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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.comSource:ChinaCache International Holdings Ltd.