ChinaCache Reports Adjusted Fourth Quarter and Full Year 2016 Results

Announces Impairment to Property and Equipment and Intangible Assets

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| Source: ChinaCache International Holdings Ltd.

BEIJING, Nov. 14, 2017 (GLOBE NEWSWIRE) -- ChinaCache International Holdings Ltd. ("ChinaCache" or the "Company") (Nasdaq:CCIH), a leading total solutions provider of Internet content and application delivery services in China, today reported adjusted audited financial results for the fourth quarter and full year 2016, which included a non-cash impairment charge of RMB399.1 million, resulting in an retroactive increase to operating expenses for both the fourth quarter and full year 2016.  

Due to the downturn in the Company’s operating results, ChinaCache has impaired the net value of all its property and equipment and intangible assets as of December 31, 2016 based on the excess of the carrying amount of the asset group over its fair value. The Company determined the fair value of the asset group using the income approach based on the discounted expected cash flows associated with the asset group. The discounted cash flow for the asset group was based on three-year projections, which is consistent with the remained useful lives of the principal assets. Cash flow projections were based on past experience, actual results of operations and management best estimates about future developments, as well as certain market assumptions.

ChinaCache currently expects to generate total net revenues in the range of RMB0.84 billion to RMB0.87 billion for the full year of 2017, representing year-over-year decrease of approximately 20% to 17%.

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

The following presents the Company's unaudited financial results for the fourth quarter 2016 and full year 2016 after giving effect to the aforementioned adjustment(s).

 
Condensed Consolidated Balance Sheets
(amounts in thousands)
         
    As of Dec 31 As of Dec 31 As of Dec 31
    2015 2016 2016
    RMB RMB US$
    (Audited) (Unaudited) (Unaudited)
ASSETS       
Current assets      
 Cash and cash equivalents 606,796 134,924  19,433 
 Accounts receivable, net 243,431 190,587  27,450 
 Prepaid expenses and other current assets 31,560 56,976  8,206 
 Short term investments 26,169 -  - 
 Deferred tax assets 17,923 -  - 
 Amount due from a subsidiary held for sale 435 53,169  7,658 
 Assets held for sale 1,060,543 1,270,483  182,988 
  Total current assets 1,986,857 1,706,139  245,735 
         
Non-current assets      
 Property and equipment, net 499,946 -  - 
 Intangible assets, net 10,898 -  - 
 Long term investments 50,157 34,159  4,920 
 Deferred tax assets 11,368 -  - 
 Long term deposits and other non-current assets 59,390 36,525  5,261 
  Total non-current assets 631,759 70,684  10,181 
         
Total Assets  2,618,616 1,776,823  255,916 
         
LIABILITIES AND SHAREHOLDERS' EQUITY       
Current Liabilities      
 Short-term loan - 29,311  4,222 
 Accounts payable 205,593 301,569  43,435 
 Accrued employee benefits 44,690 46,233  6,659 
 Accrued expenses and other payables 76,409 52,697  7,590 
 Income tax payable 13,513 13,924  2,005 
 Liabilities for uncertain tax positions 11,337 10,020  1,443 
 Amounts due to related parties 18 18  3 
 Current portion of long term loan 7,180 3,840  553 
 Current portion of capital lease obligations 70,615 72,851  10,493 
 Deferred government grant 16,360 13,000  1,872 
 Amount due to a subsidiary held for sale 319,536 18,063  2,602 
 Liabilities held for sale 1,014,449 1,302,658  187,622 
  Total current liabilities 1,779,700 1,864,184  268,499 
         
Non-current liabilities      
         
 Long-term loan 4,340 -  - 
 Non-current portion of capital lease obligations 104,450 43,951  6,330 
 Deferred government grant 8,439 11,208  1,614 
  Total non-current liabilities 117,229 55,159  7,944 
         
Total Liabilities 1,896,929 1,919,343  276,443 
         
Total Shareholders' equity 721,687 (142,520) (20,527)
         
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2,618,616 1,776,823  255,916 
         


 
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 For the Twelve Months Ended
        Dec 31, 2015 Sep 30, 2016 Dec 31, 2016 Dec 31, 2016 Dec 31, 2015 Dec 31, 2016 Dec 31, 2016
        RMB RMB RMB US$ RMB RMB US$
        (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited)
                     
Net revenues  311,447  261,643  263,312  37,926  1,353,627  1,054,235  151,842 
Cost of revenues  (267,339) (255,133) (275,927) (39,742) (1,041,412) (1,077,810) (155,237)
                     
Gross profit (loss)   44,108  6,510  (12,615) (1,816) 312,215  (23,575) (3,395)
 Other operating income (loss)  13,911  3,260  (28,895) (4,162) 13,911  (19,044) (2,743)
 Sales & marketing expenses  (30,145) (23,009) (22,467) (3,236) (115,621) (93,603) (13,482)
 General & administrative expenses  (61,062) (62,202) (50,264) (7,240) (198,626) (265,017) (38,170)
 Research & development expenses  (25,530) (24,037) (25,102) (3,615) (103,110) (104,018) (14,982)
 Transaction tax on assets transfer  (5,394) -  -  -  (27,733) -  - 
 Impairment of long lived assets  -  -  (399,094) (57,482) -  (399,094) (57,482)
 Impairment of long term investments  -  -  (18,240) (2,627) -  (18,240) (2,627)
                     
Operating loss  (64,112) (99,478) (556,677) (80,178) (118,964) (922,591) (132,881)
 Interest income  1,940  1,627  261  38  4,618  4,669  672 
 Interest expense  (2,473) (2,932) (2,091) (301) (13,158) (11,647) (1,678)
 Other income (expense)  141  5,171  (263) (38) 2,991  5,336  769 
 Foreign exchange gain, net  4,845  915  8,015  1,154  13,164  14,209  2,047 
                     
Loss before income taxes  (59,659) (94,697) (550,755) (79,325) (111,349) (910,024) (131,071)
 Income tax benefit (expense)  22,861  384  (21,805) (3,141) 22,614  (4,229) (609)
                     
 Net loss      (36,798) (94,313) (572,560) (82,466) (88,735) (914,253) (131,680)
                     
Net loss attributable to the noncontrolling interest(44) (152) (463) (67) (44) (776) (112)
                     
Net loss attributable to the Company's shareholders(36,754) (94,161) (572,097) (82,399) (88,691) (913,477) (131,568)
                     
Foreign currency translation  249  (196) (286) (41) 264  (293) (42)
Unrealized holding gain on available-for-sale investments1,106  36  -  -  1,853  659  95 
Reclassification adjustments for gains included in net income-  (3,741) -  -  -  (3,552) (512)
                     
Total other comprehensive income (loss), net of tax1,355  (3,901) (286) (41) 2,117  (3,186) (459)
                     
Comprehensive loss  (35,443) (98,214) (572,846) (82,507) (86,618) (917,439) (132,139)
                     
Comprehensive loss attributable to the noncontrolling interest(44) (152) (463) (67) (44) (776) (112)
                     
Comprehensive loss attributable to the Company's shareholders(35,399) (98,062) (572,383) (82,440) (86,574) (916,663) (132,027)
                     
                     
Loss per ordinary share:               
 Basic    (0.09) (0.23) (1.36) (0.20) (0.22) (2.24) (0.32)
 Diluted   (0.09) (0.23) (1.36) (0.20) (0.22) (2.24) (0.32)
                     
Loss per ADS*:               
 Basic    (1.45) (3.68) (21.76) (3.20) (3.49) (35.84) (5.12)
 Diluted   (1.45) (3.68) (21.76) (3.20) (3.49) (35.84) (5.12)
                     
Weighted average number of ordinary shares used in earnings per share computation:        
 Basic    404,344,939  412,253,323  421,522,374  421,522,374  407,149,509  408,189,722  408,189,722 
 Diluted   404,344,939  412,253,323  421,522,374  421,522,374  407,149,509  408,189,722  408,189,722 
                     
*Note1: 1 ADS = 16 shares               
                 


  
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 For the Twelve Months Ended
     Dec 31, 2015 Sep 30, 2016 Dec 31, 2016 Dec 31, 2016 Dec 31, 2015 Dec 31, 2016 Dec 31, 2016
     RMB RMB RMB US$ RMB RMB US$
Adjusted EBITDA — defined as EBITDA before share-based compensation expense, foreign exchange gain, transaction tax on assets transfer, impairment of long lived assets and impairment of long term investments                  
                  
Net loss  (36,798) (94,313)   (572,560) (82,466) (88,735) (914,253) (131,680)
Depreciation  40,872  38,653    38,090  5,486  153,313  155,225  22,357 
Amortization  1,151  1,102    1,253  180  4,298  3,869  557 
Interest expense 2,473  2,932    2,091  301  13,158  11,647  1,678 
Interest income (1,940) (1,627)   (261) (38) (4,618) (4,669) (672)
Income tax (benefit) expense (22,861) (384)   21,805  3,141  (22,614) 4,229  609 
Share-based compensation 18,259  8,601    2,685  387  48,606  85,025  12,246 
Foreign exchange gain (4,845) (915)   (8,015) (1,154) (13,164) (14,209) (2,047)
Penalties on uncertain tax positions 2,206  -    658  95  2,206  658  95 
Transaction tax on assets transfer 5,394  -    -  -  27,733  -  - 
Impairment of long lived assets -  -    399,094  57,482  -  399,094  57,482 
Impairment of long term investments -  -    18,240  2,627  -  18,240  2,627 
Adjusted EBITDA 3,911  (45,951)   (96,920) (13,959) 120,183  (255,144) (36,748)
Margin%
 1.3 % (17.6
%)   (36.8%) (36.8%) 8.9 % (24.2%) (24.2%)
                  
                  
Adjusted net loss — defined as net loss before share-based compensation, foreign exchange gain (loss), penalties on uncertain tax positions, transaction tax on assets transfer, impairment of long lived assets and impairment of long term investments             
                  
Net loss  (36,798) (94,313)   (572,560) (82,466) (88,735) (914,253) (131,680)
Share-based compensation 18,259  8,601    2,685  387  48,606  85,025  12,246 
Foreign exchange gain (4,845) (915)   (8,015) (1,154) (13,164) (14,209) (2,047)
Penalties on uncertain tax positions 2,206  -    658  95  2,206  658  95 
Transaction tax on assets transfer 5,394  -    -  -  27,733  -  - 
Impairment of long lived assets -  -    399,094  57,482  -  399,094  57,482 
Impairment of long term investments -  -    18,240  2,627  -  18,240  2,627 
Adjusted net loss (15,784) (86,627)   (159,898) (23,029) (23,354) (425,445) (61,277)
Margin%
 (5.1%) (33.1
%)   (60.7%) (60.7%) (1.7%) (40.4%) (40.4%)
Loss per ordinary share:              
Basic  (0.04) (0.21)   (0.38) (0.05) (0.13) (1.04) (0.15)
Diluted  (0.04) (0.21)   (0.38) (0.05) (0.13) (1.04) (0.15)
Loss per ADS:              
Basic  (0.64) (3.36)   (6.08) (0.80) (2.01) (16.64) (2.40)
Diluted  (0.64) (3.36)   (6.08) (0.80) (2.01) (16.64) (2.40)
                      
              
Non-GAAP gross profit (loss) — defined as gross profit (loss) before share-based compensation expense                
                     
Gross profit (loss) 44,108  6,510  (12,615) (1,816) 312,215  (23,575) (3,395)
Plus: Share-based compensation 945  378  623  90  3,670  5,961  859 
Non-GAAP gross profit (loss) 45,053  6,888  (11,992) (1,726) 315,885  (17,614) (2,536)
Margin%
 14.5 % 2.6 % (4.6%) (4.6%) 23.3 % (1.7%) (1.7%)
                  
                  
Non-GAAP operating expense — defined as operating expense before share-based compensation expense             
                  
Sales & marketing expenses 30,145  23,009  22,467  3,236  115,621  93,603  13,482 
Minus: Share-based compensation (693) 131  (7) (1) (2,882) (2,753) (397)
Non-GAAP sales & marketing expenses 29,452  23,140  22,460  3,235  112,739  90,850  13,085 
% of net revenues
 9.5 % 8.8 % 8.5 % 8.5 % 8.3 % 8.6 % 8.6 %
                  
General & administrative expenses 61,062  62,202  50,264  7,240  198,626  265,017  38,170 
Minus: Share-based compensation (15,876) (8,092) (1,854) (267) (38,796) (72,483) (10,440)
Non-GAAP general & administrative expenses 45,186  54,110  48,410  6,973  159,830  192,534  27,730 
% of net revenues
 14.5 % 20.7 % 18.4 % 18.4 % 11.8 % 18.3 % 18.3 %
                  
Research & development expenses 25,530  24,037  25,102  3,615  103,110  104,018  14,982 
Minus: Share-based compensation (745) (262) (201) (29) (3,258) (3,828) (550)
Non-GAAP research & development expenses 24,785  23,775  24,901  3,586  99,852  100,190  14,432 
% of net revenues
 8.0 % 9.1 % 9.5 % 9.5 % 7.4 % 9.5 % 9.5 %
                  
                  
Non-GAAP operating loss — defined as GAAP operating loss before share-based compensation expense, transaction tax on assets transfer, impairment of long lived assets and impairment of long term investments             
                  
Operating loss (64,112) (99,478) (556,677) (80,178) (118,964) (922,591) (132,881)
Share-based compensation 18,259  8,601  2,685  387  48,606  85,025  12,246 
Transaction tax on assets transfer 5,394  -  -  -  27,733  -  - 
Impairment of long lived assets -  -  399,094  57,482  -  399,094  57,482 
Impairment of long term investments -  -  18,240  2,627  -  18,240  2,627 
Non-GAAP operating loss (40,459) (90,877) (136,658) (19,682) (42,625) (420,232) (60,526)
Margin%
 (13.0%) (34.7%) (51.9%) (51.9%) (3.1%) (39.9%) (39.9%)
                  

About ChinaCache International Holdings Ltd.

ChinaCache International Holdings Ltd. (Nasdaq:CCIH) is a 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

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 revenue guidance 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. 

For investor and media inquiries please contact:

Investor Relations Department
ChinaCache International Holdings
Tel: +86 10 6408 5306
Email: ir@chinacache.com

Mr. Ross Warner
The Piacente Group | Investor Relations
Tel: +86 10 5730-6200
Email: chinacache@tpg-ir.com

Ms. Brandi Piacente
The Piacente Group | Investor Relations 
Tel: +1 212-481-2050
Email: chinacache@tpg-ir.com