ChinaCache International Holdings Ltd. Announces First Quarter 2014 Financial Results

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| Source: ChinaCache International Holdings Ltd.

BEIJING, May 15, 2014 (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, 2014.

Highlights for the First Quarter of 2014

  • Net revenues in the first quarter were RMB323.9 million (US$52.1 million), exceeded prior guidance by approximately 5.2%, and representing a 40.4% increase year-over-year.
  • Gross profit in the first quarter was RMB98.3 million (US$15.8 million), an increase of 38.0% year-over-year.
  • Adjusted EBITDA (non-GAAP) in the first quarter was RMB25.4 million (US$4.1 million), a 25.2% increase from the prior quarter and a significant improvement of 159.8% year-over-year.
  • Net income attributable to ordinary shareholders in the first quarter was RMB6.3 million (US$1.0 million), compared with a net loss attributable to ordinary shareholders of RMB14.0 million in the fourth quarter of 2013 and a net loss attributable to ordinary shareholders of RMB8.5 million in the corresponding period in 2013.
  • Adjusted net income (non-GAAP) was RMB2.7 million (US$0.4 million) in the first quarter, compared with adjusted net loss (non-GAAP) of RMB7.2 million in the fourth quarter of 2013 and adjusted net loss (non-GAAP) of RMB7.5 million in the corresponding period in 2013.

"I am very pleased to report another very successful quarter. With the continued growth of our business, simplified organization structure and improved efficiency, we had a very good start to 2014. We achieved financial and operating breakeven in the first quarter, due to the hard work and dedication of our employees and management team," said Mr. Song Wang, Founder, Chairman and Chief Executive Officer of ChinaCache. "During the first quarter, we announced a strategic partnership with China Telecom to build and manage a content delivery network. We also announced in April that we have signed a framework agreement with People.cn relating to the development of the cloud infrastructure to meet their rapidly growing cloud computing and storage needs. With these two agreements, we have aligned with industry leaders and have created partnerships that are very beneficial for each party. We believe there are many promising opportunities in this fast-growing industry, and we are very excited for our prospects in 2014. We continue to make significant progresses in all of our business segments, including Enterprise and mobile Internet technology. We remain focused on delivering strong financial results while also investing in opportunities that will lead to sustainable growth in the long-term."

First Quarter 2014 Financial Results

Net revenues for the first quarter of 2014 were RMB323.9 million (US$52.1 million), representing a 4.6% decrease from the previous quarter and a 40.4% increase from the corresponding period in 2013. Net revenues exceeded prior guidance, due to improvements in all areas of operations, with particular strength in the media and entertainment vertical's video business.

Cost of revenues for the first quarter of 2014 was RMB225.6 million (US$36.3 million), representing a 2.8% decrease from the previous quarter and a 41.4% increase from the corresponding period in 2013. Gross margin for the first quarter of 2014 was 30.3%, compared with 31.6% in the previous quarter and 30.9% in the corresponding period in 2013. Non-GAAP gross margin for the first quarter of 2014, which excludes share-based compensation, was 30.5%, compared with 31.7% in the previous quarter and 31.1% in the corresponding period in 2013.

Sales and marketing expenses for the first quarter of 2014 were RMB32.7 million (US$5.3 million), or 10.1% of net revenues, representing a 14.1% decrease from the previous quarter and a 22.3% increase from the corresponding period in 2013. The quarter-over-quarter decrease was mainly due to the better cost control measures the Company imposed across the board, and reduced personnel-related expenses in the first quarter of 2014.

General and administrative expenses for the first quarter of 2014 were RMB37.2 million (US$6.0 million), or 11.5% of net revenues, representing a 14.3% decrease from the previous quarter and a 22.8% increase from the corresponding period in 2013. The quarter-over-quarter decrease in general and administrative expenses was primarily attributable to decreased personnel-related expenses in the first quarter of 2014.

Research and development expenses for the first quarter of 2014 were RMB28.2million (US$4.5 million), or 8.7% of net revenues, representing a 7.7% decrease from the previous quarter and a 33.4% increase from the corresponding period in 2013. The quarter-over-quarter decrease was mainly due to the decreased personnel-related expenses in the first quarter of 2014.

Operating income was RMB0.2 million (US$33,000) in the first quarter of 2014, compared to an operating loss of RMB6.0 million in the previous quarter and an operating loss of RMB6.9 million in the corresponding period in 2013. Non-GAAP operating income, which excludes share-based compensation expense and impairment of an available-for-sale investment, was RMB3.7 million (US$0.6 million), compared with a non-GAAP operating loss of RMB1.1 million in the fourth quarter of 2013 and a non-GAAP operating loss of RMB5.3 million in the corresponding period in 2013.

Income tax expense was RMB0.8 million (US$0.1 million) in the first quarter of 2014, compared with RMB9.4 million in the fourth quarter of 2013 and RMB3.1 million in the corresponding period in 2013.

Net income turned positive to RMB6.3 million (US$1.0 million) in the first quarter of 2014, compared with a net loss of RMB14.0 million in the fourth quarter of 2013 and a net loss of RMB8.5 million in the corresponding period in 2013. Basic and diluted earnings per American depositary share ("ADS") for the first quarter of 2014 was RMB0.26 (US$0.04) and RMB0.25 (US$0.04), respectively. 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 (loss)/gain, penalties on uncertain tax positions and impairment of an available-for-sale investment, was RMB2.7 million (US$0.4 million), compared with an adjusted net loss (non-GAAP) of RMB7.2 million in the fourth quarter of 2013 and an adjusted net loss (non-GAAP) of RMB7.5 million in the corresponding period in 2013. Non-GAAP basic and diluted earnings per ADS in the first quarter of 2014 were RMB0.11 (US$0.02) and RMB0.11 (US$0.02), respectively.

Adjusted EBITDA (non-GAAP), defined as EBITDA excluding share-based compensation expense, foreign exchange (loss)/gain and impairment of an available-for-sale investment, jumped to RMB25.4 million (US$4.1 million) compared with RMB20.3 million in the fourth quarter of 2013 and RMB9.8 million in the corresponding period in 2013.

Capital Resources

As of March 31, 2014, the Company had cash and cash equivalents of RMB521.7 million (US$83.9 million), compared with RMB338.1 million as of December 31, 2013. In addition, the Company had an available-for-sale investment amounting to RMB 24.7 million (US$4.0 million) in an RMB denominated fund, which is presented as current assets. Capital expenditures for the first quarter of 2014 were RMB29.7 million (US$4.8 million).

Share Repurchases

On June 21, 2013, the Company's Board authorized the Company to resume its previously announced US$10 million share repurchase plan. Under the resumed plan, ChinaCache is authorized, but not obligated, to repurchase up to US$8.5 million worth of its ADSs over the next 12 months on the open market or in block trades.

As of May 15, 2014, the Company has not repurchased any ADSs under this buyback program on the open market.

Outlook for the Company's Second Quarter of 2014

ChinaCache currently expects to generate total net revenues in the range of RMB340.0 million (US$54.7 million) to RMB345.0 million (US$55.5 million) for the second quarter of 2014, representing an increase of 5.0% to 6.5% from the first quarter of 2014, and an increase of 31.9% to 33.9% from the second quarter of 2013. 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 Daylight Time on May 15, 2014, which corresponds to 8:00 AM Beijing time on May 16, 2014.

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 3051-2745
  • International dial-in number: +65 6723-9385
  • China dial-in number: 400-1200-654
  • Conference ID: 33944234

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 May 23, 2014 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: 33944234

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 share-based compensation expense.

To present non-GAAP operating income/(loss), the Company excludes share-based compensation expense and impairment of an available-for-sale investment.

The Company defines adjusted net income/(loss) as net income/(loss) before share-based compensation expense, foreign exchange (loss)/gain, penalties on uncertain tax positions and impairment of an available-for-sale investment.

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, foreign exchange (loss)/gain and impairment of an available-for-sale investment 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 6.2164 as of March 31, 2014.

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 2014 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 Mar 31 As of Mar 31
  2013 2014 2014
   RMB   RMB   US$ 
  (Audited) (Unaudited) (Unaudited)
ASSETS       
Current assets       
Cash and cash equivalents   338,092 521,687 83,921
Restricted Cash   60,000 60,000 9,652
Accounts receivable, net   306,237 380,359 61,186
Prepaid expenses and other current assets   50,549 68,071 10,950
Available-for-sale investment   24,636 24,730 3,978
Deferred tax assets   7,096 11,137 1,792
Amount due from a related party   141 150 24
Total current assets   786,751 1,066,134 171,503
       
Non-current assets       
Property and equipment, net   240,650 284,526 45,770
Cloud infrastructure construction in progress   12,236 22,032 3,544
Intangible assets, net   5,563 5,581 898
Land use right, net   50,730 50,472 8,119
Long term investments   21,450 21,450 3,451
Available-for-sale investments   12,240 15,308 2,463
Deferred tax assets   1,719 992 160
Long term deposits and other non-current assets   35,829 38,802 6,242
Total non-current assets   380,417 439,163 70,647
       
Total Assets   1,167,168 1,505,297 242,150
       
LIABILITIES AND SHAREHOLDERS' EQUITY       
Current Liabilities       
Short-term loan   60,000 60,000 9,652
Accounts payable   203,750 256,749 41,302
Accrued employee benefits   43,922 55,020 8,851
Accrued expenses and other payables   157,075 239,051 38,455
Income tax payable   10,399 14,346 2,308
Liabilities for uncertain tax positions   11,540 11,540 1,856
Amounts due to related parties   862  1,061  171
Deferred government grant   24,360  37,360 6,010
Total current liabilities   511,908  675,127 108,605
       
Non-current liabilities       
Deferred tax liabilities   2,127  2,185 351
Total non-current liabilities   2,127  2,185  351
       
Total Liabilities  514,035 677,312 108,956
       
Total Shareholders' equity   653,133 827,985 133,194
       
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  1,167,168 1,505,297 242,150
 
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
  Mar 31, 2013 Dec 31, 2013 Mar 31, 2014 Mar 31, 2014
  RMB RMB RMB US$
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
         
Net revenues  230,748  339,373  323,866  52,099
Cost of revenues  (159,538)  (232,203)  (225,586)  (36,289)
         
Gross profit  71,210  107,170  98,280  15,810
Sales & marketing expenses  (26,711)  (38,017)  (32,671)  (5,256)
General & administrative expenses  (30,297)  (43,409)  (37,194)  (5,983)
Research & development expenses  (21,139)  (30,555)  (28,207)  (4,538)
Impairment of an available-for-sale investment  --   (1,217)  --   -- 
         
Operating (loss)/income  (6,937)  (6,028)  208  33
Interest income  446  459  424  68
Interest expense  (411)  (1,275)  (1,491)  (240)
Other income   878  3,973  922  148
Foreign exchange gain/(loss), net  643  (1,735)  7,048  1,134
         
(Loss)/income before income taxes  (5,381)  (4,606)  7,111  1,143
Income tax expense  (3,098)  (9,410)  (846)  (136)
         
Net (loss)/income attributable to ordinary shareholders  (8,479)  (14,016)  6,265  1,007
         
Foreign currency translation  28  (2,328)  337  54
Unrealized holding gains arising during the period  557  232  95  15
Reclassification adjustments for gains included in net loss  --   (499)  --   -- 
         
Total other comprehensive income/(loss), net of tax  585  (2,595)  432  69
         
Comprehensive (loss)/income  (7,894)  (16,611)  6,697  1,076
         
(Loss)/earnings per ordinary share:        
Basic (0.02) (0.04) 0.02 0.00
Diluted (0.02) (0.04) 0.02 0.00
         
(Loss)/earnings per ADS*:        
Basic (0.37) (0.61) 0.26 0.04
Diluted (0.37) (0.61) 0.25 0.04
         
Weighted average number of ordinary shares used in earnings per share computation:  
Basic  362,102,972  367,762,251  381,584,158  381,584,158
Diluted  362,102,972  367,762,251  394,517,873  394,517,873
         
*Note1:1 ADS = 16 shares        
 Note2: Non-GAAP Financial Measures        
 
Supplementary Metrics
(Unaudited)
           
   Mar 31,  Jun 30,  Sep 30,  Dec 31,  Mar 31,
  2013 2013 2013 2013  2014
           
Revenues breakdown by industry verticals          
           
Internet and software 20% 20% 22% 25% 23%
Mobile internet 17% 17% 17% 15% 15%
Media and entertainment 30% 29% 27% 27% 28%
E-commerce 22% 22% 21% 21% 21%
Enterprises 8% 9% 10% 10% 11%
Government agencies 3% 3% 3% 2% 2%
Total 100% 100% 100% 100% 100%
           
Capital expenditures  55,584  28,444  22,689  32,886  29,728
As a percentage of net revenues 24.1% 11.0% 8.2% 9.7% 9.2%
 
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, 2013 Dec 31, 2013 Mar 31, 2014 Mar 31, 2014
  RMB RMB RMB US$
Adjusted EBITDA — defined as EBITDA before share-based compensation expense, foreign exchange (loss)/gain and impairment of an available-for-sale investment        
         
Net (loss)/income  (8,479)  (14,016)  6,265  1,007
Depreciation  13,832  16,613  20,321  3,269
Amortization  361  631  522  84
Interest expense  411  1,275  1,491  240
Interest income  (446)  (459)  (424)  (68)
Income tax expense  3,098  9,410  846  136
Share-based compensation  1,656  3,684  3,464  557
Foreign exchange (loss)/gain  (643)  1,735  (7,048)  (1,134)
Penalties on uncertain tax positions  --   229  --   -- 
Impairment of an available-for-sale investment  --   1,217  --   -- 
Adjusted EBITDA  9,790  20,319  25,437  4,091
Margin% 4.2% 6.0% 7.9% 7.9%
         
Adjusted net (loss)/income — defined as net (loss)/income before share-based compensation, foreign exchange (loss)/gain, penalties on uncertain tax positions and impairment of an available-for-sale Investment        
         
Net (loss)/income  (8,479)  (14,016)  6,265  1,007
Share-based compensation  1,656  3,684  3,464  557
Foreign exchange (loss)/gain  (643)  1,735  (7,048)  (1,134)
Penalties on uncertain tax positions  --   229  --   -- 
Impairment of an available-for-sale Investment  --   1,217  --   -- 
Adjusted net (loss)/income  (7,466)  (7,151)  2,681  430
Margin% (3.2%) (2.1%) 0.8% 0.8%
(Loss)/earnings per ordinary share:        
Basic (0.02) (0.02) 0.01 0.00
Diluted (0.02) (0.02) 0.01 0.00
(Loss)/earnings per ADS:        
Basic (0.33) (0.31) 0.11 0.02
Diluted (0.33) (0.31) 0.11 0.02
         
Non-GAAP gross profit – defined as gross profit before share-based compensation expense        
         
Gross profit  71,210  107,170  98,280  15,810
Plus: Share-based compensation  527  302  374  60
Non-GAAP gross profit  71,737  107,472  98,654  15,870
Margin% 31.1% 31.7% 30.5% 30.5%
         
Non-GAAP operating expense – defined as operating expense before share-based compensation expense        
         
Sales & marketing expenses  26,711  38,017  32,671  5,256
Minus: Share-based compensation  (1,259)  (656)  (808)  (130)
Non-GAAP sales & marketing expenses  25,452  37,361  31,863  5,126
% of net revenues 11.0% 11.0% 9.8% 9.8%
         
General & administrative expenses  30,297  43,409  37,194  5,983
Minus: Share-based compensation  686  (2,022)  (1,569)  (252)
Non-GAAP general & administrative expenses  30,983  41,387  35,625  5,731
% of net revenues 13.4% 12.2% 11.0% 11.0%
         
Research & development expenses  21,139  30,555  28,207  4,538
Minus: Share-based compensation  (556)  (704)  (713)  (115)
Non-GAAP research & development expenses  20,583  29,851  27,494  4,423
% of net revenues 8.9% 8.8% 8.5% 8.5%
         
Non-GAAP operating (loss)/income — defined as GAAP operating (loss)/income before share-based compensation expense and impairment of an available-for-sale investment        
         
Operating (loss)/income  (6,937)  (6,028)  208  33
Plus: Share-based compensation  1,656  3,684  3,464  557
Plus: Impairment of an available-for-sale investment  --   1,217  --   -- 
Non-GAAP operating (loss)/income  (5,281)  (1,127)  3,672  590
Margin% (2.3%) (0.3%) 1.1% 1.1%
For investor and media inquiries please contact:

Ms. Edith Kwan
Investor Relations
ChinaCache International Holdings
Tel: +86 (10) 6408 5307
Email: 

Mr. Glenn Garmont
The Piacente Group | Investor Relations
Tel: +1 212-481 2050
Email: