Gridsum Reports Unaudited Financial Results for First Half of 2018
BEIJING, Jan. 7, 2019 /PRNewswire/ -- Gridsum Holding Inc. ("Gridsum" or the "Company") (NASDAQ: GSUM), a leading provider of cloud-based big-data analytics and artificial intelligence ("AI") solutions in China, today reported its unaudited financial results for the six months ended June 30, 2018.
Highlights
-- Net revenues increased by 39.3% to RMB249.3 million (US$37.7 million)
from RMB178.9 million in the comparable period of 2017, driven by a
52.1% rise in Enterprise revenues.
-- Gross profit increased by 42.9% to RMB210.0 million (US$31.7 million)
from RMB147.0 million in the comparable period of 2017.
First Half of 2018 Financial Results
REVENUES: Net revenues increased by 39.3% to RMB249.3 million (US$37.7 million) from RMB178.9 million in the comparable period of 2017, driven by a 52.1% increase in Enterprise revenues.
Enterprise revenues increased by 52.1% to RMB224.2 million (US$33.9 million) from RMB147.4 million in the comparable period of 2017, mainly due to strong growth in our Social Listening solutions.
E-Government and other revenues decreased by 16.6% to RMB30.5 million (US$4.6 million) from RMB36.5 million in the comparable period of 2017, mainly due to a lengthening of the sales cycle for E-Government solutions associated with the governmental reorganization that occurred during this period.
COST OF REVENUES: Cost of revenues was RMB39.3 million (US$5.9 million), compared with RMB32.0 million in the comparable period of 2017. The rise was primarily due to a RMB9.0 million increase in system maintenance and system security expenses.
GROSS PROFIT AND GROSS MARGIN: Gross profit increased by 42.9% to RMB210.0 million (US$31.7 million) from RMB147.0 million in the comparable period of 2017. Gross margin increased to 84.2% from 82.1%. The increase was primarily attributable to the evolution of our sales mix with our Social Listening solutions carrying a higher gross margin than our core Marketing Automation solutions.
OPERATING EXPENSES: Total operating expenses were RMB376.7 million (US$56.9 million), compared with RMB247.2 million in the comparable period of 2017. As a percentage of net revenues, operating expenses were 151.1%, compared with 138.2% in the comparable period of 2017.
-- Sales and marketing expenses were RMB77.3 million (US$11.7 million),
compared with RMB88.0 million in the comparable period of 2017. The
decrease was primarily due to a RMB14.9 million decrease in advertising
expenses and a RMB11.1 million decrease in marketing promotion expenses,
partially offset by a RMB9.8 million increase in personnel costs.
-- Research and development expenses were RMB226.5 million (US$34.2
million), compared with RMB109.1 million in the comparable period of
2017. The increase was primarily due to a RMB63.1 million increase in
technical service fees in connection with the Company's continued focus
on the development and maintenance of market-leading data-warehouse
software, and a RMB36.8 million increase in outsourcing fees associated
with contracting specialized user interface, security and other module
development. The increases primarily reflect the Company's strong
commitment to enhancing its capabilities in technology and innovation
and productizing that technology into compelling client solutions.
-- General and administrative expenses were RMB72.9 million (US$11.0
million), compared with RMB50.2 million in the comparable period of
2017. The increase was primarily due to a RMB17.5 million increase in
professional fees incurred in connection with the audit committee's
internal investigation and a RMB5.2 million increase in personnel cost.
LOSS FROM OPERATIONS: Loss from operations was RMB166.7 million (US$25.2 million), compared with a loss from operations of RMB100.3 million in the comparable period of 2017.
NET LOSS ATTRIBUTABLE TO GRIDSUM'S ORDINARY SHAREHOLDERS: Net loss attributable to Gridsum's ordinary shareholders was RMB182.0 million (US$27.5 million), compared with RMB113.9 million in the comparable period of 2017. The increase was primarily due to an increase in operating expenses, especially research and development expenses, as the Company aims to capture the opportunities in its Intelligent CRM, judicial, and IIoT business segments.
NON-GAAP NET LOSS ATTRIBUTABLE TO GRIDSUM'S ORDINARY SHAREHOLDERS: Non-GAAP net loss attributable to Gridsum's ordinary shareholders, which is defined as net loss attributable to Gridsum's ordinary shareholders before share-based compensation expense, was RMB165.1 million (US$25.0 million), compared with RMB104.0 million in the comparable period of 2017.
EBITDA: Loss before interest, income tax, depreciation and amortization for the first half of 2018 was RMB152.6 million (US$23.1 million), compared with RMB89.6 million in the comparable period of 2017. The increase was mainly due to an increase in loss from operations of RMB66.5 million, an increase in foreign exchange expense and interest expenses of RMB2.0 million and RMB0.5 million, respectively, and an increase in depreciation and amortization expenses of RMB2.0 million.
ADJUSTED EBITDA: Adjusted loss before interest, income tax, depreciation and amortization, which excludes share-based compensation expenses, was RMB135.7 million (US$20.5 million), compared with RMB79.6 million in the comparable period of 2017.
NET LOSS PER ADS ATTRIBUTABLE TO GRIDSUM'S ORDINARY SHAREHOLDERS: Net loss per ADS attributable to Gridsum's ordinary shareholders was RMB5.90 (US$0.89), compared with RMB3.83 in the comparable period of 2017.
NON-GAAP NET LOSS PER ADS ATTRIBUTABLE TO GRIDSUM'S ORDINARY SHAREHOLDERS: Non-GAAP net loss per ADS attributable to Gridsum's ordinary shareholders was RMB5.36 (US$0.81), compared with RMB3.49 in the comparable period of 2017.
Each ADS represents one Class B ordinary share. For purposes of determining net loss per ADS attributable to Gridsum's ordinary shareholders, the weighted average number of ordinary shares for the first half of 2018 was 30,824,175. As of June 30, 2018, the total number of ordinary shares outstanding was 30,825,740.
Balance Sheet
As of June 30, 2018, the Company had cash and cash equivalents of RMB60.2 million (US$9.1 million), and restricted cash of RMB150.2 million (US$22.7 million).
Outlook
2018 was a very challenging year for the Company. For example, the filing of our annual report on Form 20-F for the year ended December 31, 2017 was delayed in part due to inadequate internal control over financial reporting and changes of auditor. Our ability to secure new financing has declined. Some customers have reduced their level of business with us or not renewed their contracts, and our ability to sign up new customers has weakened. We also lost a number of sales and other employees. These have had an adverse effect on our financial results.
In terms of net revenues, despite the growth seen in the first half of 2018, the Company experienced a down year in 2018 based on our preliminary review.
Exchange Rate
This announcement contains translations of certain RMB amounts into U.S. Dollars ("US$") at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to US$ were made at the rate of RMB6.6171 to US$1.00, the noon buying rate in effect on June 29, 2018 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all.
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is preliminary and subject to potential adjustments. Adjustments to the consolidated financial statements may be identified when audit work has been performed for the Company's year-end audit for 2018, which could result in significant differences from this preliminary unaudited condensed financial information.
Use of Non-GAAP Financial Measures
In evaluating the Company's business, the Company considers and uses the following non-GAAP financial measures as supplemental measures to review and assess the Company's operating performance: non-GAAP net loss attributable to Gridsum's ordinary shareholders, non-GAAP net loss per share attributable to Gridsum's ordinary shareholders, EBITDA and adjusted EBITDA. 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 in accordance with U.S. GAAP. Non-GAAP net loss attributable to Gridsum's ordinary shareholders is net loss attributable to Gridsum's ordinary shareholders before share-based compensation, non-GAAP net loss per share attributable to Gridsum's ordinary shareholders is the per share equivalent and non-GAAP net loss per ADS attributable to Gridsum's ordinary shareholders is the per ADS equivalent, EBITDA is net loss before interest income and expenses, income tax expenses and depreciation expenses, and adjusted EBITDA is EBITDA before share-based compensation.
The Company presents these non-GAAP financial measures because they are used by the Company's management to evaluate the Company's operating performance and formulate the Company's business plans. These non-GAAP financial measures enable the Company's management to assess the Company's operating results without considering the impact of non-cash charges, including depreciation expenses and share-based compensation, and without considering the impact of non-operating items such as interest income and expenses and income tax expenses. The Company also believes that the use of these non-GAAP measures facilitates investors' assessment of the Company's operating performance.
These non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. These non-GAAP financial measures have limitations as analytical tools. One of the key limitations of using these non-GAAP financial measures is that they do not reflect all items of income and expense that affect the Company's operations. Interest income and expenses, income tax expenses, depreciation expenses and share-based compensation have been and may continue to be incurred in the Company's business and are not reflected in the presentation of adjusted EBITDA. Further, these non-GAAP financial measures may differ from the non-GAAP financial measures used by other companies, including Gridsum's peer companies, so their utility for comparison purposes may be limited.
The Company compensates for these limitations by reconciling the Company's non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures, which should be considered when evaluating the Company's performance.
About Gridsum
Gridsum Holding Inc. (NASDAQ: GSUM) is a leading provider of cloud-based big-data analytics and AI solutions for multinational and domestic enterprises and government agencies in China. Gridsum's core technology, the Gridsum Big Data Platform and the Gridsum Prophet: Enterprise AI Engine, is built on a distributed computing framework and performs real-time multi-dimensional correlation analysis of both structured and unstructured data. This enables Gridsum's customers to identify complex relationships within their data and gain new insights that help them make better business decisions. The Company is named "Gridsum" to symbolize the combination of distributed computing (Grid) and analytics (sum). As a digital intelligence pioneer, the Company's mission is to help enterprises and government organizations in China use data in new and powerful ways to make better informed decisions and be more productive.
For more information, please visit http://www.gridsum.com/.
Safe Harbor Statement
This announcement contains forward-looking statements. These forward-looking statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements can be identified by terminology such as "may," "will," "expects," "anticipates," "aims," "future," "intends," "plans," "believes," "estimates," "likely to" and similar statements. Forward-looking statements involve inherent risks and uncertainties. Many factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to uncertainty about whether a stay of delisting will be granted. Further information regarding these and other risks is included in Gridsum's reports filed with, or furnished to, the Securities and Exchange Commission. All information provided in this press release is as of the date of this press release, and Gridsum undertakes no duty to update such information except as required under applicable law.
Investor Relations
Gridsum
ir@gridsum.com
Christensen
In China
Mr. Christian Arnell
Phone: +86-10-5900-1548
Email: carnell@christensenir.com
In U.S.
Mr. Tip Fleming
Phone: +1 917 412 3333
Email: tfleming@christensenir.com
GRIDSUM HOLDING INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands)
As of
December 31,
June 30,
June 30,
2017 2018 2018
RMB
RMB
USD
ASSETS
Current assets:
Cash and cash equivalents 166,690 60,210 9,099
Restricted cash 245,320 150,219 22,702
Notes Receivable 6,000 -
Accounts receivable, net 599,280 579,935 87,642
Prepayment and other current assets 306,092 321,914 48,649
Total current assets 1,323,381 1,112,277 168,091
Non-current assets:
Fixed assets, net 50,873 57,383 8,672
Intangible assets, net 9,426 8,246 1,246
Goodwill 537 537 81
Deferred tax assets non-current 18,392 17,691 2,673
Other non-current assets 487 420 63
Total non-current assets 79,715 84,276 12,736
Total assets 1,403,097 1,196,553 180,827
LIABILITIES
Current liabilities:
Accounts payable 208,155 10,623 1,605
Deferred revenue 13,391 17,795 2,689
Salaries and welfare payable 60,696 42,955 6,492
Tax payable (Exclude income tax) 103,331 121,870 18,417
Short-term loans 266,019 94,000 14,206
Accrued expenses and other current
liabilities 90,722 109,040 16,479
Advance from customers 116,847 160,152 24,203
Total current liabilities 859,160 556,435 84,091
Non-current liabilities:
Convertible note - 264,684 40,000
Defer tax liabilities 249 271 41
Total non-current liabilities 249 264,955 40,041
Total liabilities 859,409 821,391 124,131
SHAREHOLDERS' EQUITY
Ordinary shares 207 207 31
Additional paid-in capital 1,107,202 1,124,073 169,874
Statutory reserve 6,730 6,730 1,017
Accumulated other comprehensive income (30,539) (34,253) (5,176)
Accumulated deficit (549,915) (731,885) (110,605)
Total shareholders' equity 533,685 364,872 55,141
Non-controlling interest 10,003 10,290 1,555
Total equity 543,688 375,163 56,696
Total liabilities, mezzanine equity and
shareholders' equity 1,403,097 1,196,553 180,827
GRIDSUM HOLDING INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(All amounts in thousands, except for share, per share and per ADS data)
For the Six Months Ended
June 30,
June 30,
June 30,
2017 2018 2018
---
RMB
RMB
USD
Revenues:
Enterprise 147,407 224,166 33,877
e-Government and other 36,524 30,457 4,603
Less: Business tax and surcharges (4,984) (5,363) (810)
Net revenues 178,946 249,261 37,669
Cost of revenues (31,978) (39,297) (5,939)
Gross profit 146,968 209,964 31,730
Operating expenses:
Sales and marketing expenses (87,974) (77,317) (11,684)
Research and development expenses (109,064) (226,528) (34,234)
General and administrative expenses (50,205) (72,861) (11,011)
Total operating expenses (247,244) (376,706) (56,929)
Loss from operations (100,276) (166,742) (25,199)
Other income/(expense):
Foreign currency exchange gain/
(loss) (3,382) (5,400) (816)
Interest income /(expense), net (3,097) (3,645) (551)
Other income /(expense), net (899) 2,541 384
Loss before income tax (107,654) (173,246) (26,182)
Income tax expense (6,322) (8,436) (1,275)
Net loss (113,976) (181,682) (27,456)
Less: Net loss attributable to non-
controlling interests (35) 288 43
Net loss attributable to Gridsum
Holding Inc. (113,941) (181,970) (27,500)
Net loss attributable to Gridsum's
ordinary shareholders (113,941) (181,970) (27,500)
Net loss (113,976) (181,682) (27,456)
Foreign currency translation
adjustment (8,522) (3,714) (561)
Comprehensive loss (122,498) (185,396) (28,018)
Less: Comprehensive loss
attributable to non-controlling
interests (35) 288 43
Comprehensive loss attributable to
Gridsum Holding Inc. (122,463) (185,684) (28,061)
Weighted average number of ordinary shares used in per share
calculations:
Basic and diluted 29,751,812 30,824,175 30,824,175
Net loss per ordinary share attributable to Gridsum's ordinary
shareholders:
Basic and diluted (3.83) (5.90) (0.89)
Net loss per ADS attributable to Gridsum's ordinary shareholders:
Basic and diluted (3.83) (5.90) (0.89)
GRIDSUM HOLDING INC.
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
(All amounts in thousands, except for share, per share and per ADS data)
For the Six Months Ended
June 30,
June 30,
June 30,
2017 2018 2018
---
RMB
RMB
USD
Reconciliation of net loss attributable to Gridsum's ordinary
shareholders to non-GAAP net loss attributable to Gridsum's
ordinary shareholders
Net loss attributable to
Gridsum's ordinary shareholders (113,941) (181,970) (27,500)
Share-based compensation 9,985 16,864 2,549
Non-GAAP net loss attributable
to Gridsum's ordinary
shareholders (103,955) (165,106) (24,951)
Weighted average number of ordinary shares used in net loss per
share attributable to Gridsum's ordinary shareholders and non-
GAAP net loss per share attributable to Gridsum's ordinary
shareholders calculations:
Basic and diluted 29,751,812 30,824,175 30,824,175
Net loss per ordinary share attributable to Gridsum's ordinary
shareholders:
Basic and diluted (3.83) (5.90) (0.89)
Net loss per ADS attributable to Gridsum's ordinary shareholders:
Basic and diluted (3.83) (5.90) (0.89)
Non-GAAP net loss per ordinary share attributable to Gridsum's
ordinary shareholders:
Basic and diluted (3.49) (5.36) (0.81)
Non-GAAP net loss per ADS attributable to Gridsum's ordinary
shareholders:
Basic and diluted (3.49) (5.36) (0.81)
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA:
Net loss (113,976) (181,682) (27,456)
Interest expense/(income), net 3,097 3,645 551
Income tax expenses 6,322 8,436 1,275
Depreciation and amortization
expenses 14,997 17,030 2,574
EBITDA (89,560) (152,571) (23,057)
Share-based compensation 9,985 16,864 2,549
Adjusted EBITDA (79,574) (135,708) (20,509)
Restatement of previously issued financial statements
During the preparation of our annual report on Form 20-F for the fiscal year ended December 31, 2017 ("2017 Form 20-F"), the Company restated the Company's previously issued audited consolidated financial statements for the years ended December 31, 2015 and 2016. For more information on the effects of the restatement, see note 2(a) to the Company's consolidated financial statements included in 2017 Form 20-F. The financial information for the first half of 2017 and the first half of 2018 herein is prepared on the same basis as the 2015 and 2016 restated financial statements. Some amounts for interim periods in 2017 differ from what were previously reported.
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SOURCE Gridsum Holding Inc.
