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ChinaCache International Holdings Ltd. Announces Fourth Quarter And Full Fiscal Year 2012 Financial Results

"Looking ahead, we plan to leverage our technological leadership to expand our Content-aware Network Services. This unique offering combines our best-in-class CDN platform with cloud infrastructure, security, data analytics and other value-added services to create a comprehensive suite of services for our clients in the Internet, enterprise and e-commerce, telecom and mobile communications markets. We are confident that this technology-driven, industry-focused approach will best position ChinaCache for sustainable growth over the long-term, and are excited about the opportunities ahead of us."

Fourth Quarter 2012 Financial Results

Net revenues for the fourth quarter 2012 were RMB225.0 million (US$36.1 million), representing a 7.6% increase from the third quarter of 2012 and a 25.3% increase from the corresponding period in 2011. Net revenue growth was primarily driven by the Internet and software vertical.

Cost of revenues for the fourth quarter increased by 11.7% quarter-over-quarter and 24.5% year-over-year to RMB157.4 million (US$25.3 million). Gross margin was 30.1%, compared to 32.6% in the previous quarter and 29.6% in the corresponding period in 2011. Non-GAAP gross margin, which excludes share-based compensation and depreciation and amortization expenses, was 35.1%, compared to 38.7% in the third quarter and 39.2% in the corresponding period in 2011.

Sales and marketing expenses for the fourth quarter increased by 26.9% from the previous quarter to RMB27.4 million (US$4.4 million) and increased by 23.0% year-over-year, reaching 12.2% of net revenues. The increase in sales and marketing expenses was primarily attributable to increased personnel expenses and expenses related to marketing activities.

General and administrative expenses for the fourth quarter increased by 94.3% over the previous quarter to RMB43.2 million (US$6.9 million) and increased by 149.1% year-over-year, reaching 19.2% of net revenues. The increase in general and administrative expenses was primarily attributable to RMB17.1 million in accruals for bad debt provision.

Research and development expenses for the fourth quarter increased by 12.3% over the previous quarter to RMB20.9 million (US$3.4 million) and increased by 55.7% year-over-year, reaching 9.3% of net revenues. This increase was related to increased development efforts for the Company's enterprise and mobile offerings.

Operating loss was RMB23.8 million (US$3.8 million) in the fourth quarter of 2012, compared to an operating profit of RMB5.9 million in the previous quarter and an operating profit of RMB0.2 million in the corresponding period in 2011. Non-GAAP operating loss, which excludes share-based compensation expenses and post-acquisition settlement consideration, was RMB20.8 million (US$3.3 million), compared with a non-GAAP operating profit of RMB9.8 million in the third quarter and a non-GAAP operating profit of RMB6.5 million in the corresponding period in 2011. Such results reflect the Company's investments in its long-term growth initiatives.

Income tax benefit was RMB0.3 million (US$0.0 million) in the fourth quarter of 2012, compared to an income tax expense of RMB1.2 million in the third quarter of 2012 and an income tax expense of RMB 5.7 million in the corresponding period in 2011.

Net loss was RMB26.7 million (US$4.3 million) in the fourth quarter of 2012, compared to net income of RMB2.9 million in the third quarter of 2012 and a net income of RMB19.5 million in the corresponding period in 2011. Basic and diluted loss per American depositary share ("ADS') for the fourth quarter of 2012 was RMB1.17 (US$0.19) and RMB1.17 (US$0.19), respectively. Each ADS represents 16 ordinary shares of the Company.

Adjusted net income (non-GAAP), defined as income from continuing operations before share-based compensation expenses, foreign exchange loss or gain, penalties on uncertain tax positions and post-acquisition settlement consideration, was negative RMB19.9 million (US$3.2 million), compared to adjusted net income of RMB8.2 million in the third quarter of 2012 and an adjusted net income of negative RMB3.5 million in the corresponding period in 2011. Non-GAAP basic and diluted loss per ADS for the fourth quarter of 2012 amounted to RMB0.88 (US$0.14) and RMB0.88 (US$0.14), respectively.

Adjusted EBITDA (non-GAAP), defined as EBITDA excluding share-based compensation expenses, foreign exchange loss or gain and post-acquisition settlement consideration, was negative RMB5.9 million (US$0.9 million) compared to an adjusted EBITDA of RMB23.6 million in the third quarter of 2012 and RMB19.4 million in the corresponding period in 2011.

Capital Resources

As of December 31, 2012, the Company had cash and cash equivalents of RMB317.1 million (US$50.9 million). In addition, the Company had an available-for-sale investment amounting to RMB82.3 million (US$13.2 million) in an RMB denominated short term fixed income fund which is presented as non-current assets. Capital expenditures for the fourth quarter of 2012 were RMB16.0 million (US$2.6 million).

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