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21Vianet Group, Inc. Reports Unaudited Third Quarter 2017 Financial Results
[December 05, 2017]

21Vianet Group, Inc. Reports Unaudited Third Quarter 2017 Financial Results


Adjusted EBITDA up 98.8% YoY to RMB135.0 million, exceeding high end of the Company’s guidance 
Adjusted EBITDA margin up 8.2 percentage points to 15.2%

BEIJING, Dec. 05, 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 third quarter ended September 30, 2017. The Company will hold a conference call at 8:00 p.m. Eastern Time on Tuesday, December 5, 2017. Dial-in details are provided at the end of the release.

Third quarter 2017 Financial Highlights

  • Core hosting and related services revenues increased by 8.7% year over year to RMB759.3 million (US$114.1 million). Total net revenues were RMB886.0 million (US$133.2 million).
  • Gross profit increased by 1.6% year over year to RMB189.8 million (US$28.5 million). Gross margin expanded to 21.4% from 19.3% in the comparative period in 2016.
  • Adjusted EBITDA increased by 98.8% year over year to RMB135.0 million (US$20.3 million), exceeding the high end of the Company’s previous guidance. Adjusted EBITDA margin expanded to 15.2% from 7.0% in the comparative period of 2016.

Third quarter 2017 Operational Highlights

  • Total Monthly Recurring Revenues ("MRR") per cabinet increased to RMB8,571 in the third quarter of 2017 from RMB8,311 in the second quarter of 2017.
  • Monthly Recurring Revenues for the Company’s hosting business (“Hosting MRR”) per cabinet increased to RMB7,817 in the third quarter of 2017 from RMB7,615 in the third quarter of 2016 and RMB7,697 in the second quarter of 2017.
  • Total cabinets under management increased to 27,424 as of September 30, 2017 from 27,361 as of June 30, 2017, with 21,273 cabinets in the Company's self-built data centers and 6,151 cabinets in its partnered data centers.
  • Utilization rate was 74.4% in the third quarter of 2017, compared to 75.2% in the second quarter of 2017.
  • Hosting churn rate, which is based on the Company’s core IDC business, was 0.97% in the third quarter of 2017, compared to 0.24% in the second quarter of 2017.

Mr. Steve Zhang, Chief Executive Officer of the Company, stated, “We are delighted to see our core IDC business maintained steady growth in the third quarter of 2017. Several of our large clients, such as JD Finance, Ele.me, Momo and Xiaomi, further expanded their capacity at our IDC centers. Meanwhile, as small and medium businesses continue to migrate from public cloud to hybrid cloud solutions, and as large businesses further evolve their requirements towards customized solutions, our competitive advantages in network quality, carrier neutrality and service quality have uniquely positioned us to capitalize on such market demand, as evidenced by our newly formed partnership with BMW. In terms of our managed network services (MNS) business, we completed its divestiture at the end of the third quarter. We view this as our milestone development, which will enable us to re-focus on our IDC business and strengthen our core competitive power. Overall, we believe we are leaner and stronger than ever before, and we have the right strategy to bring our business to the next level of growth.”

Mr. Terry Wang, Chief Financial Officer of the Company, further commented, "In the third quarter, our total net revenues were RMB886.0 million, in line with our previous guidance. Consistent with our strategy of business realignment and cost control, our profitability in the third quarter continued to improve. Our adjusted EBITDA reached RMB135.0 million in the quarter, exceeding the upper end of our guidance of RMB122.0 million. Adjusted EBITDA margin further expanded to 15.2% in the quarter from 7.0% in the prior year period. We also saw an increase in our gross margin to 21.4% in the quarter from 19.3% in the prior year period. Additionally, our net cash from operating activities increased to RMB208.6 million in the third quarter. With our divestiture of the MNS business, we believe that we will be able to accelerate our future growth with the aid of a stronger cash flow.”

Third Quarter 2017 Financial Results

REVENUES: Total net revenues were RMB886.0 million (US$133.2 million) in the third quarter of 2017, compared to RMB968.0 million in the comparative period in 2016. The decrease in net revenues was mainly due to the decrease in revenues from MNS business, which was partially offset by the increase in revenues from hosting and related services business.

Net revenues for hosting and related services increased by 8.7% year over year to RMB759.3 million (US$114.1 million) in the third quarter of 2017 from RMB698.5 million in the comparative period in 2016. The increase was primarily due to the increase in revenues from the Company’s business lines across the segment.

Net revenues for MNS were RMB126.8 million (US$19.1 million) in the third quarter of 2017, compared to RMB269.5 million in the comparative period in 2016. The decrease was primarily due to intensifying competition and pricing pressure.

GROSS PROFIT: Gross profit increased by 1.6% to RMB189.8 million (US$28.5 million) in the third quarter of 2017 from RMB186.9 million in the comparative period in 2016. Gross margin increased to 21.4% in the third quarter of 2017 from 19.3% in the comparative period in 2016. The increase was primarily due to the Company’s execution of its cost control strategies.  

Adjusted gross profit, which excludes share-based compensation expenses and amortization of intangible assets derived from acquisitions, was RMB220.5 million (US$33.1 million) in the third quarter of 2017, compared to RMB224.6 million in the comparative period in 2016. Adjusted gross margin increased to 24.9% in the third quarter of 2017 from 23.2% in the comparative period in 2016.

OPERATING EXPENSES: Total operating expenses were RMB1,418.9 million (US$213.3 million) in the third quarter of 2017, compared to RMB313.8 million in the comparative period in 2016. The increase in operating expenses was primarily due to impairment of long-lived assets of RMB401.8 million (US$60.4 million) and impairment of goodwill of RMB766.4 million (US$115.2 million). Excluding the impairment of long-lived assets and impairment of goodwill, total operating expenses were RMB250.6 million (US$37.7 million).

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, improved by 20.5% to RMB228.2 million (US$34.3 million) in the third quarter of 2017 from RMB287.1 million in the comparative period in 2016. As a percentage of net revenues, adjusted operating expenses decreased to 25.8% in the third quarter of 2017 from 29.7% in the comparative period in 2016.

Sales and marketing expenses decreased by 22.8% to RMB77.3 million (US$11.6 million) in the third quarter of 2017 from RMB100.1 million in the comparative period in 2016. The decrease was primarily due to a decrease in third-party channel costs.

General and administrative expenses decreased by 20.3% to RMB129.7 million (US$19.5 million) in the third quarter of 2017 from RMB162.7 million in the comparative period in 2016. The decrease was primarily driven by a reduction in headcount.

Research and development expenses were RMB38.3 million (US$5.8 million) in the third quarter of 2017, compared to RMB36.1 million in the comparative period in 2016. The increase was primarily driven by increased research staff for the Company’s core data center business. 

Bad debt provisions decreased by 83.9% to RMB4.4 million (US$0.7 million) in the third quarter of 2017 from RMB27.1 million in the comparative period in 2016.

Changes in the fair value of contingent purchase consideration payable was negative RMB1.0 million (US$0.2 million) in the third quarter of 2017, compared to RMB12.3 million in the comparative period in 2016.

One-time impairment of long-lived assets was RMB401.8 million (US$60.4 million) in the third quarter of 2017.

One-time impairment of goodwill was RMB766.4 million (US$115.2 million) in the third quarter of 2017.

ADJUSTED EBITDA: Adjusted EBITDA for the third quarter of 2017 was RMB135.0 million (US$20.3 million), as compared with RMB67.9 million in the comparative period in 2016. Adjusted EBITDA margin expanded to 15.2% in the third quarter of 2017 from 7.0% in the comparative period in 2016.  Adjusted EBITDA for the third quarter of 2017 excludes impairment of long-lived assets of RMB401.8 million (US$60.4 million), impairment of goodwill of RMB766.4 million (US$115.2 million), share-based compensation expenses of RMB15.8 million (US$2.4 million) and changes in the fair value of contingent purchase consideration payable which was a loss of RMB1.0 million (US$0.2 million).

Adjusted EBITDA for hosting and related services increased by 41.0% to RMB175.8 million (US$26.4 million) in the third quarter of 2017 from RMB124.8 million in the comparative period in 2016.

Adjusted EBITDA for MNS improved by 28.3% year over year to negative RMB40.8 million (US$6.1 million) in the third quarter of 2017 from negative RMB56.9 million in the comparative period in 2016.

NET PROFIT/LOSS: Net loss was RMB1,479.1 million (US$222.3 million) in the third quarter of 2017, compared to RMB171.5 million in the comparative period in 2016. The increase in net loss was primarily due to impairment of long-lived assets of RMB401.8 million (US$60.4 million), impairment of goodwill of RMB766.4 million (US$115.2 million), and disposal loss of subsidiaries of RMB180.0 million (US$27.1 million). Excluding the impact of the impairment of long-lived assets, impairment of goodwill and disposal loss of subsidiaries, net loss was RMB130.8 million (US$19.7 million) in the third quarter of 2017.

Adjusted net loss for the third quarter of 2017 was RMB68.8 million (US$10.3 million), as compared with an adjusted net loss of RMB91.4 million in the comparative period in 2016. Adjusted net loss in the third quarter of 2017 excludes impairment of long-lived assets of RMB401.8 million (US$60.4 million), impairment of goodwill of RMB766.4 million (US$115.2 million), disposal loss of subsidiaries of RMB180.0 million (US$27.1 million), impairment of long-term investment of RMB20.4 million (US$3.1 million), tax impact for the reconciliation adjustments of RMB6.0 million (US$0.9 million), amortization of intangible assets derived from acquisitions of RMB30.8 million (US$4.6 million), share-based compensation expenses of RMB15.8 million (US$2.4 million) and changes in the fair value of contingent purchase consideration payable which was a loss of RMB1.0 million (US$0.2 million). Adjusted net margin was negative 7.8% in the third quarter of 2017, compared to negative 9.4% in the comparative period in 2016.

LOSS PER SHARE: Diluted loss per share was RMB2.20 in the third quarter of 2017, which represents the equivalent of RMB13.20 (US$1.98) per American Depositary Share ("ADS"). Each ADS represents six ordinary shares.

Adjusted diluted loss per share was RMB0.10 in the third quarter of 2017, which represents the equivalent of RMB0.60 (US$0.12) per ADS. Adjusted diluted loss per share is calculated using adjusted net loss divided by the weighted average number of shares.

As of September 30, 2017, the Company had a total of 669.9 million ordinary shares outstanding, or the equivalent of 111.7 million ADS.

BALANCE SHEET: As of September 30, 2017, the Company's cash and cash equivalents and short-term investment were RMB1,823.4 million (US$274.1 million).

Recent Developments

In August 2017, the Company issued US$200 million in aggregate principal amount of USD-denominated notes due 2020 at a coupon rate of 7.000% per annum (the "Original Notes"). The Original Notes were offered outside the United States in reliance on Regulation S under the Securities Act of 1933, as amended. The Company intends to use the Original Notes proceeds to refinance outstanding indebtedness, fund future capital needs, and for general corporate purposes.

In September 2017, the Company issued US$100 million in aggregate principal amount of USD-denominated notes due 2020 at a coupon rate of 7.000% per annum (the "Notes"). The Notes were priced at a slight premium of 100.04, with an effective yield of 6.98%. The Notes constitute a further issuance of, and were consolidated to form a single series with, the Original Notes. The Notes were initially subject to certain resale restrictions in the United States during the 40-day distribution compliance period pursuant to Regulation S under the Securities Act. The Notes were not fungible with the Original Notes until the expiration of the initial 40-day distribution compliance period. The Notes were offered outside the United States in reliance on Regulation S under the Securities Act of 1933, as amended. The Company intends to use the Notes proceeds to refinance outstanding indebtedness, fund future capital needs, and for general corporate purposes. The USD$100 million is currently not reflected in the Company’s cash and cash equivalents account balance because the funds were not received by the Company until after September 30, 2017. The funds are instead in the Company’s prepaid expenses and other current assets account.  

In September 2017, the Company completed divesting two business units within its MNS business. Prior to completion of this transaction, the Company's MNS business included content delivery network (CDN) services, hosting area network services, route optimization and last-mile broadband businesses. After the completion of the transaction, the Company holds 33.3% equity interests in each of the six (6) wholly-owned companies engaged in the CDN, hosting area network services and route optimization businesses (collectively, the “WiFire Entities”) and 50% equity interest minus 1 share in Sichuan Aipu Network Co., Ltd., and the financials have been deconsolidated. For more information and details on the transaction, please go to: http://ir.21vianet.com/releasedetail.cfm?ReleaseID=1041788

To provide further support for the development of WiFire Entities, the Company is committed to inject up to RMB100 million and the joint venture partners are committed to inject up to RMB200 million into the WiFire Entities within the next 12 months. The Company’s injection will be in installments, based on the business need of the WiFire Entities, and can be in the form of equity or bridge loan, depending on the timing of the investment by the joint venture partners. As of November 2017, the Company has already injected RMB15 million and one joint venture partner has already injected RMB30 million into the WiFire Entities.

In November 2017, the Company announced that it has signed a five-and-half-year contract with BMW, the world's leading automobile manufacturer. The Company will leverage its expertise and technology advantages in data center and cloud computing to provide a cutting-edge turnkey solution to BMW, which includes hosting, equipment and management services, as well as private and hybrid cloud services, to support BMW's capacity needs in China.

Financial Outlook

Starting from the fourth quarter of 2017, the Company will only provide guidance for its hosting and related services business, as it has completed the divestiture of its MNS business. 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 fourth quarter of 2017, the Company expects net revenues from the hosting and related services business to be in the range of RMB740 million to RMB760 million, compared to RMB703.2 million in the prior year period. Adjusted EBITDA for hosting and related services business is expected to be in the range of RMB160 million to RMB170 million, compared to RMB129.7 million in the prior year period.

Conference Call

The Company will hold a conference call on Tuesday, December 5, 2017 at 8:00 pm U.S. Eastern Time, or Wednesday, December 6, 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:7689767

The replay will be accessible through December 13, 2017, by dialing the following numbers:

United States Toll Free:+1-855-452-5696
International:+61-2-9003-4211
Conference ID:7689767

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 RMB6.6533 to US$1.00, the noon buying rate in effect on September 30, 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.
Xueli Song
+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, 2016September 30, 2017
 RMB RMB US$
 (Audited) (Unaudited) (Unaudited)
Assets   
Current assets:   
Cash and cash equivalents1,297,418 1,484,936 223,188 
Restricted cash1,963,561 1,861,717 279,819 
Accounts and notes receivable, net655,459 476,728 71,653 
Short-term investments277,946 338,499 50,877 
Inventories4,431 111 17 
Prepaid expenses and other current assets777,131 1,696,904 255,046 
Amount due from related parties182,615 374,423 56,276 
Total current assets5,158,561 6,233,318 936,876 
Non-current assets:      
Property and equipment, net3,781,613 3,291,656 494,740 
Intangible assets, net977,341 418,857 62,955 
Land use rights, net167,646 164,633 24,745 
Deferred tax assets100,676 55,466 8,337 
Goodwill1,755,970 989,530 148,728 
Long term investments298,871 411,351 61,827 
Restricted cash33,544 3,399 511 
Other non-current assets147,302 78,318 11,771 
Total non-current assets7,262,963 5,413,210 813,614 
Total assets12,421,524 11,646,528 1,750,490 
Liabilities and Shareholders' Equity      
Current liabilities:      
Short-term bank borrowings1,683,676 1,570,000 235,973 
Accounts and notes payable529,569 291,733 43,848 
Accrued expenses and other payables787,916 653,961 98,292 
Deferred revenue320,023 47,079 7,076 
Advances from customers201,397 426,927 64,168 
Income taxes payable21,899 20,145 3,028 
Amounts due to related parties121,928 284,324 42,734 
Current portion of long-term bank borrowings39,303 52,289 7,859 
Current portion of capital lease obligations243,723 220,179 33,093 
Current portion of deferred government grant5,107 4,601 692 
Current portion of bonds payable419,316 10,732 1,613 
Total current liabilities4,373,857 3,581,970 538,376 
Non-current liabilities:      
Long-term bank borrowings268,221 273,509 41,109 
Deferred revenue62,531 - - 
Unrecognized tax benefits28,689 24,474 3,678 
Deferred tax liabilities274,700 199,616 30,003 
Non-current portion of capital lease obligations536,623 548,294 82,409 
Non-current portion of deferred government grant25,886 23,013 3,459 
Bonds payable- 1,947,084 292,649 
Derivative liabilities- 676,629 101,698 
Total non-current liabilities1,196,650 3,692,619 555,005 
       
Redeemable noncontrolling interests700,000 - - 
       
Shareholders' equity      
Treasury stock(204,557)(337,683)(50,754)
Ordinary shares45 45 7 
Additional paid-in capital9,015,846 8,966,096 1,347,616 
Accumulated other comprehensive gain118,290 16,032 2,410 
Statutory reserves64,622 39,009 5,863 
Accumulated deficit(2,869,031)(4,414,790)(663,549)
Total 21Vianet Group, Inc. shareholders’ equity6,125,215 4,268,709 641,593 
Noncontrolling interest25,802 103,230 15,516 
Total shareholders' equity6,151,017 4,371,939 657,109 
Total liabilities, redeemable noncontrolling interests and shareholders' equity12,421,524 11,646,528 1,750,490 
       


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  Nine months ended
 September 30, 2016June 30, 2017September 30, 2017 September 30, 2016September 30, 2017
 RMBRMBRMBUS$ RMBRMBUS$
 (Unaudited)(Unaudited)(Unaudited)(Unaudited) (Unaudited)(Unaudited)(Unaudited)
Net revenues        
Hosting and related services698,502 743,398 759,255 114,117  1,965,484 2,209,364 332,070 
Managed network services269,504 135,281 126,780 19,055  775,643 417,527 62,755 
Total net revenues968,006 878,679 886,035 133,172  2,741,127 2,626,891 394,825 
Cost of revenues(781,124)(690,716)(696,234)(104,645) (2,212,362)(2,068,650)(310,921)
Gross profit186,882 187,963 189,801 28,527  528,765 558,241 83,904 
Operating expenses        
Sales and marketing(100,138)(70,880)(77,268)(11,613) (260,908)(213,980)(32,161)
Research and development(36,079)(43,108)(38,308)(5,758) (110,912)(119,803)(18,007)
General and administrative(162,746)(139,113)(129,683)(19,492) (452,904)(404,599)(60,812)
Bad debt provision(27,103)(16,449)(4,366)(656) (70,114)(36,280)(5,453)
Changes in the fair value of contingent purchase consideration payable12,285 1,032 (1,002)(151) 26,110 2,897 435 
Impairment of long-lived assets- - (401,808)(60,392) - (401,808)(60,392)
Impairment of goodwill- - (766,440)(115,197) - (766,440)(115,197)
Total operating expenses(313,781)(268,518)(1,418,875)(213,259) (868,728)(1,940,013)(291,587)
Other operating income6,783 - 5,439 817  6,783 5,439 817 
Operating loss (120,116)(80,555)(1,223,635)(183915) (333,180)(1,376,333)(206,866)
Interest income3,716 7,188 6,664 1,002  16,239 22,104 3,322 
Interest expense(49,490)(40,033)(57,417)(8,630) (157,937)(134,477)(20,212)
Impairment of long-term investment- - (20,397)(3,066) - (20,397)(3,066)
Disposal loss of subsidiaries- - (180,048)(27,061) - (180,048)(27,061)
Other income19,090 1,458 7,220 1,085  23,563 13,504 2,030 
Other expense(1,010)(2,636)(12,630)(1,898) (14,624)(16,828)(2,529)
Foreign exchange gain (loss)8,511 (10,372)(5,628)(846) 27,492 (21,481)(3,229)
Loss on debt extinguishment(29,841)- - -  (29,841)- - 
Loss before income taxes and gain from equity method investments(169,140)(124,950)(1,485,871)(223,329) (468,288)(1,713,956)(257,611)
Income tax expense(10,064)(1,387)(19,794)(2,975) (6,658)(37,308)(5,607)
Gain from equity method investments7,656 7,080 26,546 3,990  28,231 36,051 5,419 
Net loss(171,548)(119,257)(1,479,119)(222,314) (446,715)(1,715,213)(257,799)
Net loss attributable to noncontrolling interest37,579 22,444 104,354 15,685  72,971 143,841 21,619 
Net loss attributable to ordinary shareholders(133,969)(96,813)(1,374,765)(206,629) (373,744)(1,571,372)(236,180)
                
         
         
Loss per share        
Basic(0.15)(0.18)(2.20)(0.33) (0.63)(2.54)(0.38)
Diluted(0.15)(0.18)(2.20)(0.33) (0.63)(2.54)(0.38)
Shares used in loss per share computation        
Basic*682,146,465 670,534,467 670,701,497 670,701,497  594,573,516 673,261,889 673,261,889 
Diluted*682,146,465 670,534,467 670,701,497 670,701,497  594,573,516 673,261,889 673,261,889 
         
Loss per ADS (6 ordinary shares equal to 1 ADS)        
Basic(0.90)(1.08)(13.20)(1.98) (3.78)(15.24)(2.28)
Diluted(0.90)(1.08)(13.20)(1.98) (3.78)(15.24)(2.28)
         
* 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  Nine months ended
 September 30, 2016June 30, 2017September 30, 2017 September 30, 2016September 30, 2017
 RMBRMBRMBUS$ RMBRMBUS$
Gross profit186,882 187,963 189,801 28,527  528,765 558,241 83,904 
Plus: share-based compensation expense1,173 42 (181)(27) (5,975)(361)(54)
Plus: amortization of intangible assets derived from acquisitions36,504 31,258 30,848 4,636  113,668 93,478 14,050 
Adjusted gross profit224,559 219,263 220,468 33,136  636,458 651,358 97,900 
Adjusted gross margin23.2% 25.0% 24.9% 24.9%  23.2% 24.8% 24.8% 
Operating expenses(306,998)(268,518)(1,413,436)(212,442) (861,945)(1,934,574)(290,770)
Plus: share-based compensation expense32,208 11,563 15,981 2,402  68,031 32,089 4,823 
Plus: changes in the fair value of contingent purchase consideration payable(12,285)(1,032)1,002 151  (26,110)(2,897)(435)
Plus: impairment of long-lived assets- - 401,808 60,392  - 401,808 60,392 
Plus: Goodwill impairment- - 766,440 115,197  - 766,440 115,197 
Adjusted operating expenses(287,075)(257,987)(228,205)(34,300) (820,024)(737,134)(110,793)
Net loss(171,548)(119,257)(1,479,119)(222,314) (446,715)(1,715,213)(257,799)
Plus: share-based compensation expense33,381 11,605 15,800 2,375  62,056 31,728 4,769 
Plus: amortization of intangible assets derived from acquisitions36,504 31,258 30,848 4,636  113,668 93,478 14,050 
Plus: changes in the fair value of contingent purchase consideration
payable and related deferred tax impact
(12,285)(1,032)1,002 151  (25,615)(2,897)(435)
Plus: loss on debt extinguishment29,841 - - -  29,841 - - 
Plus: impairment of long-lived assets- - 401,808 60,392  - 401,808 60,392 
Plus: Goodwill impairment- - 766,440 115,197  - 766,440 115,197 
Plus: Disposal loss of subsidiaries- - 180,048 27,061  - 180,048 27,061 
Plus: Impairment of long-term investment- - 20,397 3,066  - 20,397 3,066 
Plus: tax impact for the reconciliation adjustments(7,256)(6,101)(6,004)(902) (21,768)(18,218)(2,738)
Adjusted net loss(91,363)(83,527)(68,780)(10,338) (288,533)(242,429)(36,437)
Adjusted net margin-9.4% -9.5% -7.8% -7.8%  -10.5% -9.2% -9.2% 
Net loss(171,548)(119,257)(1,479,119)(222,314) (446,715)(1,715,213)(257,799)
Minus: Provision for income taxes(10,064)(1,387)(19,794)(2,975) (6,658)(37,308)(5,607)
Minus: Interest income3,716 7,188 6,664 1,002  16,239 22,104 3,322 
Minus: Interest expenses(49,490)(40,033)(57,417)(8,630) (157,937)(134,477)(20,212)
Minus: Loss on debt extinguishment(29,841)- - -  (29,841)- - 
Minus: Exchange gain (loss)8,511 (10,372)(5,628)(846) 27,492 (21,481)(3,229)
Minus: Gain from equity method investment7,656 7,080 26,546 3,990  28,231 36,051 5,419 
Minus: Other income19,090 1,458 7,220 1,085  23,563 13,504 2,030 
Minus: Other expenses(1,010)(2,636)(12,630)(1,898) (14,624)(16,828)(2,529)
Minus: Impairment of long-term investment- - (20,397)(3,066) - (20,397)(3,066)
Minus: Disposal loss of subsidiaries- - (180,048)(27,061) - (180,048)(27,061)
Plus: depreciation122,484 137,577 132,240 19,876  349,619 399,426 60,034 
Plus: amortization44,452 41,014 41,352 6,215  139,566 123,710 18,594 
Plus: share-based compensation expense33,381 11,605 15,800 2,375  62,056 31,728 4,769 
Plus: changes in the fair value of contingent purchase consideration payable(12,285)(1,032)1,002 151  (26,110)(2,897)(435)
Plus: impairment of long-lived assets- - 401,808 60,392  - 401,808 60,392 
Plus: Goodwill impairment- - 766,440 115,197  - 766,440 115,197 
Adjusted EBITDA67,916 108,609 135,007 20,291  191,951 343,882 51,685 
Adjusted EBITDA margin7.0% 12.4% 15.2% 15.2%  7.0% 13.1% 13.1% 
                
                
                
Adjusted net loss(91,363)(83,527)(68,780)(10,338) (288,533)(242,429)(36,437)
Less: Net loss attributable to noncontrolling interest37,579 22,444 104,354 15,685  72,971 143,841 21,619 
Adjusted net loss attributable to the Company’s ordinary shareholders(53,784)(61,083)35,574 5,347  (215,562)(98,588)(14,818)
         
Adjusted loss per share        
Basic(0.02)(0.13)(0.10)(0.02) (0.33)(0.36)(0.05)
Diluted(0.02)(0.13)(0.10)(0.02) (0.33)(0.36)(0.05)
Shares used in adjusted loss per share computation:        
Basic*682,146,465 670,534,467 670,701,497 670,701,497  594,573,516 673,261,889 673,261,889 
Diluted*682,146,465 670,534,467 670,701,497 670,701,497  594,573,516 673,261,889 673,261,889 
         
Adjusted loss per ADS (6 ordinary shares equal to 1 ADS)        
Basic(0.12)(0.78)(0.60)(0.12) (1.98)(2.16)(0.30)
Diluted(0.12)(0.78)(0.60)(0.12) (1.98)(2.16)(0.30)
         
* 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  Nine months ended
 September 30, 2016June 30, 2017September 30, 2017 September 30, 2016September 30, 2017
 RMBRMBRMBUS$ RMBRMBUS$
Hosting and related services        
Operating profit14,138 48,637 47,927 7,203  52,177 148,837 22,370 
Plus: depreciation and amortization89,982 109,868 111,510 16,760  248,255 322,010 48,398 
Plus: share-based compensation expense24,563 13,835 15,326 2,304  45,148 31,843 4,786 
Plus: changes in the fair value of contingent purchase consideration payable(3,898)(1,032)1,002 151  (18,372)(2,897)(435)
Adjusted EBITDA124,785 171,308 175,765 26,418  327,208 499,793 75,119 
                
Managed network services               
Operating profit(134,254)(129,192)(1,271,562)(191,118) (385,357)(1,525,170)(229,236)
Plus: depreciation and amortization76,954 68,723 62,082 9,331  240,930 201,126 30,230 
Plus: share-based compensation expense8,818 (2,230)474 71  16,908 (115)(17)
Plus: changes in the fair value of contingent purchase consideration payable(8,387)- - -  (7,738)- - 
Plus: impairment of long-lived assets- - 401,808 60,392  - 401,808 60,392 
Plus: Goodwill impairment- - 766,440 115,197  - 766,440 115,197 
Adjusted EBITDA(56,869)(62,699)(40,758)(6,127) (135,257)(155,911)(23,434)
                

 

21VIANET GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))
    
  Three months ended 
 June 30, 2017 September 30, 2017
  RMB  RMB  US$
  (Unaudited)  (Unaudited)  (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss(119,257)(1,479,119)(222,314)
Adjustments to reconcile net loss to net cash generated from
  operating activities:
   
Foreign exchange loss10,372 5,628 846 
Changes in the fair value of contingent purchase consideration
  payable
(1,032)1,002 151 
Gain on disposal of property and equipment- (2,837)(426)
Loss from disposal of intangible assets- 295 44 
Depreciation of property and equipment137,577 132,240 19,876 
Amortization of intangible assets41,014 41,352 6,215 
Provision for doubtful accounts and other receivables16,449 8,990 1,351 
Impairment of long-lived assets- 401,808 60,392 
Impairment of goodwill- 766,440 115,197 
Impairment of long-term investment- 20,398 3,066 
Loss from disposal of subsidiaries- 180,048 27,061 
Share-based compensation expense11,573 15,720 2,363 
Deferred income taxes (benefit) expense(8,058)5,887 885 
Gain from equity method investment(7,080)(26,546)(3,990)
Gain from disposal of cost method investments(1,425)- - 
Dividend received from cost method investment- (396)(60)
Changes in operating assets and liabilities    
Restricted cash(8,217)2,075 312 
Inventories277 (658)(99)
Accounts and notes receivable30,509 36,562 5,495 
Unrecognized tax benefits1,981 951 143 
Prepaid expenses and other current assets(82,143)(119,384)(17,944)
Amounts due from related parties(9,616)13,280 1,996 
Accounts and notes payable(5,560)26,379 3,965 
Accrued expenses and other payables61,956 120,015 18,038 
Deferred revenue(19,417)(11,598)(1,743)
Advances from customers36,406 77,225 11,607 
Income taxes payable(13,508)7,087 1,065 
Amounts due to related parties(6,139)(13,419)(2,017)
Deferred government grants2,282 (786)(118)
Net cash generated from operating activities 68,944 208,639 31,357 
CASH FLOWS FROM INVESTING ACTIVITIES       
Purchases of property and equipment(144,092)(86,831)(13,051)
Purchases of intangible assets(5,466)(43)(6)
Payment for asset acquisition(10,000)- - 
Proceeds from disposal of property and equipment- 14,679 2,206 
Disposal of subsidiaries, net of cash- (64,580)(9,706)
Payments for short-term investments17 (337,137)(50,672)
Proceeds received from maturity of short-term investments484,932 - - 
Proceeds from disposal of cost method investment1,425 - - 
Dividend received from cost method investment- 396 60 
Payments for long-term investments(36,264)(61,898)(9,303)
Restricted cash134,176 - - 
Net cash generated from (used in) investing activities 424,728 (535,414)(80,472)
CASH FLOWS FROM FINANCING ACTIVITIES       
Restricted cash35,513 37,920 5,699 
Proceeds from exercise of stock options13 171 26 
Proceeds from long-term bank borrowings23,662 11,740 1,765 
Proceeds from issuance of 2020 bonds- 1,316,974 197,943 
Payment for issurance cost of 2020 bonds- (3,278)(493)
Proceeds from short-term bank borrowings20,000 - - 
Repayments of short-term bank borrowings(18,000)(40,676)(6,114)
Repayments of long-term bank borrowings(12,349)(11,843)(1,780)
Repayments of 2017 Bonds(420,600)- - 
Repayment of loan from a third party- (100,000)(15,030)
Prepayment for shares repurchase plan- (3,866)(581)
Payments for shares repurchase plan(41,880)(50,054)(7,523)
Rental prepayments and deposits for sales and leaseback transactions(31,813)(39,513)(5,939)
Payments for capital leases(60,552)(39,280)(5,904)
Contribution from noncontrolling interest in a subsidary22,962 62,357 9,373 
Net cash (used in) generated from financing activities (483,044)1,140,652 171,442 
Effect of foreign exchange rate changes on cash and short
  term investments
(32,322)(86,759)(13,040)
Net (decrease) increase in cash and cash equivalents (21,694)727,117 109,287 
Cash and cash equivalents at beginning of period 779,513 757,819 113,901 
Cash and cash equivalents at end of period 757,819 1,484,936 223,188 
       

 


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