic as the Company continued to optimize and advance its platform operation.

Cost of revenues for the third quarter of 2015 was RMB261.3 million (US$41.1 million), representing a 1.8% increase from the previous quarter and remaining flat compared with the corresponding period in 2014.

Gross margin for the third quarter of 2015 was 19.6%, compared with 27.4% for the previous quarter and 30.3% for the corresponding period in 2014. Non-GAAP gross margin for the third quarter of 2015, which excludes share-based compensation, was 19.8%, compared with 27.7% in the previous quarter and 30.4% for the corresponding period in 2014. The decrease in gross margin was mainly due to the decrease in revenue resulting in reduced bandwidth efficiency.

Sales and marketing expenses for the third quarter of 2015 were RMB28.1 million (US$4.4 million), or 8.6% of net revenues, a 10.2% increase over the previous quarter and an 8.2% decrease from the corresponding period in 2014.

General and administrative expenses for the third quarter of 2015 were RMB33.3 million (US$5.2 million), or 10.3% of net revenues, a 38.8% decrease from the previous quarter and a 21.6% decrease over the corresponding period in 2014. The decreases in general and administrative expenses were primarily attributable to an RMB14.9 million reversal for bad debt provision from one customer.

Research and development (R&D) expenses for the third quarter of 2015 were RMB23.8 million (US$3.7 million), or 7.3% of net revenues, representing an 11.3% decrease from the previous quarter and a 20.8% decrease from the corresponding period in 2014. The decrease in R&D expenses from the corresponding period in 2014 was mainly due to the significant amount of investment made in ChinaCache's infrastructure development throughout 2014.

Transaction tax on assets transfer was RMB22.3 million (US$3.5 million), which was related to an asset transaction within the Company.

Adjusted EBITDA (non-GAAP), defined as EBITDA excluding share-based compensation expense and foreign exchange gain (loss), was RMB2.5 million (US$0.4 million), compared with RMB41.8 million in the previous quarter and RMB36.9 million in the corresponding period in 2014. Excluding the transaction tax on assets transfer, the adjusted EBITDA was RMB24.8 million (US$3.9 million).

Operating loss was RMB43.8 million (US$6.9 million) in the third quarter of 2015, compared with an operating loss of RMB10.0 million in the previous quarter and an operating income of RMB10.7 million in the corresponding period in 2014. Non-GAAP operating loss, which excludes share-based compensation expense, was RMB40.1 million (US$6.3 million), compared with non-GAAP operating income of RMB1.5 million in the previous quarter and non-GAAP operating income of RMB12.6 million in the corresponding period in 2014. Excluding the transaction tax on assets transfer, the non-GAAP operating loss was RMB17.8 million (US$2.8 million).

Income tax expense was RMB2.7 million (US$0.4 million) in the third quarter of 2015, compared with income tax benefit of RMB3.0 million in the previous quarter and income tax expense of RMB2.6 million in the corresponding period in 2014.

Net loss was RMB39.4 million (US$6.2 million) in the third quarter of 2015, compared with a net loss of RMB7.3 million in the previous quarter and a net income of RMB0.6 million in the corresponding period in 2014. Basic and diluted loss per American depositary share ("ADS") for the third quarter of 2015 was RMB1.49 (US$0.23) each. Each ADS represents 16 ordinary shares of the Company. Excluding the transaction tax on assets transfer, net loss was RMB17.1 million (US$2.7 million).

Adjusted net loss (non-GAAP), defined as net loss before share-based compensation expense, foreign exchange gain (loss), and penalties on uncertain tax positions, was RMB44.4 million (US$7.0 million), compared with adjusted net income of RMB4.0 million in the previous quarter and adjusted net income of RMB8.9 million for the corresponding period in 2014. Non-GAAP basic and diluted loss per ADS in the third quarter of 2015 was RMB1.68 (US$0.26) each. Excluding the transaction tax on assets transfer, adjusted net loss was RMB22.0 million (US$3.5 million), and the adjusted net loss per basic and diluted ADS for the third quarter of 2015 was RMB0.84 (US$0.13) each.

Balance Sheet

As of September 30, 2015, the Company had cash and cash equivalents of RMB618.6 million (US$97.3 million), compared with RMB375.9 million as of December 31, 2014. Capital expenditures for the third quarter of 2015 were RMB7.7 million (US$1.2 million).

2015 Revenue Guidance

ChinaCache currently expects to generate total net revenues in the range of RMB1.34 billion to RMB1.44 billion for full year 2015.

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

Share Repurchase Program

On August 24, 2015, the Board of Directors approved a share buyback program, under which the Company is authorized to repurchase, through open market purchases or privately negotiated transactions, up to US$6 million worth of outstanding ADSs of ChinaCache over the next 12 months, depending on market conditions, share price and other factors, and subject to relevant rules and regulations under the U.S. securities laws. This buyback program is in addition to the program previously approved and announced on December 18, 2014 (the "2014 Buyback Program"). The 2014 Buyback Program authorized the Company to repurchase ADSs of ChinaCache not to exceed US$10 million in the aggregate.

As of December 1, 2015, the Company had repurchased 1,590,498 ADSs on the open market for a consideration of US$12.3 million under the two share buyback programs.

Conference Call Information

The Company has scheduled a corresponding conference call and live webcast to discuss these results at 7:00 PM Eastern time on December 2, 2015, which corresponds to 8:00 AM Beijing time on December 3, 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: 79187972

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 December 8, 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: 79187972

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 6.3556 as of September 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 Sep 30 As of Sep 30
2014 2015 2015
RMB RMB US$
(Audited) (Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents 375,879 618,558 97,325
Restricted Cash 68,191 -- --
Accounts receivable, net 319,494 350,643 55,171
Prepaid expenses and other current assets 55,374 131,894 20,752
Short term investments 25,219 175,969 27,687
Deferred tax assets 20,658 20,090 3,161
Total current assets 864,815 1,297,154 204,096
Non-current assets
Property and equipment, net 418,886 536,985 84,490
Cloud infrastructure construction in progress 283,475 412,778 64,947
Intangible assets, net 10,321 11,345 1,785
Land use right, net 49,697 49,149 7,733
Long term investments 46,950 49,253 7,750
Deferred tax assets 980 2,077 327
Long term deposits and other non-current assets 56,084 76,411 12,023
Total non-current assets 866,393 1,137,998 179,055
Total Assets 1,731,208 2,435,152 383,151
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term loan 60,000 -- --
Accounts payable 255,821 248,403 39,084
Accrued employee benefits 45,016 47,526 7,478
Accrued expenses and other payables 411,803 1,169,055 183,941
Income tax payable 21,374 13,600 2,140
Liabilities for uncertain tax positions 11,739 11,739 1,847
Amounts due to related parties 18 18 3
Current portion of long term loan 7,180 7,180 1,130
Current portion of capital lease obligations 13,794 46,416 7,303
Deferred government grant 37,360 37,360 5,878
Total current liabilities 864,105 1,581,297 248,804
Non-current liabilities
Long-term loan 11,520 7,180 1,130
Non-current portion of capital lease obligations 20,592 67,201 10,574
Deferred tax liabilities 44 45 7
Deferred government grant -- 1,350 212
Total non-current liabilities 32,156 75,776 11,923
Total Liabilities 896,261 1,657,073 260,727
Total Shareholders' equity 834,947 778,079 122,424
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,731,208 2,435,152 383,151
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
Sep 30, 2014 Jun 30, 2015 Sep 30, 2015 Sep 30, 2015
RMB RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net revenues 375,258 353,344 325,091 51,150
Cost of revenues (261,371) (256,524) (261,250) (41,105)
Gross profit 113,887 96,820 63,841 10,045
Sales & marketing expenses (30,637) (25,526) (28,117) (4,424)
General & administrative expenses (42,523) (54,511) (33,341) (5,246)
Transaction tax on assets transfer -- -- (22,339) (3,515)
Research & development expenses (30,035) (26,819) (23,799) (3,745)
Operating income (loss) 10,692 (10,036) (43,755) (6,885)
Interest income 863 1,153 533 84
Interest expense (1,965) (3,322) (3,234) (509)
Other income 88 1,718 1,114 175
Foreign exchange (loss) gain, net (6,409) 188 8,606 1,354
Income (loss) before income taxes 3,269 (10,299) (36,736) (5,781)
Income tax (expense) benefit (2,646) 2,953 (2,652) (417)
Net income (loss) attributable to ordinary shareholders 623 (7,346) (39,388) (6,198)
Foreign currency translation 1,687 (148) (103) (16)
Unrealized holding gains arising during the period 141 212 249 39
Total other comprehensive income, net of tax 1,828 64 146 23
Comprehensive income (loss) 2,451 (7,282) (39,242) (6,175)
Earnings (loss) per ordinary share:
Basic 0.00 (0.02) (0.09) (0.01)
Diluted 0.00 (0.02) (0.09) (0.01)
Earnings (loss) per ADS*:
Basic 0.02 (0.28) (1.49) (0.23)
Diluted 0.02 (0.28) (1.49) (0.23)
Weighted average number of ordinary shares used in earnings per share computation:
Basic 411,553,199 419,437,177 422,294,433 422,294,433
Diluted 422,211,476 419,437,177 422,294,433 422,294,433
* Note1:1 ADS = 16 shares
Note2: 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
Sep 30, 2014 Jun 30, 2015 Sep 30, 2015 Sep 30, 2015
RMB RMB RMB US$
Adjusted EBITDA — defined as EBITDA before share-based compensation expense and foreign exchange loss (gain)
Net income (loss) 623 (7,346) (39,388) (6,198)
Depreciation 23,707 37,737 40,519 6,375
Amortization 534 817 981 154
Interest expense 1,965 3,322 3,234 509
Interest income (863) (1,153) (533) (84)
Income tax expense (benefit) 2,646 (2,953) 2,652 417
Share-based compensation 1,872 11,569 3,615 569
Foreign exchange loss (gain) 6,409 (188) (8,606) (1,354)
Adjusted EBITDA 36,893 41,805 2,474 388
Margin% 9.8% 11.8% 0.8% 0.8%
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) 623 (7,346) (39,388) (6,198)
Share-based compensation 1,872 11,569 3,615 569
Foreign exchange loss (gain) 6,409 (188) (8,606) (1,354)
Adjusted net income (loss) 8,904 4,035 (44,379) (6,983)
Margin% 2.4% 1.1% (13.7%) (13.7%)
Earnings (loss) per ordinary share:
Basic 0.02 0.01 (0.11) (0.02)
Diluted 0.02 0.01 (0.11) (0.02)
Earnings (loss) per ADS:
Basic 0.35 0.15 (1.68) (0.26)
Diluted 0.34 0.15 (1.68) (0.26)
Non-GAAP gross profit – defined as gross profit before share-based compensation expense
Gross profit 113,887 96,820 63,841 10,045
Plus: Share-based compensation 162 999 419 66
Non-GAAP gross profit 114,049 97,819 64,260 10,111
Margin% 30.4% 27.7% 19.8% 19.8%
Non-GAAP operating expense – defined as operating expense before share-based compensation expense
Sales & marketing expenses 30,637 25,526 28,117 4,424
Minus: Share-based compensation (366) (824) (262) (41)
Non-GAAP sales & marketing expenses 30,271 24,702 27,855 4,383
% of net revenues 8.1% 7.0% 8.6% 8.6%
General & administrative expenses 42,523 54,511 33,341 5,246
Minus: Share-based compensation (998) (8,933) (2,898) (456)
Non-GAAP general & administrative expenses 41,525 45,578 30,443 4,790
% of net revenues 11.1% 12.9% 9.4% 9.4%
Research & development expenses 30,035 26,819 23,799 3,745
Minus: Share-based compensation (346) (813) (36) (6)
Non-GAAP research & development expenses 29,689 26,006 23,763 3,739
% of net revenues 7.9% 7.4% 7.3% 7.3%
Non-GAAP operating income — defined as GAAP operating income (loss) before share-based compensation expense
Operating income (loss) 10,692 (10,036) (43,755) (6,885)
Plus: Share-based compensation 1,872 11,569 3,615 569
Non-GAAP operating income (loss) 12,564 1,533 (40,140) (6,316)
Margin% 3.3% 0.4% (12.3%) (12.3%)
Supplementary Metrics
(Unaudited)
Jun 30,
2014
Sep 30,
2014
Dec 31,
2014
Mar 31,
2015
Jun 30,
2015
Sep 30,
2015
Revenues breakdown by industry verticals
Internet and software 23% 23% 22% 22% 21% 21%
Mobile internet 15% 16% 16% 16% 16% 18%
Media and entertainment 29% 29% 29% 29% 30% 28%
E-commerce 20% 19% 19% 19% 19% 19%
Enterprises 12% 13% 14% 14% 14% 14%
Government agencies 1% 0% 0% 0% 0% 0%
Total 100% 100% 100% 100% 100% 100%
Capital expenditures 58,368 104,588 66,611 56,144 25,150 7,735
As a percentage of net revenues 16.9% 27.9% 19.7% 15.4% 7.1% 2.4%

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.