Form 6-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of December 2019

Commission File Number: 001-37871

 

 

Gridsum Holding Inc.

 

 

South Wing, High Technology Building

No. 229 North 4th Ring Road

Haidian District, Beijing 100083

People’s Republic of China

(86-10) 8261-9988

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒             Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

 

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Gridsum Holding Inc.
By:  

/s/ Ravi Sarathy

Name:   Ravi Sarathy
Title:   Chief Financial Officer

Date: December 23, 2019


Exhibit Index

Exhibit 99.1 — Press Release dated December 23, 2019

EX-99.1

Exhibit 99.1

Gridsum Reports Unaudited Third Quarter 2019 Financial Results

BEIJING, Dec. 23, 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 third quarter ended September 30, 2019.

Highlights

 

   

Net revenues decreased 25%, to RMB60.1 million (US$8.4 million), from RMB80.5 million in the comparable period of 2018.

 

   

Net loss attributable to Gridsum’s ordinary shareholders decreased 35%, to RMB126.7 million (US$17.7 million), from RMB193.9 million in the comparable period of 2018.

Third Quarter 2019 Financial Results

REVENUES: Net revenues decreased 25%, to RMB60.1 million (US$8.4 million), from RMB80.5 million in the comparable period of 2018.

Enterprise revenues decreased 20%, to RMB54.5 million (US$7.6 million), from RMB67.8 million in the comparable period of 2018, primarily due to the Company’s ongoing strategic restructuring to target its Search Engine Marketing (SEM) business toward higher return opportunities and to a slowdown in the Chinese economy.

E-Government and other revenues decreased 56%, to RMB6.0 million (US$0.8 million), from RMB13.7 million in the comparable period of 2018, primarily due to reduced budgeted spending by the Chinese government as a result of government reorganization activities that began in 2018.

COST OF REVENUES: Cost of revenues decreased 10%, to RMB21.3 million (US$3.0 million), compared with RMB23.6 million in the comparable period of 2018.

GROSS PROFIT AND GROSS MARGIN: Gross profit decreased 32%, to RMB38.8 million (US$5.4 million), from RMB56.8 million in the comparable period of 2018. Gross margin decreased to 64.5% from 70.6%, reflecting the shift in revenue mix and the timelag between the Company’s revenue restructuring.The Company believes its gross profit will begin to improve in 2020 as its sales mix continues to evolve with its IIoT solutions delivering a greater contribution.

OPERATING EXPENSES: Total operating expenses declined 42%, to RMB148.4million (US$20.8 million), from RMB254.4 million in the comparable period of 2018.

 

 

Sales and marketing expenses declined 27%, to RMB33.1 million (US$4.6 million), from RMB45.6 million in the comparable period of 2018. The decrease reflected a RMB6.6 million decrease in marketing and promotion expenses and a RMB4.2 million decrease in staff costs.


 

Research and development expenses declined 53%, to RMB74.5 million (US$10.4 million), from RMB158.3 million in the comparable period of 2018. The decrease primarily reflected the Company moving past the peak of front-end investment into its industrial AI and IIoT platforms.

 

 

General and administrative expenses declined 19%, to RMB40.9 million (US$5.7 million), from RMB50.5 million in the comparable period of 2018. The decrease was primarily due to a RMB8.3 million decrease in professional services fees.

LOSS FROM OPERATIONS: Loss from operations was RMB109.6 million (US$15.3 million), compared with RMB197.5 million in the comparable period of 2018.

NET LOSS ATTRIBUTABLE TO GRIDSUM’S ORDINARY SHAREHOLDERS: Net loss attributable to Gridsum’s ordinary shareholders was RMB126.7 million (US$17.7 million), compared with RMB193.9 million in the comparable period of 2018.

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 expenses, was RMB115.9 million (US$16.2million), compared with RMB182.8 million in the comparable period of 2018.

EBITDA: Loss before interest, income tax, depreciation and amortization was RMB97.1 million (US$13.6 million), compared with RMB199.6 million in the comparable period of 2018.

ADJUSTED EBITDA: Adjusted loss before interest, income tax, depreciation and amortization, which excludes share-based compensation expenses, was RMB86.3 million (US$12.1 million), compared with RMB188.5 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 RMB3.68 (US$0.51), compared with RMB6.29 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 RMB3.36 (US$0.47), compared with RMB5.93 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 third quarter of 2019 was 34,470,418. As of September 30, 2019, the total number of ordinary shares outstanding was 34,540,511.

 

2


Balance Sheet

As of September 30, 2019, the Company had cash and cash equivalents of RMB42.7 million (US$6.0 million), and restricted cash of RMB0.06 million (US$0.008 million).

Third Quarter 2019 Review

The Company’s performance in the third quarter of 2019 continued to reflect the Company’sefforts and challenges around its strategic restructuring to achieve a more optimal revenue and cost structure under operating conditions also characterized by cashflow and liquidity pressures. Momentum also continued to be impacted by the slowdown in the Chinese economy.

Recent Developments

On October 9, 2019, the Company announced that the special committee (the “Special Committee”) of the Company’s board of directors (the “Board”) retained Houlihan Lokey (China) Limited as its financial advisor in connection with its review and evaluation of the preliminary non-binding proposal received by the Board on July 15, 2019 (the “Proposal”) from Guosheng Qi, Guofa Yu, their respective affiliated entities, and Beta Dynamic Limited, an affiliate of Hammer Capital Private Investments Limited. At this time, no decisions have been made by the Special Committee with respect to the Company’s response to the Proposal or any other alternative transaction. The Special Committee has not set a definitive timetable for the completion of its evaluation of the Proposal or any other alternative transaction, and does not currently intend to announce developments unless and in the event a definitive agreement has been reached. There can be no assurance that any definitive offer will be made, that any agreement will be executed or that the transactions contemplated by the Proposal or any other alternative transaction will be approved or consummated.

On May 5, 2018, the Company issued to FutureX Innovation SPC (“FutureX”) a convertible note in the principal amount of US$40,000,000 due November 5, 2019 (the “Note”).The Company has not yet repaid the Note.On December 9, 2019, FutureXserved a statutory demand on the Company, under which FutureX (i) claims that the Company owes, as of December 9, 2019, a total amount of US$41,913,498 under the Note (the “Debt”), (ii) demands that the Company pay the Debt or secure or compound for it to FutureX’s satisfaction, and (iii) states that if payment of the Debt is not made within 21 days of the date when the statutory demand was served on the Company, the Company will be deemed to be insolvent and a winding up petition may be presented against the Company in accordance with applicable Cayman laws.The Company is engaged in discussions to resolve its obligations under the Note but there can be no assurance that any such resolution can be reached on a timely basis, or at all. In the event the Company is deemed insolvent there can be no assurance that the Company’s ADRs will remain listed for trading on The Nasdaq Stock Market.

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 RMB7.1477 to US$1.00, the noon buying rate in effect on September 30, 2019 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all.

 

3


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 the Company’s 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.

 

4


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 general economic conditions in China, unexpected difficulties in pursuit of our business strategy, unpredictable demand for solutions we have developed, difficulties keeping and strengthening relationships with existing customers or expanding our customer base, availability of additional capital when needed, uncertainties associated with our repayiment of indebtedness and our ability to maintain listing for trading on The Nasdaq Stock Market, and uncertainty about the Proposal. Further information regarding these and other risks is included in Gridsum’sannual 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

 

5


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

 

6


GRIDSUM HOLDING INC.

CONSOLIDATED BALANCE SHEETS

(All amounts in thousands, unaudited)

 

     As of  
     December 31, 2018     September 30, 2019     September 30, 2019  
     RMB     RMB     USD  

Assets

      

Current assets:

      

Cash and cash equivalents

     92,684       42,717       5,976  

Restricted cash

     1,334       55       8  

Accounts receivable, net

     397,969       370,159       51,787  

Prepayments and other current assets

     294,904       283,093       39,606  
  

 

 

   

 

 

   

 

 

 

Total current assets

     786,891       696,024       97,377  

Non-current assets:

      

Investment in associates

     5,000       5,000       700  

Property, equipment and software, net

     62,328       50,978       7,132  

Intangible assets, net

     13,840       21,373       2,990  

Goodwill

     537       537       75  

Deferred tax assets

     46,359       47,712       6,675  

Other non-current assets

     435       337       47  

Operating lease right-of-use assets

     —       122,224       17,100  
  

 

 

   

 

 

   

 

 

 

Total non-current assets

     128,499       248,161       34,719  
  

 

 

   

 

 

   

 

 

 

Total assets

     915,390       944,185       132,096  
  

 

 

   

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

      

Current liabilities:

      

Short-term bank loan

     5,000       40,000       5,596  

Accounts payable

     97,293       50,581       7,076  

Salary and welfare payables

     65,451       62,101       8,688  

Taxes payable

     110,529       113,749       15,914  

Deferred revenues

     36,126       52,769       7,383  

Advances from customers

     154,731       187,088       26,175  

Accrued expenses and other current liabilities

     147,940       156,891       21,950  

Derivative liabilities

     596       5,649       790  

Operating lease liabilities current

     —       31,104       4,352  

Convertible note

     242,702       282,548       39,530  
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     860,368       982,480       137,454  

Non-current liabilities:

      

Long-term borrowing

     —       91,627       12,819  

Corporate bond

     —       18,289       2,559  

Deferred tax liabilities

     212       184       26  

Other non-current liabilities

     —       1,248       175  

Operating lease liabilities non-current

     —       101,586       14,212  
  

 

 

   

 

 

   

 

 

 

Total non-current liabilities

     212       212,934       29,791  
  

 

 

   

 

 

   

 

 

 

Total liabilities

     860,580       1,195,414       167,245  
  

 

 

   

 

 

   

 

 

 

Shareholders’ (deficit)/equity:

      

Ordinary shares - Class A

     31       31       4  

Ordinary shares - Class B

     177       200       28  

Additional paid-in capital

     1,146,253       1,262,751       176,665  

Statutory reserve

     12,903       12,903       1,805  

Accumulated other comprehensive loss

     (35,496     (47,464     (6,640

Accumulated deficit

     (1,077,409     (1,489,041     (208,324
  

 

 

   

 

 

   

 

 

 

Total Gridsum shareholders’ (deficit)/equity

     46,459       (260,620     (36,462

Non-controlling interest

     8,351       9,391       1,314  
  

 

 

   

 

 

   

 

 

 

Total shareholders’ (deficit)equity

     54,810       (251,229     (35,148
  

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

     915,390       944,185       132,096  
  

 

 

   

 

 

   

 

 

 

 

7


GRIDSUM HOLDING INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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

 

     For the Three Months Ended  
     30-Sep-18     30-Sep-19     30-Sep-19  
     RMB     RMB     USD  

Revenues:

      

Enterprise

     67,815       54,464       7,620  

e-Government and other

     13,701       6,049       846  

Less: Business tax and surcharges

     (1,062     (379     (53
  

 

 

   

 

 

   

 

 

 

Net revenues

     80,454       60,134       8,413  

Cost of revenues

     (23,630     (21,326     (2,984
  

 

 

   

 

 

   

 

 

 

Gross profit

     56,824       38,808       5,429  

Operating expenses:

      

Sales and marketing expenses

     (45,565     (33,064     (4,626

Research and development expenses

     (158,348     (74,490     (10,422

General and administrative expenses

     (50,454     (40,889     (5,720
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     (254,367     (148,443     (20,768
  

 

 

   

 

 

   

 

 

 

Losses from operations

     (197,543     (109,635     (15,339

Foreign exchange loss

     (3,644     37       5  

Interest expense, net

     (2,795     (4,126     (577

Other (expense)/income, net

     3,297       589       82  

Amortization of debt discount

     (9,593     (10,711     (1,498

Gain on change in fair value of derivative liabilities

     —         13,932       1,949  
  

 

 

   

 

 

   

 

 

 

Loss before income tax

     (210,278     (109,914     (15,378

Income tax benefit (expenses)

     15,783       (15,151     (2,119
  

 

 

   

 

 

   

 

 

 

Net loss

     (194,495     (125,065     (17,497

Less: Net loss attributable to non-controlling interests

     (597     1,649       231  
  

 

 

   

 

 

   

 

 

 

Net loss attributable to Gridsum Holding Inc.

     (193,898     (126,714     (17,728
  

 

 

   

 

 

   

 

 

 

Net loss attributable to Gridsum’s ordinary shareholders

     (193,898     (126,714     (17,728
  

 

 

   

 

 

   

 

 

 

Net loss

     (194,495     (125,065     (17,497

Foreign currency translation adjustment, net of tax

     (2,567     (22,000     (3,078
  

 

 

   

 

 

   

 

 

 

Comprehensive loss

     (197,062     (147,065     (20,575

Less: Comprehensive loss attributable to non-controlling interests

     (598     1,649       231  
  

 

 

   

 

 

   

 

 

 

Comprehensive loss attributable to Gridsum Holding Inc.

     (196,464     (148,714     (20,806
  

 

 

   

 

 

   

 

 

 

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

      

Basic and diluted

     30,827,609       34,470,418       34,470,418  

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

      

Basic and diluted

     (6.29     (3.68     (0.51

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

      

Basic and diluted

     (6.29     (3.68     (0.51

 

8


GRIDSUM HOLDING INC.

RECONCILIATION OF GAAP AND NON-GAAP RESULTS

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

 

     For the Three Months Ended  
     30-Sep-18     30-Sep-19     30-Sep-19  
     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

     (193,898     (126,714     (17,728

Share-based compensation

     11,081       10,859       1,519  

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

     (182,817     (115,855     (16,209

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

     30,827,609       34,470,418       34,470,418  

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

      

Basic and diluted

     (6.29     (3.68     (0.51

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

      

Basic and diluted

     (6.29     (3.68     (0.51

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

      

Basic and diluted

     (5.93     (3.36     (0.47

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

      

Basic and diluted

     (5.93     (3.36     (0.47

Reconciliation of net loss to EBITDA and adjusted EBITDA

 

   

Net loss

     (194,495     (125,065     (17,497

Interest expense, net

     2,795       4,126       577  

Income tax expenses

     (15,783     15,151       2,120  

Depreciation and amortization expenses

     7,922       8,659       1,211  

EBITDA

     (199,561     (97,129     (13,589

Share-based compensation

     11,081       10,859       1,519  

Adjusted EBITDA

     (188,480     (86,270     (12,070

 

9