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ChinaCache International Holdings Ltd. Announces Second Quarter 2014 Financial Results(GlobeNewswire Via Acquire Media NewsEdge) BEIJING, Aug. 19, 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 second quarter of 2014. Highlights for the Second Quarter of 2014 Net revenues in the second quarter were RMB346.3 million (US$55.8 million), exceeding the high end of the prior guidance range by approximately 0.4%, and representing a 34.4% increase year-over-year.Gross profit in the second quarter was RMB103.9 million (US$16.7 million), an increase of 28.8% year-over-year.Adjusted EBITDA (non-GAAP) in the second quarter was RMB28.5 million (US$4.6 million), a 12.1% increase from the prior quarter and a significant improvement of 134.6% year-over-year.Net incomeattributable to ordinary shareholders in the second quarter was RMB6.9 million (US$1.1 million), compared with RMB6.3 million in the first quarter of 2014, and RMB11.0 million in the corresponding period in 2013.Adjusted net income (non-GAAP) was RMB11.6 million (US$1.9 million) in the second quarter, compared with RMB2.7 million in the first quarter of 2014, and RMB12.6 million in the corresponding period in 2013. "Our strong performance in the second quarter reflects our success in driving adoption of content delivery technology by enterprises, the development of our mobile Internet technologies, and our continuing efforts to achieve operational efficiencies," said Mr. Song Wang, Founder, Chairman and Chief Executive Officer of ChinaCache. "During the quarter we also made meaningful progress on two important strategic initiatives - the partnership with China Telecom, and the construction of the cloud data center with People.cn - and strengthened our management capabilities to help expand our business with carriers, content providers and enterprises worldwide. We hosted the Global CDN Conference in June, where leading companies in the technology and telecommunications industries stressed the importance of CDN in fulfilling the promise of the Internet for all aspects of e-commerce, entertainment, media and user experience. We have a very positive outlook for the second half of 2014. With our global network, broad range of customer solutions, and strong relationships with industry leaders, I believe ChinaCache is well positioned for sustained growth and profitability over the long term." Second Quarter 2014 Financial Results Net revenues for the second quarter of 2014 were RMB346.3 million (US$55.8 million), representing a 6.9% sequential increase from the previous quarter, and a 34.4% increase from the corresponding period in 2013. Net revenues exceeded prior guidance, due to improvements across all areas of operations, with growth in the media & entertainment and enterprise verticals in particular. Cost of revenues for the second quarter of 2014 was RMB242.4 million (US$39.1 million), representing a 7.5% increase from the previous quarter, and a 36.9% increase from the corresponding period in 2013. Gross margin for the second quarter of 2014 was 30.0%, compared with 30.3% in the previous quarter, and 31.3% in the corresponding period in 2013. Non-GAAP gross margin for the second quarter of 2014, which excludes share-based compensation, was 30.1%, compared with 30.5% in the previous quarter and 31.4% in the corresponding period in 2013. Sales and marketing expenses for the second quarter of 2014 were RMB35.4 million (US$5.7 million), or 10.2% of net revenues, representing an 8.2% increase from the previous quarter and a 19.4% increase from the corresponding period in 2013. The quarter-over-quarter increase was mainly due to the cost of hosting the Global CDN Conference in June 2014. General and administrative expenses for the second quarter of 2014 were RMB37.5 million (US$6.0 million), or 10.8% of net revenues, an increase of 0.7% from the previous quarter and an 18.4% increase from the corresponding period in 2013. The quarter-over-quarter decline in general and administrative expenses as a percentage of net revenues primarily reflects the economy of scale as our top-line expands. Research and development expenses for the second quarter of 2014 were RMB30.0 million (US$4.8 million), or 8.7% of net revenues, representing a 6.4% increase from the previous quarter and a 21.2% increase from the corresponding period in 2013. The quarter-over-quarter increase was mainly due to increased personnel-related expenses for continued efforts in online service solutions development in the second quarter of 2014. Operating income was RMB1.0 million (US$0.2 million) in the second quarter of 2014, compared to RMB0.2 million in the previous quarter and an operating loss of RMB5.4 million in the corresponding period in 2013. Non-GAAP operating income, which excludes share-based compensation expense, was RMB4.1 million (US$0.7 million), compared with non-GAAP operating income of RMB3.7 million in the first quarter of 2014 and a non-GAAP operating loss of RMB3.7 million in the corresponding period in 2013. Income tax benefit was RMB3.6 million (US$0.6 million) in the second quarter of 2014, compared with an income tax expense of RMB0.8 million in the first quarter of 2014, and an income tax benefit of RMB15.1 million in the corresponding period in 2013. Net income was RMB6.9 million (US$1.1 million) in the second quarter of 2014, compared with a net income of RMB6.3 million in the first quarter of 2014, and RMB11.0 million in the corresponding period in 2013. Basic and diluted earnings per American depositary share ("ADS") for the second quarter of 2014 were RMB0.27 (US$0.04) and RMB0.26 (US$0.04). 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 and penalties on uncertain tax positions, was RMB11.6 million (US$1.9 million) in the second quarter of 2014, compared with adjusted net income (non-GAAP) of RMB2.7 million in the first quarter of 2014, and RMB12.6 million in the corresponding period in 2013. Non-GAAP basic and diluted earnings per ADS in the second quarter of 2014 were RMB0.45 (US$0.07) and RMB0.44 (US$0.07), respectively. Adjusted EBITDA (non-GAAP), defined as EBITDA excluding share-based compensation expense, foreign exchange (loss)/gain, increased to RMB28.5 million (US$4.6 million) in the second quarter, compared with RMB25.4 million in the first quarter of 2014 and RMB12.2 million in the corresponding period in 2013. Capital Resources As of June 30, 2014, the Company had cash and cash equivalents of RMB 607.8 million (US$98.0 million), compared with RMB338.1 million as of December 31, 2013. In addition, the Company had an available-for-sale investment amounting to RMB 24.9 million (US$4.0 million) in an RMB denominated fund, which is presented as a current asset. Capital expenditures for the second quarter of 2014 were RMB58.4 million (US$9.4 million). Third Quarter of 2014 Outlook ChinaCache currently expects to generate total net revenues in the range of RMB375.0 million (US$60.4 million) to RMB380.0 million (US$61.3 million) for the third quarter of 2014, representing an increase of 8.3% to 9.7% from the second quarter of 2014, and an increase of 36.2% to 38.0% from the third 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 August 19, 2014, which corresponds to 8:00 AM Beijing time on August 20, 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: 85387694 A live and archived webcast of the conference call will be available on the Investor Relations section of ChinaCache's website at ir.chinacache.com. A replay of the conference call will also be available until August 25, 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: 85387694About 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 (loss)/gain, penalties on uncertain tax positions. The Company uses EBITDA to assist in reconciliation to adjusted EBITDA. The Company defines EBITDA as net income 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 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 6.2036 as of June 30, 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 third 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 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 2013 2014 2014 RMB RMB US$ (Audited) (Unaudited) (Unaudited) ASSETS Current assets Cash and cash equivalents 338,092 607,817 97,978 Restricted Cash 60,000 68,174 10,989 Accounts receivable, net 306,237 380,565 61,346 Prepaid expenses and other current assets 50,549 72,029 11,610 Available-for-sale investment 24,636 24,878 4,010 Deferred tax assets 7,096 16,272 2,623 Amount due from a related party 141 140 23 Total current assets 786,751 1,169,875 188,579 Non-current assets Property and equipment, net 240,650 315,749 50,898 Cloud infrastructure construction in progress 12,236 72,557 11,696 Intangible assets, net 5,563 7,236 1,166 Land use right, net 50,730 50,214 8,094 Long term investments 21,450 24,648 3,973 Available-for-sale investments 12,240 15,308 2,468 Deferred tax assets 1,719 1,004 162 Long term deposits and other non-current assets 35,829 37,509 6,046 Total non-current assets 380,417 524,225 84,503 Total Assets 1,167,168 1,694,100 273,082 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term loan 60,000 60,000 9,672 Accounts payable 203,750 274,264 44,210 Accrued employee benefits 43,922 57,566 9,279 Accrued expenses and other payables 157,075 375,783 60,575 Income tax payable 10,399 14,504 2,338 Liabilities for uncertain tax positions 11,540 11,627 1,874 Amounts due to related parties 862 524 84 Current portion of long term liabilities -- 6,345 1,023 Deferred government grant 24,360 37,360 6,022 Total current liabilities 511,908 837,973 135,077 Non-current liabilities Long-term loan -- 11,360 1,831 Non-current portion of capital lease obligation -- 1,275 206 Deferred tax liabilities 2,127 2,180 351 Total non-current liabilities 2,127 14,815 2,388 Total Liabilities 514,035 852,788 137,465 Total Shareholders' equity 653,133 841,312 135,617 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,167,168 1,694,100 273,082 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 Jun 30, 2013 Mar 31, 2014 Jun 30, 2014 Jun 30, 2014 RMB RMB RMB US$ (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net revenues 257,730 323,866 346,299 55,822Cost of revenues (177,083) (225,586) (242,444) (39,081) Gross profit 80,647 98,280 103,855 16,741 Sales & marketing expenses (29,615) (32,671) (35,360) (5,700) General & administrative expenses (31,656) (37,194) (37,466) (6,039) Research & development expenses (24,782) (28,207) (30,026) (4,840) Operating (loss)/income (5,406) 208 1,003 162 Interest income 335 424 3,190 514 Interest expense (289) (1,491) (1,572) (253) Other income 1,604 922 2,190 353 Foreign exchange (loss)/gain, net (303) 7,048 (1,509) (243) (Loss)/income before income taxes (4,059) 7,111 3,302 533 Income tax benefit/(expense) 15,070 (846) 3,608 582 Net income attributable to ordinary shareholders 11,011 6,265 6,910 1,115 Foreign currency translation (12) 337 (121) (20) Unrealized holding gains arising during the period 306 95 147 24 Reclassification adjustments for gains included in net loss (1,090) -- -- -- Total other comprehensive (loss)/income, net of tax (796) 432 26 4 Comprehensive income 10,215 6,697 6,936 1,119 Earnings per ordinary share: Basic 0.03 0.02 0.02 0.00 Diluted 0.03 0.02 0.02 0.00 Earnings per ADS*: Basic 0.49 0.26 0.27 0.04 Diluted 0.48 0.25 0.26 0.04 Weighted average number of ordinary shares used in earnings per share computation: Basic 362,472,671 381,584,158 407,486,064 407,486,064 Diluted 367,753,503 394,517,873 419,885,015 419,885,015 * Note1:1 ADS = 16 shares Note2: Non-GAAP Financial Measures Supplementary Metrics(Unaudited) Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, 2013 2013 2013 2014 2014 Revenues breakdown by industry verticals Internet and software 20% 22% 25% 23% 23% Mobile internet 17% 17% 15% 15% 15% Media and entertainment 29% 27% 27% 28% 29% E-commerce 22% 21% 21% 21% 20% Enterprises 9% 10% 10% 11% 12% Government agencies 3% 3% 2% 2% 1%Total 100% 100% 100% 100% 100% Capital expenditures 28,444 22,689 32,886 29,728 58,368 As a percentage of net revenues 11.0% 8.2% 9.7% 9.2% 16.9% 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, 2013 Mar 31, 2014 Jun 30, 2014 Jun 30, 2014 RMB RMB RMB US$Adjusted EBITDA — defined as EBITDA before share-based compensation expense, and foreign exchange gain/(loss) Net income 11,011 6,265 6,910 1,115 Depreciation 14,174 20,321 21,642 3,489 Amortization 463 522 527 85 Interest expense 289 1,491 1,572 253 Interest income (335) (424) (3,190) (514) Income tax (benefit)/expense (15,070) 846 (3,608) (582) Share-based compensation 1,674 3,464 3,115 502 Foreign exchange gain/(loss) 303 (7,048) 1,509 243 Penalties on uncertain tax positions (352) -- 44 7Adjusted EBITDA 12,157 25,437 28,521 4,598Margin%4.7% 7.9% 8.2% 8.2% Adjusted net income — defined as net income before share-based compensation, foreign exchange gain/(loss) and penalties on uncertain tax positions Net income 11,011 6,265 6,910 1,115 Share-based compensation 1,674 3,464 3,115 502 Foreign exchange gain/(loss) 303 (7,048) 1,509 243 Penalties on uncertain tax positions (352) -- 44 7Adjusted net income 12,636 2,681 11,578 1,867Margin%4.9% 0.8% 3.3% 3.3% Earnings per ordinary share: Basic 0.03 0.01 0.03 0.00 Diluted 0.03 0.01 0.03 0.00Earnings per ADS: Basic 0.56 0.11 0.45 0.07 Diluted 0.55 0.11 0.44 0.07 Non-GAAP gross profit – defined as gross profit before share-based compensation expense Gross profit 80,647 98,280 103,855 16,741 Plus: Share-based compensation 301 374 307 49Non-GAAP gross profit 80,948 98,654 104,162 16,790Margin%31.4% 30.5% 30.1% 30.1% Non-GAAP operating expense – defined as operating expense before share-based compensation expense Sales & marketing expenses 29,615 32,671 35,360 5,700 Minus: Share-based compensation (720) (808) (666) (107)Non-GAAP sales & marketing expenses 28,895 31,863 34,694 5,593% of net revenues11.2% 9.8% 10.0% 10.0% General & administrative expenses 31,656 37,194 37,466 6,039 Minus: Share-based compensation (335) (1,569) (1,503) (242)Non-GAAP general & administrative expenses 31,321 35,625 35,963 5,797% of net revenues12.2% 11.0% 10.4% 10.4% Research & development expenses 24,782 28,207 30,026 4,840 Minus: Share-based compensation (318) (713) (639) (104)Non-GAAP research & development expenses 24,464 27,494 29,387 4,736% of net revenues9.5% 8.5% 8.5% 8.5% Non-GAAP operating (loss)/income — defined as GAAP operating (loss)/income before share-based compensation expense Operating (loss)/income (5,406) 208 1,003 162 Plus: Share-based compensation 1,674 3,464 3,115 502Non-GAAP operating (loss)/income (3,732) 3,672 4,118 664Margin%(1.4%)1.1% 1.2% 1.2% CONTACT: For investor and media inquiries please contact: Mr. David She Investor Relations ChinaCache International Holdings Tel: +86 (10) 6408 5307 Email: [email protected] Mr. Glenn Garmont or Mr. Don Markley The Piacente Group | Investor Relations Tel: +1 212-481 2050 Email: [email protected] Source: ChinaCache International Holdings Ltd. 2014 GlobeNewswire, Inc. |