• 21Vianet Group, Inc. Reports Unaudited Fourth Quarter and Full Year 2017 Financial Results

    Source: Nasdaq GlobeNewswire / 12 Mar 2018 16:30:49   America/New_York

    Adjusted EBITDA up 228.9% YoY to RMB171.0 million 
    Adjusted EBITDA margin expanded to 22.3% from 5.8% in prior year period

    BEIJING, March 12, 2018 (GLOBE NEWSWIRE) -- 21Vianet Group, Inc. (Nasdaq:VNET) ("21Vianet" or the "Company"), a leading carrier-neutral Internet data center services provider in China, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2017. The Company will hold a conference call at 8:00 pm on Monday, March 12, 2018 U.S. Eastern Time to discuss the financial results. Dial-in details are provided at the end of this release.

    Fourth Quarter 2017 Financial Highlights

    • Net revenues for hosting and related services increased by 8.9% year over year to RMB765.8 million (US$117.7 million).
    • Gross profit increased by 9.2% year over year to RMB200.2 million (US$30.8 million). Gross margin expanded to 26.1% from 20.4% in the same period in 2016.  
    • Adjusted EBITDA increased by 228.9% year over year to RMB171.0 million (US$26.3 million). Adjusted EBITDA margin expanded to 22.3% from 5.8% in the same period of 2016.

    Mr. Steve Zhang, Co-Chief Executive Officer of the Company, stated, “2017 was an exciting and milestone year for 21Vianet. We completed the restructuring of the Company by optimizing and then ultimately divesting our loss-generating managed network services (MNS) business, which allows us to fully focus our resources on our core hosting and related services business. During the past quarter, we further expanded our client base, including new relationships with Meitu, Douyu, and 99Bill, while many of our large clients, such as Xiaomi, Momo, Huawei and Lianjia, continued to expand their capacity at our IDC centers. As China’s internet companies migrate from public cloud to the hybrid cloud, their demand for customized cloud solutions rose continuously throughout 2017. To satisfy our customers’ specific requirements, we have proactively expanded our service offerings with more customized solutions. We are confident that our carrier- and cloud-neutral solutions coupled with customization will enable us to capitalize on rising demand and solidify our leadership position in this blooming Chinese market.”

    Ms. Sharon Liu, Chief Financial Officer of the Company, commented, “We are pleased to once again deliver better-than-expected financial and operating results in the fourth quarter. Our revenue from the core hosting and related services business increased by 8.9% to RMB765.8 million and our Adjusted EBIDTA increased by 228.9% to RMB171.0 million, both of which exceeded the upper end of our guidance. Furthermore, in December of last year, we successfully completed the divestiture of the remaining equity stake in Sichuan Aipu Network Co. Ltd (“Aipu”), as well as the elimination of the Aipu put option. As we move toward a leaner business model with an improved cost structure, we expect our financial and operating metrics to show continued improvement going forward.”

    Fourth Quarter 2017 Financial Results

    REVENUES: Total net revenues were RMB765.8 million (US$117.7 million) in the fourth quarter of 2017, compared to RMB900.6 million in the same period in 2016. The decrease in net revenues was due to the discontinuation of the Company’s MNS business following the completion of the divestiture in the third quarter of 2017.

    Net revenues for hosting and related services, which represent 100% of the company’s total net revenues in the fourth quarter of 2017, increased by 8.9% year over year to RMB765.8 million (US$117.7 million) in the fourth quarter of 2017 from RMB703.2 million in the same period in 2016. The increase was primarily due to the growth in revenues from the Company’s business lines of hosting and related services.

    GROSS PROFIT: Gross profit increased by 9.2% to RMB200.2 million (US$30.8 million) in the fourth quarter of 2017 from RMB183.4 million in the same period in 2016. Gross margin increased to 26.1% in the fourth quarter of 2017 from 20.4% in the same period in 2016. The increase was primarily due to the divestiture of the MNS business and execution of the Company’s cost control strategies.  

    Adjusted gross profit, which excludes share-based compensation expenses and amortization of intangible assets derived from acquisitions, was RMB211.1 million (US$32.4 million) in the fourth quarter of 2017, compared to RMB222.6 million in the same period in 2016. Adjusted gross margin expanded to 27.6% in the fourth quarter of 2017 from 24.7% in the same period in 2016.

    OPERATING EXPENSES: Total operating expenses were RMB192.4 million (US$29.6 million) in the fourth quarter of 2017, compared to RMB690.4 million in the same period in 2016. The decrease in operating expenses was primarily due to the divestiture of the MNS business and the execution of the Company’s cost control strategies.

    Adjusted operating expenses, which exclude impairment of long-lived assets, impairment of goodwill, share-based compensation expenses and changes in the fair value of contingent purchase consideration payable, decreased by 44.1% to RMB173.2 million (US$26.6 million) in the fourth quarter of 2017 from RMB309.8 million in the same period in 2016. As a percentage of net revenues, adjusted operating expenses decreased to 22.6% in the fourth quarter of 2017 from 34.4% in the same period in 2016.

    Sales and marketing expenses decreased by 53.6% to RMB42.7 million (US$6.6 million) in the fourth quarter of 2017 from RMB92.0 million in the same period in 2016. The decrease was primarily due to the divesture of our MNS business

    General and administrative expenses decreased by 38.2% to RMB115.4 million (US$17.7 million) in the fourth quarter of 2017 from RMB186.7 million in the same period in 2016. The decrease was primarily due to the divesture of our MNS business and a reduction in headcount.

    Research and development expenses were RMB29.3 million (US$4.5 million) in the fourth quarter of 2017, compared to RMB38.4 million in the same period in 2016. The decrease was primarily due to the divesture of our MNS business.

    Changes in the fair value of contingent purchase consideration payable was a loss of RMB3.8 million (US$0.6 million) in the fourth quarter of 2017, compared to a gain of RMB67.2 million in the same period in 2016.

    ADJUSTED EBITDA: Adjusted EBITDA for the fourth quarter of 2017 increased by 228.9% to RMB171.0 million (US$26.3 million), from RMB52.0 million in the same period in 2016. Adjusted EBITDA margin expanded to 22.3% in the fourth quarter of 2017 from 5.8% in the same period in 2016.  Adjusted EBITDA for the fourth quarter of 2017 excludes disposal gain of subsidiaries of RMB677.1 million (US$104.1 million), share-based compensation expense of RMB15.4 million (US$2.4 million), and changes in the fair value of contingent purchase consideration payable which was a loss of RMB3.8 million (US$0.6million).

    NET PROFIT/LOSS: Net profit was RMB797.6 million (US$122.6 million) in the fourth quarter of 2017, compared to a net loss of RMB485.2 million in the same period in 2016. The increase in net profit was primarily due to a one-off gain from the disposal of subsidiaries of RMB677.1 million (US$104.1 million).

    Adjusted net profit for the fourth quarter of 2017 was RMB51.6 million (US$7.9 million), as compared with an adjusted net loss of RMB70.6 million in the same period in 2016. Adjusted net profit in the fourth quarter of 2017 excludes share-based compensation expense of RMB15.4 million (US$2.4 million), amortization of intangible assets derived from acquisitions of RMB10.8 million (US$1.7 million), changes in the fair value of contingent purchase consideration payable and related deferred tax impact of RMB3.8 million (US$ 0.6 million), disposal gain of subsidiaries of RMB677.1 million (US$104.1 million), impairment of long-term investment of RMB0.1 million (US$21 thousand), tax impact for the reconciliation adjustments of RMB4.6 million (US$0.7 million),and tax impact for the disposal of long-term investment of RMB94.2 million (US$14.5 million). Adjusted net margin was positive 6.7% in the fourth quarter of 2017, as compared to negative 7.8% in the same period in 2016.

    PROFIT PER SHARE: Diluted profit per share was RMB1.18 (US$0.18) in the fourth quarter of 2017, which represents the equivalent of RMB7.08 (US$1.09) per American Depositary Share ("ADS"). Each ADS represents six ordinary shares.

    Adjusted diluted profit per share was RMB0.08 (US$0.01) in the fourth quarter of 2017, which represents the equivalent of RMB0.48 (US$0.06) per ADS. Adjusted diluted profit per share is calculated using adjusted net profit divided by the weighted average number of shares.

    As of December 31, 2017, the Company had a total of 675.5 million diluted ordinary shares outstanding, or the equivalent of 112.6 million ADS.

    As of December 31, 2017, the Company's cash and cash equivalents and short-term investment were RMB2,498.5 million (US$384.0 million).

    Net cash generated from operating activities was RMB106.3 million (US$16.3 million) in the fourth quarter of 2017.

    Full Year 2017 Financial Performance

    For the full year of 2017, net revenues for hosting and related services increased to RMB2.98 billion (US$457.3 million) from RMB2.67 billion in the prior year. Adjusted EBITDA for the full year was RMB514.9 million (US$79.1 million), as compared with RMB243.9 million in the prior year. Adjusted EBITDA margin was 15.2%, as compared with 6.7% in the prior year. Adjusted EBITDA for the full year excludes share-based compensation expenses of RMB47.1 million (US$7.2 million), changes in the fair value of contingent purchase consideration payable which was a loss of RMB0.9 million (US$0.1 million), impairment of long-lived assets of RMB401.8 million (US$61.8 million), and impairment of goodwill of RMB766.4 million (US$117.8 million). Adjusted net loss for the full year was RMB190.8 million (US$29.3 million), as compared with RMB359.1 million in the prior year. Adjusted net loss in the full year excludes share-based compensation expense of RMB47.1 million (US$7.2 million), amortization of intangible assets derived from acquisitions of RMB104.3 million (US$16.0 million), changes in the fair value of contingent purchase consideration payable and related deferred tax impact of RMB0.9 million (US$0.1 million), impairment of long-lived assets of RMB401.8 million (US$61.8 million), impairment of goodwill of RMB766.4 million (US$117.8 million), disposal gain of subsidiaries of RMB497.0 million (US$76.4 million), impairment of long-term investment of RMB20.3 million (US$3.1 million), tax impact for the reconciliation adjustments of RMB22.8 million (US$3.5million), and tax impact for the disposal of long-term investment of RMB94.2 million (US$14.5million). Adjusted diluted loss per share for the full year of 2017 was RMB0.28 (US$0.04), which represents the equivalent of RMB1.68 (US$0.24) per ADS.

    Fourth Quarter 2017 Operational Highlights

    • Monthly Recurring Revenues for the Company’s hosting and related services business per cabinet was RMB 7,766 in the fourth quarter of 2017, compared to RMB 7,878 in the fourth quarter of 2016 and RMB 7,817 in the third quarter of 2017.
    • Total cabinets under management increased to 29,080 as of December 31, 2017 from 27,424 as of September 30, 2017, with 23,823 cabinets in the Company's self-built data centers and 5,257 cabinets in its partnered data centers.
    • Utilization rate was 75.7 % in the fourth quarter of 2017, compared to 73.8 % in the third quarter of 2017.
    • Hosting churn rate, which is based on the Company’s core IDC business, was 0.18% in the fourth quarter of 2017, compared to 0.97% in the third quarter of 2017.

    Recent Developments

    On December 20, 2017, the Company announced completion of its divestiture of all remaining equity interest in Aipu and elimination of related put options.

    On January 9, 2018, the Company announced that Mr. Terry Wang has resigned due to personal reasons and Ms. Sharon Xiao Liu assumed the position of Chief Financial Officer following his departure.

    On February 5, 2018, the Company announced the addition of Mr. Alvin Wang to its leadership team as co-CEO to strengthen its cooperation with its shareholders and to foster strategic partnerships with various external parties.

    Financial Outlook

    The following forecast reflects the Company’s current and preliminary view on the market and its operational conditions, which is subject to change.

    For the first quarter of 2018, the Company expects net revenues to be in the range of RMB770 million to RMB790 million. Adjusted EBITDA is expected to be in the range of RMB178 million to RMB190 million.

    For the full year of 2018, the Company now expects net revenues to be in the range of RMB3.25 billion to RMB3.35 billion. Adjusted EBITDA for the full year 2018 is expected to be in the range of RMB750 million to RMB830 million.

    Conference Call

    The Company will hold a conference call at 8:00 pm on Monday, March 12, 2018 U.S. Eastern Time, or 8:00 am on Tuesday, March 13, 2018 Beijing Time to discuss the financial results.

    Participants may access the call by dialing the following numbers:
    United States Toll Free: +1-855-500-8701
    International: +65-6713-5440
    China Domestic: 400-120-0654
    Hong Kong: +852-3018-6776
    Conference ID: 1299086
      
    The replay will be accessible through March 19, 2018 by dialing the following numbers:
    United States Toll Free: +1-855-452-5696
    International: +61-2-9003-4211
    Conference ID: 1299086

    A live and archived webcast of the conference call will be available through the Company's investor relation website at http://ir.21vianet.com.

    Non-GAAP Disclosure

    In evaluating its business, 21Vianet considers and uses the following non-GAAP measures defined as non-GAAP financial measures by the SEC as supplemental measure to review and assess its operating performance: adjusted gross profit, adjusted gross margin, adjusted operating expenses, adjusted net profit, adjusted net margin, adjusted EBITDA, adjusted EBITDA margin, adjusted basic earnings per share, adjusted diluted earnings per share, adjusted basic earnings per ADS and adjusted diluted earnings per ADS. 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 and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of GAAP and non-GAAP results" set forth at the end of this press release.

    The non-GAAP financial measures are provided as additional information to help investors compare business trends among different reporting periods on a consistent basis and to enhance investors' overall understanding of the Company's current financial performance and prospects for the future. These non-GAAP financial measures should be considered in addition to results prepared in accordance with U.S. GAAP, but should not be considered a substitute for, or superior to, U.S. GAAP results. In addition, the Company's calculation of the non-GAAP financial measures may be different from the calculation used by other companies, and therefore comparability may be limited.

    Exchange Rate

    This announcement contains translations of certain RMB amounts into U.S. dollars (“USD”) at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to USD were made at the rate of RMB6.5063 to US$1.00, the noon buying rate in effect on December 31, 2017 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or USD amounts referred could be converted into USD or RMB, as the case may be, at any particular rate or at all. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this earnings release.

    Statement Regarding Unaudited Condensed 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, which could result in significant differences from this preliminary unaudited condensed financial information.

    About 21Vianet

    21Vianet Group, Inc. is a leading carrier-neutral Internet data center services provider in China. 21Vianet provides hosting and related services, cloud services, and business VPN services, improving the reliability, security and speed of its customers' Internet infrastructure. Customers may locate their servers and networking equipment in 21Vianet's data centers and connect to China's Internet backbone through 21Vianet's extensive fiber optic network. 21Vianet operates in more than 30 cities throughout China, servicing a diversified and loyal base of more than 4,000 hosting enterprise customers that span numerous industries ranging from Internet companies to government entities and blue-chip enterprises to small- to mid-sized enterprises.

    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 "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, quotations from management in this announcement as well as 21Vianet's strategic and operational plans contain forward-looking statements. 21Vianet may also make written or oral forward-looking statements in its reports filed with, 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. Statements that are not historical facts, including statements about 21Vianet's beliefs and expectations, are forward-looking statements. 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 statement, including but not limited to the following: 21Vianet's goals and strategies; 21Vianet's expansion plans; the expected growth of the data center services market; expectations regarding demand for, and market acceptance of, 21Vianet's services; 21Vianet's expectations regarding keeping and strengthening its relationships with customers; 21Vianet's plans to invest in research and development to enhance its solution and service offerings; and general economic and business conditions in the regions where 21Vianet provides solutions and services. Further information regarding these and other risks is included in 21Vianet's reports filed with, or furnished to, the Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of this press release, and 21Vianet undertakes no duty to update such information, except as required under applicable law.

    Investor Relations Contacts:

    21Vianet Group, Inc.
    Calvin Jiang
    +86 10 8456 2121
    IR@21Vianet.com

    ICR, Inc.
    Jack Wang
    +1 (646) 405-4922
    IR@21Vianet.com

    21VIANET GROUP, INC.
    CONSOLIDATED BALANCE SHEETS
    (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))
     As ofAs of
     December 31, 2016December 31, 2017
     RMB RMB US$
     (Audited) (Unaudited) (Unaudited)
    Assets      
    Current assets:      
    Cash and cash equivalents  1,297,418    1,949,631    299,653  
    Restricted cash  1,963,561    242,494    37,271  
    Accounts and notes receivable, net  655,459    455,811    70,057  
    Short-term investments  277,946    548,890    84,363  
    Inventories  4,431    710    109  
    Prepaid expenses and other current assets  777,131    933,750    143,514  
    Amount due from related parties  182,615    114,256    17,561  
    Total current assets  5,158,561    4,245,542    652,528  
    Non-current assets:      
    Property and equipment, net  3,781,613    3,319,424    510,186  
    Intangible assets, net  977,341    401,115    61,650  
    Land use rights, net  167,646    163,671    25,156  
    Deferred tax assets  100,676    172,818    26,562  
    Goodwill  1,755,970    989,530    152,088  
    Long term investments  298,871    510,926    78,528  
    Restricted cash  33,544    3,344    514  
    Amount due from related parties  -     20,210    3,106  
    Other non-current assets  147,302    81,581    12,539  
    Total non-current assets  7,262,963    5,662,619    870,329  
    Total assets  12,421,524    9,908,161    1,522,857  
    Liabilities and Shareholders' Equity      
    Current liabilities:      
    Short-term bank borrowings  1,683,676    50,000    7,685  
    Accounts and notes payable  529,569    252,892    38,869  
    Accrued expenses and other payables  787,916    657,133    100,999  
    Deferred revenue  320,023    55,753    8,569  
    Advances from customers  201,397    403,244    61,977  
    Income taxes payable  21,899    13,309    2,046  
    Amounts due to related parties  121,928    55,675    8,557  
    Current portion of long-term bank borrowings  39,303    70,289    10,803  
    Current portion of capital lease obligations  243,723    201,315    30,942  
    Current portion of deferred government grant  5,107    4,574    703  
    Current portion of bonds payable  419,316    11,139    1,712  
    Total current liabilities  4,373,857    1,775,323    272,862  
    Non-current liabilities:      
    Long-term bank borrowings  268,221    187,638    28,839  
    Deferred revenue  62,531    -     -  
    Unrecognized tax benefits  28,689    16,511    2,538  
    Deferred tax liabilities  274,700    190,873    29,337  
    Non-current portion of capital lease obligations  536,623    600,882    92,354  
    Non-current portion of deferred government grant  25,886    17,861    2,745  
    Bonds payable  -     1,918,069    294,802  
    Total non-current liabilities  1,196,650    2,931,834    450,615  
           
    Redeemable noncontrolling interests  700,000    -     -  
           
    Shareholders' equity      
    Treasury stock  (204,557)  (337,683)  (51,901)
    Ordinary shares   45    46    7  
    Additional paid-in capital  9,015,846    8,980,407    1,380,263  
    Accumulated other comprehensive gain  118,290    (2,673)  (411)
    Statutory reserves  64,622    38,736    5,954  
    Accumulated deficit  (2,869,031)  (3,629,300)  (557,813)
    Total 21Vianet Group, Inc. shareholders’ equity  6,125,215    5,049,533    776,099  
    Noncontrolling interest  25,802    151,471    23,281  
    Total shareholders' equity  6,151,017    5,201,004    799,380  
    Total liabilities, redeemable noncontrolling interests and shareholders' equity  12,421,524    9,908,161    1,522,857  
           


    21VIANET GROUP, INC.
    CONSOLIDATED STATEMENTS OF OPERATIONS
    (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)
             
     Three months ended  Twelve months ended
     December 31,  2016September 30, 2017December 31, 2017 December 31, 2016December 31, 2017
     RMBRMBRMBUS$ RMBRMBUS$
     (Unaudited)(Unaudited)(Unaudited)(Unaudited) (Unaudited)(Unaudited)(Unaudited)
    Net revenues        
    Hosting and related services  703,171    759,255    765,814    117,703     2,668,655    2,975,178    457,276  
    Managed network services  197,476    126,780    -     -      973,119    417,527    64,173  
    Total net revenues  900,647    886,035    765,814    117,703     3,641,774    3,392,705    521,449  
    Cost of revenues  (717,276)  (696,234)  (565,645)  (86,938)   (2,929,638)  (2,634,295)  (404,884)
    Gross profit  183,371    189,801    200,169    30,765     712,136    758,410    116,565  
    Operating expenses               
    Sales and marketing  (92,018)  (77,268)  (42,702)  (6,563)   (352,926)  (256,682)  (39,451)
    Research and development  (38,425)  (38,308)  (29,340)  (4,509)   (149,337)  (149,143)  (22,923)
    General and administrative  (186,744)  (129,683)  (115,351)  (17,729)   (639,648)  (519,950)  (79,915)
    Bad debt provision  (47,450)  (4,366)  (1,147)  (176)   (117,564)  (37,427)  (5,752)
    Changes in the fair value of contingent purchase consideration payable  67,197    (1,002)  (3,834)  (589)   93,307    (937)  (144)
    Impairment of long-lived assets  (392,947)  (401,808)  -    -     (392,947)  (401,808)  (61,757)
    Impairment of goodwill  -    (766,440)  -    -     -    (766,440)  (117,800)
    Total operating expenses  (690,387)  (1,418,875)  (192,374)  (29,566)   (1,559,115)  (2,132,387)  (327,742)
    Other operating income  -    5,439    -    -     6,783    5,439    836  
    Operating (loss) profit  (507,016)  (1,223,635)  7,795    1,199     (840,196)  (1,368,538)  (210,341)
    Interest income  4,839    6,664    10,821    1,663     21,078    32,925    5,060  
    Interest expense  (40,652)  (57,417)  (50,836)  (7,813)   (198,589)  (185,313)  (28,482)
    Impairment of long-term investment   -    (20,397)  139    21     -    (20,258)  (3,114)
    Disposal (loss) gain of subsidiaries  -    (180,048)  677,084    104,066     -    497,036    76,393  
    Other income  555    7,220    3,260    501     28,922    16,764    2,577  
    Other expense  (1,825)  (12,630)  (232)  (36)   (16,449)  (17,060)  (2,622)
    Foreign exchange gain (loss)  28,849    (5,628)  4,328    665     56,341    (17,153)  (2,636)
    Loss on debt extinguishment  -    -    -    -     (29,841)  -    -  
    (Loss) profit before income taxes and gain from equity method investments  (515,250)  (1,485,871)  652,359    100,266     (978,734)  (1,061,597)  (163,165)
    Income tax benefit/(expense)  17,818    (19,794)  127,478    19,593     11,160    90,170    13,859  
    Gain from equity method investments  12,225    26,546    17,732    2,725     35,652    53,783    8,266  
    Net (loss) profit  (485,207)  (1,479,119)  797,569    122,584     (931,922)  (917,644)  (141,040)
    Net loss attributable to noncontrolling interest  225,353    104,354    1,073    165     298,324    144,914    22,273  
    Net (loss) profit  attributable to ordinary shareholders  (259,854)  (1,374,765)  798,642    122,749     (633,598)  (772,730)  (118,767)
                    
                     
                    
    (Loss) profit per share               
    Basic  (0.69)  (2.20)  1.19    0.18     (1.37)  (1.36)  (0.21)
    Diluted  (0.69)  (2.20)  1.18    0.18     (1.37)  (1.36)  (0.21)
    Shares used in (loss) profit per share computation               
    Basic*  681,210,352   670,701,497    671,279,121    671,279,121     617,169,833    672,836,226    672,836,226  
    Diluted*  681,210,352   670,701,497    675,505,879    675,505,879     617,169,833    672,836,226    672,836,226  
                    
    (Loss) profit per ADS (6 ordinary shares equal to 1 ADS)               
    Basic(4.14)(13.20)7.14  1.10   (8.22)(8.16)(1.26)
    Diluted(4.14)(13.20)7.08  1.09   (8.22)(8.16)(1.26)
             
    * Shares used in (loss) profit per share/ADS computation were computed under weighted average method. 


    21VIANET GROUP, INC.
    RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS
    (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)
             
     Three months ended  Twelve months ended
     December 31, 2016September 30, 2017December 31, 2017 December 31, 2016December 31, 2017
     RMBRMBRMBUS$ RMBRMBUS$
    Gross profit  183,371    189,801    200,169    30,765     712,136    758,410    116,565  
    Plus: share-based compensation expense  1,865    (181)  84    13     (4,110)  (277)  (43)
    Plus: amortization of intangible assets derived from acquisitions  37,369    30,848    10,797    1,659     151,037    104,275    16,027  
    Adjusted gross profit  222,605    220,468    211,050    32,437     859,063    862,408    132,549  
    Adjusted gross margin24.7% 24.9% 27.6% 27.6%  23.6% 25.4% 25.4% 
    Operating expenses  (690,387)  (1,413,436)  (192,374)  (29,566)   (1,552,332)  (2,126,948)  (326,906)
    Plus: share-based compensation expense  54,808    15,981    15,317    2,354     122,839    47,406    7,286  
    Plus: changes in the fair value of contingent purchase consideration payable  (67,197)  1,002    3,834    589     (93,307)  937    144  
    Plus: impairment of long-lived assets   392,947    401,808    -    -     392,947    401,808    61,757  
    Plus: Goodwill impairment  -    766,440    -    -     -    766,440    117,800  
    Adjusted operating expenses  (309,829)  (228,205)  (173,223)  (26,623)   (1,129,853)  (910,357)  (139,919)
    Net (loss) profit  (485,207)  (1,479,119)  797,569    122,584     (931,922)  (917,644)  (141,040)
    Plus: share-based compensation expense  56,673    15,800    15,401    2,367     118,729    47,129    7,244  
    Plus: amortization of intangible assets derived from acquisitions  37,369    30,848    10,797    1,659     151,037    104,275    16,027  
    Plus: changes in the fair value of contingent purchase consideration payable and related deferred tax impact  (67,874)  1,002    3,834    589     (93,489)  937    144  
    Plus: loss on debt extinguishment  -    -    -    -     29,841    -    -  
    Plus: impairment of long-lived assets   392,947    401,808    -    -     392,947    401,808    61,757  
    Plus: Goodwill impairment  -     766,440    -    -     -    766,440    117,800  
    Plus: Disposal loss (gain) of subsidiaries  -    180,048    (677,084)  (104,066)   -    (497,036)  (76,393)
    Plus: Impairment of long-term investment  -    20,397    (139)  (21)   -    20,258    3,114  
    Plus: tax impact for the reconciliation adjustments  (4,489)  (6,004)  (4,546)  (699)   (26,257)  (22,764)  (3,499)
    Plus: tax impact for the disposal of long-term investment  -    -    (94,195)  (14,478)   -    (94,195)  (14,478)
    Adjusted net (loss) profit  (70,581)  (68,780)  51,637    7,935     (359,114)  (190,792)  (29,324)
    Adjusted net margin-7.8% -7.8% 6.7% 6.7%  -9.9% -5.6% -5.6% 
    Net (loss) profit  (485,207)  (1,479,119)  797,569    122,584     (931,922)  (917,644)  (141,040)
    Minus: Provision for income taxes  17,818    (19,794)  127,478    19,593     11,160    90,170    13,859  
    Minus: Interest income  4,839    6,664    10,821    1,663     21,078    32,925    5,060  
    Minus: Interest expenses  (40,652)  (57,417)  (50,836)  (7,813)   (198,589)  (185,313)  (28,482)
    Minus: Loss on debt extinguishment  -    -    -    -     (29,841)  -    -  
    Minus: Exchange gain (loss)  28,849    (5,628)  4,328    665     56,341    (17,153)  (2,636)
    Minus: Gain from equity method investment  12,225    26,546    17,732    2,725     35,652    53,783    8,266  
    Minus: Other income  555    7,220    3,260    501     28,922    16,764    2,577  
    Minus: Other expenses  (1,825)  (12,630)  (232)  (36)   (16,449)  (17,060)  (2,622)
    Minus: Impairment of long-term investment   -    (20,397)  139    21     -    (20,258)  (3,114)
    Minus: Disposal (loss) gain of subsidiaries  -    (180,048)  677,084    104,066     -    497,036    76,393  
    Plus: depreciation  130,486    132,240    120,228    18,479     480,105    519,654    79,869  
    Plus: amortization  46,092    41,352    23,738    3,648     185,658    147,448    22,662  
    Plus: share-based compensation expense  56,673    15,800    15,401    2,367     118,729    47,129    7,244  
    Plus: changes in the fair value of contingent purchase consideration payable  (67,197)  1,002    3,834    589     (93,307)  937    144  
    Plus: impairment of long-lived assets   392,947    401,808    -     -     392,947    401,808    61,757  
    Plus: Goodwill impairment  -     766,440    -     -      -     766,440    117,800  
    Adjusted EBITDA  51,985    135,007    170,996    26,282     243,936    514,878    79,135  
    Adjusted EBITDA margin5.8% 15.2% 22.3% 22.3%  6.7% 15.2% 15.2% 
                    
                    
                    
    Adjusted net (loss) profit(70,581)(68,780)51,637  7,935   (359,114)(190,792)(29,324)
    Less: Net loss attributable to noncontrolling interest  225,353    104,354    1,073    165   298,324    144,914    22,273  
    Adjusted net profit (loss) attributable to the Company’s ordinary shareholders154,772  35,574  52,710  8,100   (60,790)(45,878)(7,051)
                    
    Adjusted (loss) profit per share               
    Basic(0.08)(0.10)0.08  0.01   (0.44)(0.28)(0.04)
    Diluted(0.08)(0.10)0.08  0.01   (0.44)(0.28)(0.04)
    Shares used in adjusted (loss) profit per share computation:               
    Basic*  681,210,352    670,701,497    671,279,121    671,279,121     617,169,833    672,836,226   672,836,226  
    Diluted*  681,210,352    670,701,497    675,505,879    675,505,879     617,169,833    672,836,226   672,836,226  
                    
    Adjusted (loss) profit per ADS (6 ordinary shares equal to 1 ADS)               
    Basic(0.48)(0.60)0.48  0.06   (2.64)(1.68)(0.24)
    Diluted(0.48)(0.60)0.48  0.06   (2.64)(1.68)(0.24)
                    
    * Shares used in adjusted loss/ADS per share computation were computed under weighted average method. 


    21VIANET GROUP, INC.
    RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS SEGMENT REPORTING
    (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)
              
     Three months ended  Year ended
     December 31, 2016September 30, 2017December 31, 2017 December 31, 2016December 31, 2017
     RMBRMBRMB US$ RMBRMBUS$
    Hosting and related services         
    Operating profit  (8,077)  47,927    7,795    1,199    44,101    156,632    24,073  
    Plus: depreciation and amortization  96,935    111,510    143,966    22,127    345,190    465,976    71,619  
    Plus: share-based compensation expense  41,807    15,326    15,401    2,367    86,955    47,244    7,261  
    Plus: changes in the fair value of contingent purchase consideration payable  (1,022)  1,002    3,834    589    (19,394)  937    144  
    Adjusted EBITDA  129,643    175,765    170,996    26,281    456,852    670,789    103,097  
                   
    Managed network services              
    Operating profit  (498,939)  (1,271,562)  -    -    (884,297)  (1,525,170)  (234,414)
    Plus: depreciation and amortization  79,643    62,082    -    -    320,573    201,126    30,913  
    Plus: share-based compensation expense  14,866    474    -    -    31,774    (115)  (18)
    Plus: changes in the fair value of contingent purchase consideration payable  (66,176)  -    -    -    (73,913)  -    -  
    Plus: impairment of long-lived assets   392,947    401,808    -    -    392,947    401,808    61,757  
    Plus: Goodwill impairment  -    766,440    -    -    -    766,440    117,800  
    Adjusted EBITDA  (77,658)  (40,758)  -    -    (212,916)  (155,911)  (23,963)
                   


    21VIANET GROUP, INC.
    CONSOLIDATED STATEMENT OF CASH FLOWS
    (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))
        
      Three months ended 
     September 30, 2017 December 31, 2017
      RMB  RMB  US$
      (Unaudited)  (Unaudited)  (Unaudited)
     CASH FLOWS FROM OPERATING ACTIVITIES    
     Net (loss) profit    (1,479,119)  797,569    122,584  
     Adjustments to reconcile net (loss) profit to net cash generated
      from operating activities:
          
     Foreign exchange loss (gain)   5,628    (4,328)  (665)
     Changes in the fair value of contingent purchase consideration
      payable
      1,002    3,834    589  
     Gain on disposal of property and equipment   (2,837)  (743)  (114)
     Loss from disposal of intangible assets   295    -    -  
     Depreciation of property and equipment   132,240    120,228    18,479  
     Amortization of intangible assets   41,352    23,738    3,648  
     Provision for doubtful accounts and other receivables   8,990    (3,255)  (500)
     Impairment of long-lived assets   401,808    -    -  
     Impairment of goodwill   766,440    -    -  
     Impairment of long-term investment   20,398    (139)  (21)
     Loss (gain) from disposal of subsidiaries   180,048    (677,084)  (104,066)
     Share-based compensation expense   15,720    13,643    2,097  
     Deferred income taxes expense (benefits)   5,887    (126,095)  (19,380)
     Gain from equity method investment   (26,546)  (17,732)  (2,725)
     Dividend received from cost method invesemt   (396)  -    -  
     Changes in operating assets and liabilities       -  
     Restricted cash   2,075    (54,648)  (8,399)
     Inventories   (658)  (599)  (92)
     Accounts and notes receivable   36,562    32,070    4,929  
     Unrecognized tax benefits (expense)   951    (7,963)  (1,224)
     Prepaid expenses and other current assets   (119,384)  (23,457)  (3,605)
     Amounts due from related parties   13,280    1,854    285  
     Accounts and notes payable   26,379    (38,841)  (5,970)
     Accrued expenses and other payables   120,015    98,005    15,063  
     Deferred revenue   (11,598)  8,674    1,333  
     Advances from customers   77,225    (23,683)  (3,641)
     Income taxes payable   7,087    (6,836)  (1,051)
     Amounts due to related parties   (13,419)  (2,690)  (413)
     Deferred government grants   (786)  (5,179)  (796)
     Net cash generated from operating activities   208,639    106,343    16,345  
     CASH FLOWS FROM INVESTING ACTIVITIES       
     Purchases of property and equipment   (77,872)  (80,336)  (12,347)
     Purchases of intangible assets   (43)  (4,062)  (624)
     Proceeds from disposal of property and equipment   5,719    -    -  
     Disposal of subsidiaries net of cash   (64,580)  -    -  
     Payments for short-term investments   (337,137)  (211,752)  (32,546)
     Dividend received from cost method investment   396    -    -  
     Payments for long-term investments   (61,898)  (64,014)  (9,839)
     Restricted cash   -    (3,344)  (514)
     Net cash used in investing activities   (535,415)  (363,508)  (55,870)
     CASH FLOWS FROM FINANCING ACTIVITIES       -  
     Restricted cash   37,920    1,677,270    257,792  
     Proceeds from exercise of stock options   171    187    29  
     Proceeds from loan from a third party   -    100,000    15,370  
     Proceeds from long-term bank borrowings   11,740    -    -  
     Proceeds from issuance of 2020 bonds   1,316,974    619,180    95,166  
     Payment of issurance cost of 2020 bonds   (3,278)  (6,457)  (992)
     Repayments of short-term bank borrowings   (40,676)  (1,520,000)  (233,620)
     Repayments of long-term bank borrowings   (11,843)  (67,871)  (10,432)
     Repayment of loan from a third party   (100,000)  -    -  
     Prepayment for shares repurchase plan   (3,866)  60    9  
     Payments for shares repurchase plan   (50,054)  -     -  
     Rental prepayments and deposits for sales and leaseback transactions   (39,513)  (59,486)  (9,143)
     Payments for capital leases   (39,280)  (67,239)  (10,334)
     Contribution from noncontrolling interest in a subsidary   62,357    49,314    7,579  
     Net cash provided by financing activities   1,140,652    724,958    111,424  
           
     Effect of foreign exchange rate changes on cash and short
      term investments
      (86,759)  (3,098)  (476)
     Net increase in cash and cash equivalents   727,117    464,695    71,423  
     Cash and cash equivalents at beginning of period   757,819    1,484,936    228,230  
     Cash and cash equivalents at end of period   1,484,936    1,949,631    299,653  
           

     

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