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21Vianet Group, Inc. Reports Fourth Quarter and Full Year 2016 Unaudited Financial Results
[March 08, 2017]

21Vianet Group, Inc. Reports Fourth Quarter and Full Year 2016 Unaudited Financial Results

BEIJING, March 08, 2017 (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, 2016. The Company will hold a conference call at 8:00 p.m. Eastern Time on Wednesday, March 8, 2017. Dial-in details are provided at the end of the release.

Mr. Steve Zhang, Chief Executive Officer of the Company, stated, "Despite facing severe headwinds in our managed network services business, we continue to see stable growth in our core IDC, VPN, and cloud businesses this quarter. Last December, in partnership with Microsoft, we launched Power BI, a business data analytics cloud service, adding to our wide-array of cloud offerings for our customers. Most recently, we finalized and signed an investment agreement with Warburg Pincus, which expands upon the strategic agreement previously announced. The end result remains the same, as we will establish joint ventures for our digital real estate business with a focus on the customized wholesale data center market, and will aim to build out 80,000 to 100,000 additional cabinets in the next five to seven years. Our core retail colocation and cloud services will be supplemented with wholesale data center services, providing more complete and expanded service offerings to our customers. This restructuring of our business will allow us to continue to fine-tune our Capex structure, improve our operating leverage, and provide customers with more value-added services such as hybrid cloud solutions. With the evolving internet landscape in China and the strong demands of internet traffic, computing, and data storage, we will solidify our position as a leading internet infrastructure services provider and meet the ever-changing needs of our customers."

Mr. Terry Wang, Chief Financial Officer of the Company, further commented, "We are pleased to announce that we met our fourth quarter and full year guidance for both top line net revenues and adjusted EBITDA. In 2016, we increased our total revenues to RMB3.64 billion, which was primarily driven by a 14.2% year-over-year increase in revenues from our hosting and related businesses. During the fourth quarter of 2016, we added over 300 cabinets in our self-built data centers, bringing the total number of cabinets up to 26,380. Our cloud business maintained its growth trajectory, which was mainly attributable to the robust results from our partnerships with Microsoft and IBM. Looking forward, we will aim to consistently deploy new cabinets and enhance our monthly recurring revenues in order to reignite our top line growth and realize margin expansion. Additionally, even though our MNS and CDN businesses continued to experience pricing pressure and intense competition in 2016, we began seeing signs of price stabilization. We are confident that we will generate further value for our shareholders through our continuous effort to optimize operations, our sustainable investment in asset-light businesses and the emerging opportunities in customized wholesale data centers."

Fourth Quarter 2016 Financial Results

REVENUES: Net revenues for the fourth quarter of 2016 were RMB900.6 million (US$129.7 million), as compared with RMB983.4 million in the comparative period in 2015. The decrease was primarily due to a decrease in MNS revenues.

Net revenues from hosting and related services increased by 4.7% to RMB790.1 million (US$113.8 million) in the fourth quarter of 2016 from RMB754.7 million in the comparative period in 2015, primarily due to an increase in total number of billable cabinets, partially offset by the lower utilization rate and MRR, or monthly recurring revenue, per cabinet.

Net revenues from MNS were RMB110.6 million (US$15.9 million) in the fourth quarter of 2016, as compared with RMB228.7 million in the comparative period in 2015. The decrease was primarily due to a 107 million decrease in Aipu revenues, which was driven by intensified competition.

GROSS PROFIT: Gross profit for the fourth quarter of 2016 was RMB183.4 million (US$26.4 million), as compared with RMB219.2 million in the comparative period in 2015. Gross margin for the fourth quarter of 2016 was 20.4%, as compared with 22.3% in the comparative period in 2015.

Adjusted gross profit, which excludes share-based compensation expenses and amortization of intangible assets derived from acquisitions, was RMB222.6 million (US$32.1 million) in the fourth quarter of 2016, as compared with RMB264.3 million in the comparative period in 2015. Adjusted gross margin was 24.7% in the fourth quarter of 2016, compared with 26.9% in the comparative period in 2015.

OPERATING EXPENSES: Total operating expenses were RMB690.4 million (US$99.4 million) in the fourth quarter of 2016, as compared with RMB314.5 million in the comparative period in 2015. Adjusted operating expenses, which exclude a one-time impairment of long-term asset, share-based compensation expenses and changes in the fair value of contingent purchase consideration payable, were RMB309.8 million (US$44.6 million), as compared with RMB275.9 million in the comparative period in 2015. As a percentage of net revenues, adjusted operating expenses were 34.4%, as compared with 28.1% in the comparative period in 2015.

Sales and marketing expenses were RMB92.0 million (US$13.3 million) in the fourth quarter of 2016, as compared with RMB101.8 million in the comparative period in 2015. The decrease was primarily due to reduced agency fees.

General and administrative expenses were RMB186.7 million (US$26.9 million) in the fourth quarter of 2016, as compared with RMB141.0 million in the comparative period in 2015. The increase was primarily due to increased staff cost.

Research and development expenses were RMB38.4 million (US$5.5 million) in the fourth quarter of 2016, as compared with RMB41.6 million in the comparative period in 2015.

Bad debt provisions were RMB47.5 million (US$6.8 million) in the fourth quarter of 2016, as compared with RMB25.1 million in the comparative period in 2015.

Changes in the fair value of contingent purchase consideration payable was a gain of RMB67.2 million (US$9.7 million) in the fourth quarter of 2016, as compared with a loss of RMB5.1 million in the comparative period in 2015.

One-time impairment of long-term asset was RMB392.9 million (US$56.6 million) in the fourth quarter of 2016.

ADJUSTED EBITDA: Adjusted EBITDA for the fourth quarter of 2016 was RMB52.0 million (US$7.5 million), as compared with RMB102.1 million in the comparative period in 2015. The decrease in adjusted EBITDA was primarily due to the inclusion of a RMB47.5 million bad debt provision. Adjusted EBITDA margin for the fourth quarter of 2016 was 5.8% compared with 10.4% in the comparative period in 2015. Adjusted EBITDA for the fourth quarter of 2016 excludes a one-time impairment of long-term asset of RMB392.9 million (US$56.6 million), share-based compensation expenses of RMB56.7 million (US$8.2 million) and changes in the fair value of contingent purchase consideration payable which was a gain of RMB67.2 million (US$9.7 million).

NET PROFIT/LOSS: Net loss for the fourth quarter of 2016 was RMB485.2 million (US$69.9 million), as compared with a net loss of RMB112.9 million in the comparative period in 2015.

Adjusted net loss for the fourth quarter of 2016 was RMB66.1 million (US$9.5 million), as compared with an adjusted net loss of RMB29.1 million in the comparative period in 2015. Adjusted net loss in the fourth quarter of 2016 mainly excludes a one-time impairment of long-term asset of RMB392.9 million (US$56.6 million) and changes in the fair value of contingent purchase consideration payable and related deferred tax impact which was a gain of RMB67.9 million (US$9.8 million). Adjusted net margin in the fourth quarter of 2016 was negative 7.3%, as compared with negative 3.0% in the comparative period in 2015.

LOSS PER SHARE: Diluted loss per share for the fourth quarter of 2016 was RMB0.69, which represents the equivalent of RMB4.14 (US$0.60) per American Depositary Share ("ADS"). Each ADS represents six ordinary shares. Adjusted diluted loss per share for the fourth quarter of 2016 was RMB0.08, which represents the equivalent of RMB0.48 (US$0.07) per ADS. Adjusted diluted loss per share is calculated using adjusted net loss as discussed above divided by the weighted average number of shares.

As of December 31, 2016, the Company had a total of 679.8 million ordinary shares outstanding, or equivalent of 113.3 million ADSs.

BALANCE SHEET: As of December 31, 2016, the Company's cash and cash equivalents and short-term investment were RMB1.58 billion (US$226.9 million).

Fourth Quarter 2016 Operational Highlights

  • Monthly Recurring Revenues ("MRR") per cabinet was RMB8,490 in the fourth quarter of 2016, compared with RMB8,696 in the third quarter of 2016.
  • Total cabinets under management increased to 26,380 as of December 31, 2016 from 26,184 as of September 30, 2016, with 19,294 cabinets in the Company's self-built data centers and 7,086 cabinets in its partnered data centers.
  • Utilization rate was 75.2% in the fourth quarter of 2016, compared with 77.9% in the third quarter of 2016.
  • Hosting churn rate, which is based on the Company’s core IDC business, was 0.55% in the fourth quarter of 2016, compared with 0.95% in the third quarter of 2016.

Full Year 2016 Financial Performance

For the full year of 2016, net revenue increased to RMB3.64 billion (US$524.5 million) from RMB3.63 billion in the prior year. Adjusted EBITDA for the full year was RMB243.9 million (US$35.1 million), as compared with RMB540.4 million in the prior year. Adjusted EBITDA margin was 6.7%, as compared with 14.9% in the prior year. Adjusted EBITDA for the full year excludes impairment of long-term asset of RMB392.9 million (US$56.6 million), share-based compensation expenses of RMB118.7 million (US$17.1 million) and changes in the fair value of contingent purchase consideration payable of RMB93.3 million (US$13.4 million). Adjusted net loss for the full year was RMB332.9 million (US$47.9 million), as compared with a loss of RMB10.8 million in the prior year. Adjusted net loss in the full year excludes impairment of long-term asset of RMB392.9 million (US$56.6 million), share-based compensation expenses of RMB118.7 million (US$17.1 million), amortization of intangible assets derived from acquisitions of RMB151.0 million (US$21.8 million), changes in the fair value of contingent purchase consideration payable and related deferred tax assets of RMB93.5 million (US$13.5 million), and a one-time loss on debt extinguishment of RMB29.8 million (US$4.3 million). Adjusted diluted loss per share for the full year of 2016 was RMB0.40 (US$0.06), which represents the equivalent of RMB2.40 (US$0.35) per ADS.

Recent Developments

On March 5, 2017, the Company signed an investment agreement (“IA”) with Warburg Pincus to establish a multi-stage joint venture (“JV”) and build a digital real estate platform in China. The IA supersedes the strategic agreement signed on October 31, 2016. The overall structure remains the same, while the IA added certain details on how the cooperation will be carried out. Pursuant to the IA, 21Vianet will still seed the initial JV with four existing high-performing IDC assets, valued at over US$300 million, and Warburg Pincus will contribute direct capital and extensive industry network and resources in the real estate sector. Also pursuant to the IA, 21Vianet will own 51% of the equity interest in the initial JV while Warburg Pincus will own the remaining 49%. With respect to future JVs, 21Vianet will own 49% of the equity interest while Warburg Pincus will own the remaining 51%.

Financial Outlook

For the first quarter of 2017, the Company expects net revenues to be in the range of RMB820 million to RMB880 million, as compared with RMB862.3 million in the prior year period. Adjusted EBITDA is expected to be in the range of RMB65 million to RMB85million, as compared with RMB108.6 million in the prior year period.

For the full year of 2017, the Company now expects net revenues to be in the range of RMB3.7 billion to RMB3.9 billion, as compared with RMB3.64 billion in the prior year. Adjusted EBITDA for the full year 2017 is expected to be in the range of RMB420 million to RMB460 million, as compared with RMB243.9 million in the prior year. These forecasts reflect the Company's current and preliminary view, which may be subject to change.

Conference Call

The Company will hold a conference call on Wednesday, March 8, 2017 at 8:00 pm U.S. Eastern Time, or Thursday, March 9, 2017 at 9:00 am 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:72616852
  
  
The replay will be accessible through March 16, 2017, by dialing the following numbers:
  
United States Toll Free:+1-855-452-5696
International:+61-2-9003-4211
Conference ID:72616852
  

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 RMB6.9430 to US$1.00, the noon buying rate in effect on December 31, 2016 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, managed network services, cloud services, content delivery network services, last-mile wired broadband 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. In addition, 21Vianet's proprietary smart routing technology enables customers' data to be delivered across the Internet in a faster and more reliable manner. 21Vianet operates in more than 30 cities throughout China, servicing a diversified and loyal base of more than 2,000 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.

 
21VIANET GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))
   
 As of As of
 December 31, 2015 December 31, 2016
 RMB RMB
 US$
 (Audited) (Unaudited)
 (Unaudited)
Assets   
Current assets:   
Cash and cash equivalents  1,685,054    1,297,418    186,867 
Restricted cash  195,230    1,963,561    282,812 
Accounts and notes receivable, net  694,108    655,459    94,406 
Short-term investments  104,897    277,946    40,033 
Inventories  13,539    4,431    638 
Prepaid expenses and other current assets  642,553    777,131    111,930 
Deferred tax assets  31,113    43,362    6,245 
Amount due from related parties  105,137    182,615    26,302 
Total current assets  3,471,631    5,201,923    749,233 
Non-current assets:   
Property and equipment, net  3,653,071    3,781,613    544,666 
Intangible assets, net  1,274,166    977,341    140,766 
Land use rights, net  64,682    167,646    24,146 
Deferred tax assets  46,900    57,314    8,255 
Goodwill  1,755,970    1,755,970    252,912 
Long term investments  198,907    298,871    43,046 
Restricted cash  128,515    33,544    4,831 
Amount due from related parties  70,000    -     - 
Other non-current assets  183,868    147,302    21,216 
Total non-current assets  7,376,079    7,219,601    1,039,838 
Total assets  10,847,710    12,421,524    1,789,071 
Liabilities and Shareholders' Equity   
Current liabilities:   
Short-term bank borrowings  276,000    1,683,676    242,500 
Accounts and notes payable  482,622    529,569    76,274 
Accrued expenses and other payables  637,957    787,916    113,484 
Deferred revenue  342,105    320,023    46,093 
Advances from customers  185,800    201,397    29,007 
Income taxes payable  49,959    21,899    3,154 
Amounts due to related parties  397,588    121,928    17,561 
Current portion of long-term bank borrowings  38,803    39,303    5,661 
Current portion of capital lease obligations  140,488    243,723    35,103 
Current portion of deferred government grant  6,332    5,107    736 
Current portion of bonds payable  263,365    419,316    60,394 
Total current liabilities  2,821,019    4,373,857    629,967 
Non-current liabilities:   
Long-term bank borrowings  103,421    268,221    38,632 
Deferred revenue  68,535    62,531    9,006 
Amounts due to related parties  27,384    -     - 
Unrecognized tax benefits  14,492    28,689    4,132 
Deferred tax liabilities  293,212    274,700    39,565 
Non-current portion of capital lease obligations  579,070    536,623    77,290 
Non-current portion of deferred government grant  31,288    25,886    3,728 
Bonds payable  1,984,685    -     - 
Mandatorily redeemable noncontrolling interests  100,000    -     - 
Total non-current liabilities  3,202,087    1,196,650    172,353 
    
Redeemable noncontrolling interests  790,229    700,000    100,821 
    
Shareholders' equity   
Treasury stock  (193,142)   (204,557)   (29,462)
Ordinary shares   34    45    6 
Additional paid-in capital  6,403,117    9,199,248    1,324,967 
Accumulated other comprehensive loss  (24,236)   118,290    17,037 
Statutory reserves  63,174    64,622    9,308 
Accumulated deficit  (2,233,985)   (3,052,433)   (439,642)
Total 21Vianet Group, Inc. shareholders’ equity  4,014,962    6,125,215    882,214 
Noncontrolling interest  19,413    25,802    3,716 
Total shareholders' equity  4,034,375    6,151,017    885,930 
Total liabilities, redeemable noncontrolling interests and shareholders' equity   10,847,710    12,421,524    1,789,071 
         

 

)
      
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  Year ended 
 December 31, 2015 September 30, 2016
 December 31, 2016
 December 31, 2015 December 31, 2016
 
 RMB RMB
 RMB
 US$
 RMB RMB
 US$
 
 (Unaudited) (Unaudited)
 (Unaudited)
 (Unaudited)
 (Unaudited) (Unaudited)
 (Unaudited)
 
Net revenues         
Hosting and related services  754,706    828,121    790,079    113,795    2,707,445    3,092,256    445,378  
Managed network services  228,677    139,885    110,568    15,925    926,927    549,518    79,147  
Total net revenues  983,383    968,006    900,647    129,720    3,634,372    3,641,774    524,525  
Cost of revenues  (764,214)   (781,124)   (717,276)   (103,309)   (2,780,614)   (2,929,638)   (421,956) 
Gross profit  219,169    186,882    183,371    26,411    853,758    712,136    102,569  
Operating expenses         
Sales and marketing  (101,797)   (100,138)   (92,018)   (13,253)   (359,460)   (352,926)   (50,832) 
Research and development  (41,569)   (36,079)   (38,425)   (5,534)   (142,835)   (149,337)   (21,509) 
General and administrative  (140,995)   (162,746)   (186,744)   (26,897)   (568,741)   (639,648)   (92,128) 
Bad debt provision  (25,069)   (27,103)   (47,450)   (6,834)   (32,199)   (117,564)   (16,933) 
Changes in the fair value of contingent purchase consideration payable    (5,060)   12,285    67,197    9,678    (43,325)   93,307    13,439  
Impairment of long-lived assets  -    -    (392,947)   (56,596   -    (392,947)   (56,596) 
Other operating income  -    6,783    -    -    8,569    6,783    977  
Total operating expenses  (314,490)   (306,998)   (690,387)   (99,436)   (1,137,991)   (1,552,332)   (223,582) 
Operating loss   (95,321)   (120,116)   (507,016)   (73,025)   (284,233)   (840,196)   (121,013) 
Interest income  5,692    3,716    4,839    697    53,494    21,078    3,036  
Interest expense  (60,963)   (49,490)   (40,652)   (5,855)   (274,184)   (198,589)   (28,603) 
Loss on debt extinguishment  -    (29,841)   -    -    -    (29,841)   (4,298) 
Other income  20,115    23,894    189    27    30,430    28,556    4,113  
Other expense  (1,848)   (1,010)   (1,825)   (263)   (3,701)   (16,449)   (2,369) 
Foreign exchange gain  7,248    8,511    28,849    4,155    72,394    56,341    8,115  
Loss before income taxes and gain from equity method investments  (125,077)   (164,336)   (515,616)   (74,264)   (405,800)   (979,100)   (141,019) 
Income tax (expense) benefit  (28,044)   (10,064)   17,818    2,566    (47,830)   11,160    1,607  
Gain from equity method investments  40,231    2,852    12,591    1,813    52,355    36,018    5,188  
Net loss  (112,890)   (171,548)   (485,207)   (69,885)   (401,275)   (931,922)   (134,224) 
Net (income) loss attributable to noncontrolling interest  (11,194)   37,579    41,951    6,042    (26,824)   114,922    16,552  
Net loss attributable to ordinary shareholders  (124,084)   (133,969)   (443,256)   (63,843)   (428,099)   (817,000)   (117,672) 
          
          
          
Loss per share         
Basic  (0.24)   (0.15)   (0.69)   (0.10)   (0.85)   (1.37)   (0.20) 
Diluted  (0.24)   (0.15)   (0.69)   (0.10)   (0.85)   (1.37)   (0.20) 
Shares used in loss per share computation         
Basic*  523,366,544    682,146,465    681,210,352    681,210,352    492,065,239    617,169,833    617,169,833  
Diluted*  523,366,544    682,146,465    681,210,352    681,210,352    492,065,239    617,169,833    617,169,833  
          
Loss per ADS (6 ordinary shares equal to 1 ADS)         
Basic(1.44) (0.90) (4.14) (0.60) (5.10) (8.22) (1.18) 
Diluted(1.44) (0.90) (4.14) (0.60) (5.10) (8.22) (1.18) 
          
* Shares used in loss 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  Year ended 
 December 31, 2015 September 30, 2016
 December 31, 2016
 December 31, 2015 December 31, 2016
 
 RMB RMB
 RMB
 US$
 RMB RMB
 US$
 
Gross profit  219,169    186,882    183,371    26,411    853,758    712,136    102,569  
Plus: share-based compensation expense  6,582    1,173    1,865    269    12,422    (4,110)   (592) 
Plus: amortization of intangible assets derived from acquisitions  38,583    36,504    37,369    5,382    157,119    151,037    21,754  
                      
Adjusted gross profit  264,334    224,559    222,605    32,062    1,023,299    859,063    123,731  
Adjusted gross margin26.9% 23.2% 24.7% 24.7% 28.2% 23.6% 23.6% 
Operating expenses  (314,490)   (306,998)   (690,387)   (99,436)   (1,137,991)   (1,552,332)   (223,582) 
Plus: share-based compensation expense  33,537    32,208    54,808    7,894    177,605    122,839    17,692  
Plus: changes in the fair value of contingent purchase consideration payable  5,060    (12,285)   (67,197)   (9,678)   43,325    (93,307)   (13,439) 
Plus: impairment of long-lived assets   -    -    392,947    56,596    -    392,947    56,596  
Adjusted operating expenses  (275,893)   (287,075)   (309,829)   (44,624)   (917,061)   (1,129,853)   (162,733) 
Net loss  (112,890)   (171,548)   (485,207)   (69,885)   (401,275)   (931,922)   (134,224) 
Plus: share-based compensation expense  40,119    33,381    56,673    8,163    190,027    118,729    17,101  
Plus: amortization of intangible assets derived from acquisitions  38,583    36,504    37,369    5,382    157,119    151,037    21,754  
                      
Plus: changes in the fair value of contingent purchase consideration payable and related deferred tax impact  5,060    (12,285)   (67,874)   (9,776)   43,325    (93,489)   (13,465) 
Plus: loss on debt extinguishment  -    29,841    -    -    -    29,841    4,298  
Plus: impairment of long-lived assets   -    -    392,947    56,596    -    392,947    56,596  
Adjusted net loss   (29,128)   (84,107)   (66,092)   (9,520)   (10,804)   (332,857)   (47,940) 
Adjusted net margin-3.0% -8.7% -7.3% -7.3% -0.3% -9.1% -9.1% 
Net loss  (112,890)   (171,548)   (485,207)   (69,885)   (401,275)   (931,922)   (134,224) 
Minus: Provision for income taxes  (28,044)   (10,064)   17,818    2,566    (47,830)   11,160    1,607  
Minus: Interest income  5,692    3,716    4,839    697    53,494    21,078    3,036  
Minus: Interest expenses  (60,963)   (49,490)   (40,652)   (5,855)   (274,184)   (198,589)   (28,603) 
Minus: Loss on debt extinguishment  -    (29,841)   -    -    -    (29,841)   (4,298) 
Minus: Exchange gain  7,248    8,511    28,849    4,155    72,394    56,341    8,115  
Minus: Gain  from equity method investment  40,231    2,852    12,591    1,813    52,355    36,018    5,188  
Minus: Other income  20,115    23,894    189    27    30,430    28,556    4,113  
Minus: Other expenses  (1,848)   (1,010)   (1,825)   (263)   (3,701)   (16,449)   (2,369) 
Plus: depreciation  105,355    122,484    129,243    18,615    402,035    478,862    68,970  
Plus: amortization  46,917    44,452    47,335    6,818    189,257    186,901    26,919  
Plus: share-based compensation expense  40,119    33,381    56,673    8,163    190,027    118,729    17,101  
Plus: changes in the fair value of contingent purchase consideration payable  5,060    (12,285)   (67,197)   (9,678)   43,325    (93,307)   (13,439) 
Plus: impairment of long-lived assets   -     -     392,947    56,596    -     392,947    56,596  
Adjusted EBITDA  102,130    67,916    51,985    7,489    540,411    243,936    35,134  
Adjusted EBITDA margin10.4% 7.0% 5.8% 5.8% 14.9% 6.7% 6.7% 
          
          
          
Adjusted net loss(29,128) (84,107) (66,092) (9,520) (10,804) (332,857) (47,940) 
Less: Net (profit) loss attributable to noncontrolling interest  (11,194)   37,579    41,951    6,042    (26,824)   114,922    16,552  
Adjusted net loss attributable to the Company’s ordinary shareholders  (40,322) (46,528) (24,141) (3,478) (37,628) (217,935) (31,388) 
          
Adjusted loss per share         
Basic(0.08) (0.02) (0.08) (0.01) (0.06) (0.40) (0.06) 
Diluted(0.08) (0.02) (0.08) (0.01) (0.06) (0.40) (0.06) 
Shares used in adjusted loss per share computation:         
Basic*523,366,544  682,146,465  681,210,352  681,210,352  492,065,239  617,169,833  617,169,833  
Diluted*523,366,544  682,146,465  681,210,352  681,210,352  492,065,239  617,169,833  617,169,833  
          
Adjusted loss per ADS (6 ordinary shares equal to 1 ADS)         
Basic(0.48) (0.12) (0.48) (0.07) (0.36) (2.40) (0.35) 
Diluted(0.48) (0.12) (0.48) (0.07) (0.36) (2.40) (0.35) 
          
* Shares used in adjusted loss/ADS per share computation were computed under weighted average method.  
          

 

  
21VIANET GROUP, INC. 
CONSOLIDATED STATEMENT OF CASH FLOWS 
(Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”)) 
       
  Three months ended  
  September 30, 2016  December 31, 2016
 
  RMB   RMB
  US$
 
  (Unaudited)    (Unaudited) 
   (Unaudited) 
 
CASH FLOWS FROM OPERATING ACTIVITIES     
Net loss  (171,548)   (485,207)   (69,885) 
Adjustments to reconcile net loss to net cash generated from
  operating activities: 
    
Foreign exchange gain  (8,511)   (28,849)   (4,155) 
Changes in the fair value of contingent purchase consideration
  payable
  (12,285)   (67,197)   (9,678) 
Depreciation of property and equipment  122,484    129,243    18,615  
Amortization of intangible assets  45,683    46,103    6,640  
Provision for doubtful accounts and other receivables  24,091    48,706    7,015  
Share-based compensation expense  33,382    56,672    8,162  
Loss on debt extinguishment  29,841    -    -  
Deferred income taxes benefit  (7,969)   (31,605)   (4,552) 
Gain from equity method investment  (2,852)   (12,591)   (1,813) 
Impairment of long-lived assets  -    392,947    56,596  
Changes in operating assets and liabilities     
Restricted cash  (67,455)   11,846    1,706  
Inventories  2,214    1,617    233  
Accounts and notes receivable  (32,229)   51,084    7,358  
Unrecognized tax expense  717    5,984    862  
Prepaid expenses and other current assets  32,589    (9,855)   (1,419) 
Amounts due from related parties  (8,839)   (6,359)   (916) 
Accounts and notes payable  (22,603)   (20,145)   (2,901) 
Accrued expenses and other payables  6,362    25,348    3,652  
Deferred revenue  (20,967)   (9,192)   (1,324) 
Advances from customers  27,288    12,473    1,796  
Income taxes payable  13,594    (14,864)   (2,141) 
Amounts due to related parties  834    4,031    581  
Deferred government grants  (2,291)   (1,344)   (194) 
Gain from cost method investment  (5,160)   -    -  
Net cash (used in) generated from operating activities   (23,630)   98,846    14,238  
CASH FLOWS FROM INVESTING ACTIVITIES     
Purchases of property and equipment  (140,291)   (126,341)   (18,197) 
Purchases of intangible assets  (5,742)   (9,910)   (1,427) 
Payment for asset acquisition  (25,024)   (6,859)   (988) 
Receipt of loans from third parties  -    40,000    5,761  
Payments for short-term investments  -    (272,914)   (39,308) 
Proceeds received from maturity of short-term investments  -    10,000    1,440  
Payments for long-term investments  -    (5,025)   (724) 
Proceeds from long-term investments  11,269    -    -  
Minority investment in ZJK Energy  -    4,000    576  
Net cash used in investing activities   (159,788)   (367,049)   (52,867) 
CASH FLOWS FROM FINANCING ACTIVITIES     
Restricted cash  (1,623,127)   (76,284)   (10,987) 
Proceeds from exercise of stock options  401    662    95  
Proceeds from long-term bank borrowings  49,650    54,620    7,867  
Proceeds from short-term bank borrowings  1,570,676    37,000    5,329  
Repayments of short-term bank borrowings  (30,000)   (123,000)   (17,716) 
Repayments of long-term bank borrowings  (6,084)   (27,003)   (3,889) 
Repayments of 2017 Bonds  (1,596,335)   -    -  
Consideration paid to selling shareholders  -    (142)   (20) 
Prepayment for shares repurchase plan  (27,245)   28,004    4,033  
Payments for shares repurchase plan  (13,058)   (29,607)   (4,264) 
Payments for capital leases  (41,038)   (61,616)   (8,875) 
Net cash used in financing activities   (1,716,160)   (197,366)   (28,427) 
          
Effect of foreign exchange rate changes on cash and short
  term investments 
  6,991    100,505    14,476  
Net decrease in cash and cash equivalents   (1,892,587)   (365,064)   (52,580) 
Cash and cash equivalents at beginning of period   3,555,069    1,662,482    239,447  
Cash and cash equivalents at end of period   1,662,482    1,297,418    186,867  
     
Investor Relations Contacts:

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

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

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