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Gridsum Reports Unaudited First Quarter 2019 Financial Results

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Gridsum Reports Unaudited First Quarter 2019 Financial Results

BEIJING, June 24, 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 first quarter ended March 31, 2019.

Highlights

  • Net revenues decreased by 56% to RMB58.7 million (US$8.7 million) from RMB132.4 million in the comparable period of 2018.
  • Net loss attributable to Gridsum's ordinary shareholders increased to RMB161.4 million (US$24.0 million) from RMB62.5 million in the comparable period of 2018.

First Quarter 2019 Financial Results

REVENUES: Net revenues decreased by 56% to RMB58.7 million (US$8.7 million) from RMB132.4 million in the comparable period of 2018.

Enterprise revenues decreased by 52% to RMB57.9 million (US$8.6 million) from RMB119.8 million in the comparable period of 2018, mainly due to: an exceptionally strong performance in sales of Social Listening solutions recorded in the comparable period of 2018; the Company's ongoing strategic evolution to achieve a more optimal revenue mix by proactively optimizing its Search Engine Marketing (SEM) business toward higher return opportunities; and a slowdown in the Chinese economy.

E-Government and other revenues decreased by 88% to RMB2.0 million (US$0.3 million) from RMB17.3 million in the comparable period of 2018, mainly due to the lengthening of the sales cycle and lower budgeted spending of the Chinese government for E-Government solutions caused by China's government reorganization activities in 2018.

COST OF REVENUES: Cost of revenues was RMB17.9 million (US$2.7 million), compared with RMB16.3 million in the comparable period of 2018.

GROSS PROFIT AND GROSS MARGIN: Gross profit decreased by 65% to RMB40.9 million (US$6.1 million) from RMB116.1 million in the comparable period of 2018, while gross margin decreased to 69.6% from 87.7%. This was mainly due to a change in revenue mix as well as a time-lag between the Company's restructuring/optimization of its revenue mix and its cost structure.

OPERATING EXPENSES: Total operating expenses were RMB193.1 million (US$28.8 million), compared with RMB175.3 million in the comparable period of 2018. 

  • Sales and marketing expenses were RMB36.8 million (US$5.5 million), compared with RMB36.0 million in the comparable period of 2018. The increase was primarily due to a RMB3.3 million increase in staff costs, partially offset by a RMB1.5 million decrease in business development, marketing and promotion expenses.
  • Research and development expenses were RMB95.1 million (US$14.2 million), compared with RMB109.2 million in the comparable period of 2018. The decrease was primarily due to the Company leveraging its substantial foundation investments in Industrial AI, knowledge graph, data warehouse, and IIoT platform and applications in the corresponding period in 2018.
  • General and administrative expenses were RMB61.1 million (US$9.1 million), compared with RMB30.1 million in the comparable period of 2018. The increase was primarily due to a RMB10.5 million increase in provision for bad debt, a RMB5.1 million increase in staff costs and a RMB4.7 million increase in professional fees associated with delayed filing of the Company's periodic reports with the SEC.

LOSS FROM OPERATIONS: Loss from operations was RMB152.2 million (US$22.7 million), compared with RMB59.2 million in the comparable period of 2018.

NET LOSS ATTRIBUTABLE TO GRIDSUM'S ORDINARY SHAREHOLDERS: Net loss attributable to Gridsum's ordinary shareholders was RMB161.4 million (US$24.0 million), compared with RMB62.5 million in the comparable period of 2018. The increase was primarily due to the declines in net revenues and an increase in general and administrative expenses.

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 RMB150.3 million (US$22.4 million), compared with RMB55.0 million in the comparable period of 2018.

EBITDA: Loss before interest, income tax, depreciation and amortization was RMB155.8 million (US$23.2 million), compared with RMB51.6 million in the comparable period of 2018. The increase was mainly due to an increase in loss from operations of RMB93.0 million.

ADJUSTED EBITDA: Adjusted loss before interest, income tax, depreciation and amortization, which excludes share-based compensation expenses, was RMB144.7 million (US$21.6 million), compared with RMB44.1 million in the comparable period of 2018.

NET LOSS PER ADS ATTRIBUTABLE TO GRIDSUM'S ORDINARY SHAREHOLDERS: Net loss per ADS attributable to Gridsum's ordinary shareholders was RMB5.06 (US$0.75), compared with RMB2.03 in the comparable period of 2018.

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 RMB4.72 (US$0.70), compared with RMB1.78 in the comparable period of 2018.

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 quarter of 2019 was 31,876,482. As of March 31, 2019, the total number of ordinary shares outstanding was 34,302,710.

Balance Sheet

As of March 31, 2019, the Company had cash and cash equivalents of RMB38.8 million (US$5.8 million), and restricted cash of RMB1.3 million (US$0.2 million).

First Quarter 2019 Review and Outlook

The Company's performance in the first quarter of 2019 continued to reflect the Company moving through resolution of some of the challenges, originating in 2018, where a number of events and issues negatively impacted the Company's business and performance. Revenue and growth momentum were further impacted by the slowdown in the Chinese economy.

As a result of the Company's strategic evolution and restructuring to achieve a more optimal revenue mix and focus on higher return opportunities, revenues from Search Engine Marketing (SEM) solutions represented a smaller percentage of Enterprise revenues compared with the comparable period in 2018. Additionally, within SEM, the Company continued to evolve its client mix toward higher return opportunities.

The first quarter of 2019 saw increased traction from the restructuring of the Company's sales and service functions to encourage more effective cross-sell and upsell of additional products and solutions to its client base, as well as to focus on higher return opportunities within the Company's revenue-mix. The Company has seen early indications of additional cross-sell and upsell of products and solutions across its client base. The Company believes that this is an important initiative that will help its financial performance in the coming months and years.

The first quarter of 2019 continued to see solid traction in the Company's IIoT business leveraging its significant investments in its industrial AI and IIoT platforms during 2018.

The Company expects to continue to stabilize its core businesses and regain growth momentum through 2019 with higher Enterprise revenues and revenue growth in its IIoT vertical. On the back of the Company's front-end investment in its IIoT and related platform and solutions in 2018, the Company is showing early signs of potentially emerging as a leader in certain verticals in this nascent but high-opportunity industry segment in China.

Based on its current estimates and business trajectory, the Company expects a return to growth in net revenues in 2019.

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 RMB6.7112 to US$1.00, the noon buying rate in effect on March 29, 2019 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all.

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, non-GAAP net loss per ADS 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. Investors are encouraged to review our financial information in its entirety and not rely on a single financial measure. A reconciliation of these non-GAAP financial measures to their closest U.S. GAAP financial measures appears at the end of this release.

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 in this release include our stated expectations of future trends in our business. 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 unexpected difficulties in pursuit of our goals and strategies, unpredictability of demand for new solutions we have developed, difficulties keeping and strengthening relationships with customers, potential difficult expanding our customer base or securing new orders from existing customers, potentially costly research and development activities, liquidity and the availability of additional capital when needed, and weaknesses of our internal controls, competition in the digital intelligence market, PRC governmental policies relating to media, software, big data, the internet, internet content providers and online advertising; and general economic and business conditions . Further information regarding these and other risks is included in Gridsum's annual report on Form 20-F and other reports filed with, or furnished to, the U.S. 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.

CONSOLIDATED BALANCE SHEETS

(All amounts in thousands) 




 As of 



 December 31, 

 March 31, 

 March 31, 


2018

2019

2019

Assets

 RMB 

 RMB 

 USD 

Current assets:




          Cash and cash equivalents

92,684

38,773

5,777

          Restricted cash

1,334

1,349

201

          Accounts receivable, net

397,969

437,398

65,174

          Prepayments and other current assets

294,904

290,688

43,314

Total current assets

786,891

768,208

114,466

Non-current assets:




          Investment in associates

5,000

5,000

745

          Property, equipment and software, net

62,328

58,493

8,716

          Intangible assets, net

13,840

14,741

2,196

          Goodwill

537

537

80

          Deferred tax assets

46,359

52,573

7,834

          Other non-current assets

435

434

65

          Operating lease right-of-use assets

-

136,741

20,375

Total non-current assets

128,499

268,519

40,011

Total assets

915,390

1,036,727

154,477





Liabilities and Shareholders' Equity




Current liabilities: 




          Short-term bank loan 

5,000

13,000

1,937

          Accounts payable

97,293

131,119

19,537

          Salary and welfare payables

65,451

61,816

9,211

          Taxes payable

110,529

116,348

17,336

          Deferred revenues

36,126

42,547

6,340

          Advances from customers

154,731

154,375

23,003

          Accrued expenses and other current 
     liabilities

147,940

141,938

21,150

          Derivative liabilities

596

1,076

160

          Operating lease liabilities current

-

34,356

5,119

          Convertible note

242,702

246,366

36,710

Total current liabilities

860,368

942,941

140,503

Non-current liabilities: 




          Deferred tax liabilities

212

203

30

          Operating lease liabilities non-current

-

109,811

16,362

Total non-current liabilities

212

110,014

16,392

Total liabilities

860,580

1,052,955

156,895





Shareholders' (deficit)/equity:




Ordinary shares —Class A

31

31

5

Ordinary shares —Class B

177

199

29

Additional paid-in capital

1,146,253

1,231,202

183,455

Statutory reserve

12,903

12,903

1,923

Accumulated other comprehensive loss

(35,496)

(29,835)

(4,446)

Accumulated deficit

(1,077,409)

(1,238,801)

(184,587)

Total Gridsum shareholders' (deficit)/equity

46,459

(24,301)

(3,621)

                    Non-controlling interest

8,351

8,073

1,203

Total shareholders' (deficit)equity

54,810

(16,228)

(2,418)

Total liabilities and shareholders' equity

915,390

1,036,727

154,477

 

 

GRIDSUM HOLDING INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(All amounts in thousands, except for share, per share and per ADS data)



For the Three Months Ended


March 31, 2018

March 31, 2019

March 31, 2019


 RMB 

 RMB 

 USD 

Revenues:




         Enterprise

119,804

57,876

8,624

         e-Government and other

17,254

2,022

301

         Less: Business tax and surcharges

(4,625)

(1,181)

(176)

Net revenues

132,433

58,717

8,749

Cost of revenues

(16,343)

(17,856)

(2,661)

Gross profit

116,090

40,861

6,088

Operating expenses:




         Sales and marketing expenses

(35,957)

(36,828)

(5,487)

         Research and development expenses

(109,196)

(95,141)

(14,176)

         General and administrative expenses

(30,138)

(61,112)

(9,106)

Total operating expenses

(175,291)

(193,081)

(28,769)

Losses from operations

(59,201)

(152,220)

(22,681)

          Foreign exchange loss

(1,937)

(454)

(68)

          Interest expense, net

(2,429)

(26)

(4)

          Other (expense)/income, net

482

(2,028)

(302)

          Amortization of debt discount

-

(9,516)

(1,418)

          Gain on change in fair value of derivative 
     liabilities

-

(496)

(74)

Loss before income tax

(63,085)

(164,740)

(24,547)

          Income tax benefit

437

3,072

458

Net loss

(62,648)

(161,668)

(24,089)

Less: Net loss attributable to non-controlling
interests

(140)

(278)

(41)

Net loss attributable to Gridsum Holding
Inc.

(62,508)

(161,390)

(24,048)

Net loss attributable to Gridsum's ordinary
shareholders

(62,508)

(161,390)

(24,048)





Net loss

(62,648)

(161,668)

(24,089)

Foreign currency translation adjustment, net of
tax

(7,634)

5,661

844

Comprehensive loss

(70,282)

(156,007)

(23,245)

Less: Comprehensive loss attributable to non-
controlling interests

(140)

(278)

(41)

Comprehensive loss attributable to
Gridsum Holding Inc.

(70,142)

(155,729)

(23,204)





Weighted average number of ordinary
shares used in per share calculations:




Basic and diluted

30,824,550

31,876,482

31,876,482

Net loss per ordinary share attributable to
Gridsum's ordinary shareholders:




Basic and diluted

(2.03)

(5.06)

(0.75)

Net loss per ADS attributable to Gridsum's
ordinary shareholders:




Basic and diluted

(2.03)

(5.06)

(0.75)

 

 

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 Three Months Ended


March 31,
2018

March 31,
2019

March 31,
2019


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

(62,508)

(161,390)

(24,048)

Share-based compensation

7,555

11,052

1,647

Non-GAAP net loss attributable to Gridsum's ordinary
shareholders

(54,953)

(150,338)

(22,401)

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

30,824,550

31,876,482

31,876,482

Net loss per ordinary share attributable to Gridsum's ordinary
shareholders:




Basic and diluted

(2.03)

(5.06)

(0.75)

Net loss per ADS attributable to Gridsum's ordinary
shareholders:




Basic and diluted

(2.03)

(5.06)

(0.75)

Non-GAAP net loss per ordinary share attributable to
Gridsum's ordinary shareholders:




Basic and diluted

(1.78)

(4.72)

(0.70)

Non-GAAP net loss per ADS attributable to Gridsum's ordinary
shareholders:




Basic and diluted

(1.78)

(4.72)

(0.70)





Reconciliation of net loss to EBITDA and adjusted EBITDA

Net loss

(62,648)

(161,668)

(24,089)

Interest expense, net

2,429

26

4

Income tax expenses

(437)

(3,072)

(458)

Depreciation and amortization expenses

9,012

8,954

1,334

EBITDA

(51,644)

(155,760)

(23,209)

Share-based compensation

7,555

11,052

1,647

Adjusted EBITDA

(44,089)

(144,708)

(21,562)

 

 

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SOURCE Gridsum Holding Inc.

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