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21Vianet Group, Inc. Reports Unaudited Fourth Quarter and Full Year 2018 Financial Results

BEIJING, March 05, 2019 (GLOBE NEWSWIRE) -- 21Vianet Group, Inc. (VNET) ("21Vianet" or the "Company"), a leading carrier- and cloud-neutral Internet data center services provider in China, today announced its unaudited financial results for the fourth quarter and the full year ended December 31, 2018. The Company will hold a conference call at 8:00 pm on Monday, March 4, 2019, U.S. Eastern Time to discuss the financial results. Dial-in details are provided at the end of this release.

Fourth Quarter 2018 Financial Highlights

  • Revenues from hosting and related services increased by 17.8% year over year to RMB901.9 million (US$131.2 million).
  • Gross profit increased by 23.1% year over year to RMB246.3 million (US$35.8 million). Gross margin expanded to 27.3% from 26.1% in the same period of 2017. Adjusted cash gross profit increased by 27.9% year over year to RMB409.2 million (US$59.5 million) from RMB320.1 million. Adjusted cash gross margin expanded to 45.4% from 41.8% in the same period of 2017.
  • Adjusted EBITDA increased by 49.3% year over year to RMB255.3 million (US$37.1 million). Adjusted EBITDA margin expanded to 28.3% from 22.3% in the same period of 2017.
  • Net cash generated from operating activities was RMB237.0 million (US$34.5 million) compared to RMB157.1 million in the same period of 2017.

Full Year 2018 Financial Highlights (including hosting and related business only)

  • Revenues from hosting and related services revenues increased by 14.3% year over year to RMB3.40 billion (US$494.7 million).
  • Gross profit increased by 11.8% year over year to RMB944.9 million (US$137.4 million). Gross margin decreased to 27.8% from 28.4% in 2017. Adjusted cash gross profit increased by 21.2% year over year to RMB1.51 billion (US$220.0 million) from RMB1.25 billion. Adjusted cash gross margin expanded to 44.5% from 42.0% in 2017.
  • Adjusted EBITDA increased by 36.8% year over year to RMB917.7 million (US$133.5 million). Adjusted EBITDA margin expanded to 27.0% from 22.5% in 2017.
  • Net cash generated from operating activities was RMB705.0 million (US$102.5 million) compared to RMB487.2 million in 2017.

Fourth Quarter 2018 Operational Highlights

  • Hosting MRR1 per cabinet increased to RMB8,457 in the fourth quarter of 2018 compared to RMB7,766 in the fourth quarter of 2017 and RMB8,384 in the third quarter of 2018.
  • Total cabinets under management increased to 30,654 as of December 31, 2018, compared to 30,303 as of September 30, 2018 and 29,080 as of December 31, 2017. As of December 31, 2018, the Company had 25,711 cabinets in its self-built data centers and 4,943 cabinets in its partnered data centers.
  • Utilization rate in the fourth quarter of 2018 fell slightly to 70.3% compared to the third quarter of 2018, mainly attributable to the additional 1,194 cabinets that were delivered in September 2018, and 350 cabinets that were delivered in the fourth quarter of 2018.

“We concluded a fruitful 2018 with a solid fourth quarter performance,” commented Mr. Alvin Wang, Chief Executive Officer and President of the Company. “Our resilient financial growth and improving operating performance once again demonstrated the effectiveness of our business operation optimization and our ability to capitalize on the increasing market demand for high-quality data hosting, hybrid IT, and cloud services. To sustain our strong growth momentum, we actively acquired new land resources and new customers while expanding our footprint to new Tier-1 markets and beyond. In addition, we continued to deepen our strategic partnerships with world-class technology companies such as Red Hat Inc. to explore more solutions that can empower our customers’ business expansions. Looking ahead to 2019 and beyond, we are confident that the counter-cyclical nature of our business as well as our leadership in the Chinese IDC market will facilitate our pursuit of long-term sustainable growth.”

Ms. Sharon Liu, Chief Financial Officer of the Company, commented, “We delivered a strong quarter with healthy top- and bottom-line growth. In the fourth quarter of 2018, we had net revenues of RMB901.9 million, again exceeding the high end of our previous guidance range. More importantly, our adjusted EBITDA margin further increased to 28.3%, maintaining its consistent improvement over the previous quarters. In 2018, we improved adjusted EBITDA margin significantly to 27.0% from 22.5% in the previous year. In 2019, we are confident that as we continue to execute on our growth strategies and fortify our market leading position, we will yield long-term value for our shareholders.”

Fourth Quarter 2018 Financial Results

REVENUES: Net revenues increased by 17.8% to RMB901.9 million (US$131.2 million) in the fourth quarter of 2018 from RMB765.8 million in the same period of 2017 and increased by 3.7% from RMB870.1 million in the third quarter of 2018. The increase was primarily attributable to the growing demand for data centers and cloud services in the domestic market.

GROSS PROFIT: Gross profit increased by 23.1% to RMB246.3 million (US$35.8 million) in the fourth quarter of 2018 from RMB200.2 million in the same period of 2017 and increased by 2.1% from RMB241.2 million in the third quarter of 2018. Gross margin was 27.3% in the fourth quarter of 2018 compared to 26.1% in the same period of 2017 and 27.7% in the third quarter of 2018. The year-over-year improvement in gross margin was mainly attributable to the Company’s continuous efforts in maximizing its operating efficiency.

ADJUSTED CASH GROSS PROFIT, which excludes depreciation, amortization, and share-based compensation expenses, increased by 27.9% to RMB409.2 million (US$59.5 million) in the fourth quarter of 2018 from RMB320.1 million in the same period of 2017 and increased by 4.4% from RMB391.9 million in the third quarter of 2018. Adjusted cash gross margin expanded to 45.4% in the fourth quarter of 2018 from 41.8% in the same period of 2017 and 45.0% in the third quarter of 2018.
                                                                                                                                                                                            
OPERATING EXPENSES: Total operating expenses decreased by 5.7% to RMB181.4 million (US$26.4 million) in the fourth quarter of 2018 from RMB192.4 million in the same period of 2017 and increased by 2.8% from RMB176.6 million in the third quarter of 2018. As a percentage of net revenues, total operating expenses decreased to 20.1% in the fourth quarter of 2018 from 25.1% in the same period of 2017 and 20.3% in the third quarter of 2018. The decrease of operating expenses as a percentage of net revenues was primarily due to the successful implementation of the Company’s efficiency enhancement initiatives.

Sales and marketing expenses were RMB49.2 million (US$7.2 million) in the fourth quarter of 2018 compared to RMB42.7 million in the same period of 2017 and RMB39.9 million in the third quarter of 2018. The increase was mainly attributable to increased marketing activities and higher sales commissions, which was in line with the growth of the Company’s net revenues in the fourth quarter of 2018.

Research and development expenses were RMB23.6 million (US$3.4 million) in the fourth quarter of 2018 compared to RMB29.3 million in the same period of 2017 and RMB24.3 million in the third quarter of 2018. 

General and administrative expenses were RMB131.0 million (US$19.0 million) in the fourth quarter of 2018 compared to RMB115.4 million in the same period of 2017 and RMB110.2 million in the third quarter of 2018. The increase was mainly attributable to share-based compensation expenses that the Company recognized during the fourth quarter of 2018.

ADJUSTED OPERATING EXPENSES, which exclude share-based compensation expenses and changes in the fair value of contingent purchase consideration payables, decreased by 0.5% to RMB172.4 million (US$25.1 million) in the fourth quarter of 2018 from RMB173.2 million in the same period of 2017 and increased by 5.9% from RMB162.9 million in the third quarter of 2018. As a percentage of net revenues, adjusted operating expenses decreased to 19.1% in the fourth quarter of 2018 from 22.6% in the same period of 2017 and increased slightly from 18.7% in the third quarter of 2018.

ADJUSTED EBITDA: Adjusted EBITDA in the fourth quarter of 2018 increased by 49.3% to RMB255.3 million (US$37.1 million) from RMB171.0 million in the same period of 2017 and increased by 4.1% from RMB245.2 million in the third quarter of 2018. Adjusted EBITDA in the fourth quarter of 2018 excluded share-based compensation expenses of RMB29.2 million (US$4.2 million) and changes in the fair value of contingent purchase consideration payables, which was a gain of RMB18.5 million (US$2.7 million). Adjusted EBITDA margin expanded to 28.3% in the fourth quarter of 2018 from 22.3% in the same period of 2017 and 28.2% in the third quarter of 2018.

NET PROFIT/LOSS ATTRIBUTABLE TO ORDINARY SHAREHOLDERS: Net loss attributable to ordinary shareholders in the fourth quarter of 2018 was RMB114.1 million (US$16.6 million) compared to a net profit of RMB798.6 million in the same period of 2017 and a net loss of RMB29.6 million in the third quarter of 2018. Net loss attributable to ordinary shareholders in the fourth quarter of 2018 included a foreign exchange gain of RMB2.5 million (US$0.4 million) compared to RMB4.3 million in the same period of 2017 and a loss of RMB55.0 million in the third quarter of 2018.

PROFIT/LOSS PER SHARE: Basic and diluted loss per share were RMB0.17 (US$0.02) in the fourth quarter of 2018, which represents the equivalent of RMB1.02 (US$0.12) per American Depositary Share ("ADS"). Each ADS represents six ordinary shares. Diluted earnings per share is calculated using net earnings attributable to ordinary shareholders divided by the weighted average number of diluted shares outstanding.

As of December 31, 2018, the Company's cash and cash equivalents, restricted cash, and short-term investments were RMB2.91 billion (US$422.7 million).

Net cash generated from operating activities was RMB237.0 million (US$34.5 million) in the fourth quarter of 2018 compared to RMB157.1 million in the same period of 2017 and RMB260.7 million in the third quarter of 2018.

Full Year 2018 Financial Results

To fully reflect the Company’s performance, all analysis between “REVENUES” and “ADJUSTED EBITDA” present only the results of the hosting and related service business. The MNS business, which was disposed of in the third quarter of 2017, is excluded.

REVENUES: Net revenues increased by 14.3% to RMB3.40 billion (US$494.7 million) in 2018 from RMB2.98 billion in the prior year. The increase was primarily due to the same factors that led to the quarterly increase.

GROSS PROFIT: Gross profit increased by 11.8% to RMB944.9 million (US$137.4 million) in 2018 from RMB844.9 million in the prior year. Gross margin was 27.8% in 2018 compared to 28.4% in the prior year.

ADJUSTED CASH GROSS PROFIT, which excludes depreciation, amortization, and share-based compensation expenses, increased by 21.2% to RMB1.51 billion (US$220.0 million) in 2018 from RMB1.25 billion in the prior year. Adjusted cash gross margin expanded to 44.5% in 2018 from 42.0% in the prior year.
                                                                                                                                                                                            
OPERATING EXPENSES: Total operating expenses increased by 2.8% to RMB707.4 million (US$102.9 million) in 2018 from RMB688.3 million in the prior year. As a percentage of net revenues, total operating expenses decreased to 20.8% in 2018 from 23.1% in the prior year. The decrease of operating expenses as a percentage of net revenues was primarily due to the successful implementation of the Company’s efficiency enhancement initiatives.

Sales and marketing expenses were RMB172.2 million (US$25.0 million) in 2018 compared to RMB171.8 million in the prior year.

Research and development expenses were RMB92.1 million (US$13.4 million) in 2018 compared to RMB97.6 million in the prior year.

General and administrative expenses were RMB462.6 million (US$67.3 million) in 2018 compared to RMB417.2million in the prior year.

ADJUSTED OPERATING EXPENSES, which exclude share-based compensation expenses and changes in the fair value of contingent purchase consideration payables, increased by 3.8% to RMB664.4 million (US$96.6 million) in 2018 from RMB639.9 million in the prior year. As a percentage of net revenues, adjusted operating expenses decreased to 19.5% in 2018 from 21.5% in the prior year.

ADJUSTED EBITDA: Adjusted EBITDA in 2018 increased by 36.8% to RMB917.7 million (US$133.5 million) from RMB670.8 million in the prior year. Adjusted EBITDA in 2018 excluded share-based compensation expenses of RMB59.5 million (US$8.7 million) and changes in the fair value of contingent purchase consideration payables, which was a gain of RMB13.9 million (US$2.0 million). Adjusted EBITDA margin expanded to 27.0% in 2018 from 22.5% in the prior year.

NET PROFIT/LOSS ATTRIBUTABLE TO ORDINARY SHAREHOLDERS: Net loss attributable to ordinary shareholders for 2018 was RMB205.1 million (US$29.8 million) compared to a net loss of RMB772.7 million in the prior year. Net loss in 2018 included a foreign exchange loss of RMB81.1 million (US$11.8 million) compared to RMB17.2 million in the prior year.

PROFIT/LOSS PER SHARE: Basic and diluted loss per share were RMB0.30 (US$0.04) for 2018, which represents the equivalent of RMB1.80 (US$0.24) per ADS. Diluted loss per share is calculated using net loss attributable to ordinary shareholders divided by the weighted average number of diluted shares outstanding.

Net cash generated from operating activities was RMB705.0 million (US$102.5 million) in 2018 compared to RMB487.2 million in 2017.

Recent Development

In February 2019, the Company reached an agreement to acquire a recently-constructed data center in urban Chengdu City, Sichuan Province, China. Upon the completion of quality inspections, the new data center is expected to add approximately 500 cabinets to the Company’s sales pipeline. This additional capacity will enable 21Vianet to access the new Tier-1 market in Chengdu, the primary economic center and core network hub for Southwest China, where the customer demand for high-quality data center services has been growing.

Financial Outlook

For the first quarter of 2019, the Company expects net revenues to be in the range of RMB860 million to RMB880 million. Adjusted EBITDA is expected to be in the range of RMB230 million to RMB250 million.

For the full year of 2019, the Company expects net revenues to be in the range of RMB3,760 million to RMB3,860 million. Adjusted EBITDA is expected to be in the range of RMB1,000 million to RMB1,100 million. The midpoints of the Company’s updated estimates imply an increase of 12% year-over-year in total revenues and an increase of 14% year-over-year in adjusted EBITDA.

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

Conference Call

The Company will hold a conference call at 8:00 pm on Monday, March 4, 2019 U.S. Eastern Time, or 9:00 am on Tuesday, March 5, 2019 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:   8385847

The replay will be accessible through March 12, 2019 by dialing the following numbers:

United States Toll Free:   +1-855-452-5696
International:   +61-2-9003-4211
Conference ID:   8385847

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 cash gross profit, adjusted cash gross margin, adjusted operating expenses, adjusted EBITDA, adjusted EBITDA margin, 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 RMB6.8755 to US$1.00, the noon buying rate in effect on December 31, 2018 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- and cloud-neutral Internet data center services provider in China. 21Vianet provides hosting and related services, including IDC services, cloud services, and business VPN services to improve the reliability, security and speed of its customers' Internet infrastructure. Customers may locate their servers and equipment in 21Vianet's data centers and connect to China's Internet backbone. 21Vianet operates in more than 30 cities throughout China, servicing a diversified and loyal base of nearly 5,000 hosting and related 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.
Rene Jiang
+86 10 8456 2121
IR@21Vianet.com

Julia Jiang
+86 10 8456 2121
IR@21Vianet.com

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

______________________________________________
1
Hosting MRR: Refers to Monthly Recurring Revenues for the hosting business.

 
 
21VIANET GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))
 
  As of     As of  
  December 31, 2017     December 31, 2018 
  RMB      RMB      US$  
  (Audited)      (Unaudited)       (Unaudited)   
Assets                
Current assets:                
Cash and cash equivalents 1,949,631     2,358,556     343,038  
Restricted cash 242,494     265,214     38,574  
Accounts and notes receivable, net 455,811     524,305     76,257  
Short-term investments 548,890     245,014     35,636  
Prepaid expenses and other current assets 934,460     1,159,574     168,652  
Amounts due from related parties   114,256       125,446       18,245  
Total current assets   4,245,542       4,678,109       680,402  
                 
Non-current assets:                
Property and equipment, net 3,319,424     4,031,242     586,320  
Intangible assets, net 401,115     355,313     51,678  
Land use rights, net 163,671     147,493     21,452  
Goodwill 989,530     989,530     143,921  
Long-term investments 510,926     544,323     79,168  
Amounts due from related parties 20,210     34,424     5,007  
Restricted cash 3,344     37,251     5,418  
Deferred tax assets 172,818     159,441     23,190  
Other non-current assets   81,581       173,591       25,248  
Total non-current assets   5,662,619       6,472,608       941,402  
Total assets   9,908,161       11,150,717       1,621,804  
                 
Liabilities and Shareholders' Equity                
Current liabilities:                
Short-term bank borrowings 50,000     50,000     7,272  
Accounts and notes payable 252,892     389,508     56,652  
Accrued expenses and other payables 657,133     659,320     95,894  
Deferred revenue 55,753     57,754     8,400  
Advances from customers 403,244     670,037     97,453  
Income taxes payable 13,309     13,111     1,907  
Amounts due to related parties 55,675     52,328     7,611  
Current portion of long-term bank borrowings 70,289     75,284     10,950  
Current portion of capital lease obligations 201,315     219,695     31,953  
Current portion of deferred government grant   4,574       4,173       607  
Total current liabilities   1,764,184       2,191,210       318,699  
                 
Non-current liabilities:                
Long-term bank borrowings 187,638     112,000     16,290  
Amounts due to related parties -     504,478     73,373  
Unrecognized tax benefits 16,511     6,677     971  
Deferred tax liabilities 190,873     157,720     22,939  
Non-current portion of capital lease obligations 600,882     765,993     111,409  
Non-current portion of deferred government grant 17,861     11,619     1,690  
Bonds payable   1,929,208       2,037,836       296,391  
Total non-current liabilities   2,942,973       3,596,323       523,063  
                 
Shareholders' equity                
Treasury stock (337,683 )   (337,683 )   (49,114 )
Ordinary shares 46     46     7  
Additional paid-in capital 8,980,407     9,141,494     1,329,575  
Accumulated other comprehensive (loss) gain (2,673 )   85,979     12,505  
Statutory reserves 38,736     42,403     6,167  
Accumulated deficit   (3,629,300 )     (3,838,032 )     (558,219 )
Total 21Vianet Group, Inc. shareholders’ equity   5,049,533       5,094,207       740,921  
Noncontrolling interest 151,471     268,977     39,121  
Total shareholders' equity   5,201,004       5,363,184       780,042  
Total liabilities and shareholders' equity   9,908,161       11,150,717       1,621,804  
                 
                 

 

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, 2017     September 30, 2018     December  31, 2018      December 31, 2017     December 31, 2018 
    RMB     RMB     RMB     US$     RMB     RMB     US$  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Net revenues                                          
Hosting and related services   765,814     870,068     901,887     131,174     2,975,178     3,401,037     494,660  
Managed network services     -       -        -        -       417,527       -       -  
Total net revenues   765,814     870,068     901,887     131,174     3,392,705     3,401,037     494,660  
Cost of revenues     (565,645 )     (628,873 )     (655,546 )     (95,345 )     (2,634,295 )     (2,456,166 )     (357,235 )
Gross profit   200,169     241,195     246,341     35,829     758,410     944,871     137,425  
                                           
Operating expenses                                          
Other operating income   -     -     5,027     731     5,439     5,027     731  
Sales and marketing   (42,702 )   (39,918 )   (49,210 )   (7,157 )   (256,682 )   (172,176 )   (25,042 )
Research and development   (29,340 )   (24,333 )   (23,583 )   (3,430 )   (149,143 )   (92,109 )   (13,397 )
General and administrative   (115,351 )   (110,243 )   (130,963 )   (19,048 )   (519,950 )   (462,637 )   (67,288 )
(Allowance) reversal for doubtful debt   (1,147 )   (643 )   (1,241 )   (180 )   (37,427 )   598     87  
Changes in the fair value of contingent purchase consideration payables     (3,834 )     (1,413 )     18,528       2,695       (937 )     13,905       2,022  
Impairment of long-lived assets   -     -     -     -     (401,808 )   -     -  
Goodwill impairment   -     -     -     -     (766,440 )   -     -  
Total operating expenses     (192,374 )     (176,550 )     (181,442 )     (26,389 )     (2,126,948 )     (707,392 )     (102,887 )
                                           
Operating profit (loss)   7,795     64,645     64,899     9,440     (1,368,538 )   237,479     34,538  
Interest income   10,821     13,484     14,214     2,067     32,925     45,186     6,572  
Interest expense   (50,836 )   (60,766 )   (72,430 )   (10,535 )   (185,313 )   (236,066 )   (34,334 )
Impairment of long-term investment   139     -     -     -     (20,258 )   -     -  
Disposal gain of subsidiaries   677,084     -     -     -     497,036     4,843     704  
Other income   3,260     8,436     7,050     1,025     16,764     58,033     8,441  
Other expense   (232 )   (137 )   (1,875 )   (273 )   (17,060 )   (4,103 )   (597 )
Foreign exchange gain (loss)     4,328       (55,024 )     2,488       362       (17,153 )     (81,055 )     (11,789 )
Loss on debt extinguishment                     -           -     -  
Gain (loss) before income taxes and gain (loss) from equity method investments   652,359     (29,362 )   14,346     2,086     (1,061,597 )   24,317     3,535  
Income tax benefits (expenses)   127,478     7,624     46,350     6,741     90,170     (24,411 )   (3,550 )
Gain (loss) from equity method investments     17,732       (6,156 )     (158,738 )     (23,087 )     53,783       (186,642 )     (27,146 )
Net gain (loss)   797,569     (27,894 )   (98,042 )   (14,260 )   (917,644 )   (186,736 )   (27,161 )
Net loss (profit) attributable to noncontrolling interest     1,073       (1,739 )     (16,020 )     (2,330 )     144,914       (18,329 )     (2,666 )
Net gain (loss) attributable to ordinary shareholders     798,642       (29,633 )     (114,062 )     (16,590 )     (772,730 )     (205,065 )     (29,827 )
                                           
Profit (loss) per share                                          
Basic   1.19     (0.04 )   (0.17 )   (0.02 )   (1.36 )   (0.30 )   (0.04 )
Diluted   1.18     (0.04 )   (0.17 )   (0.02 )   (1.36 )   (0.30 )   (0.04 )
Shares used in profit (loss) per share computation                                          
Basic*   671,279,121     676,327,014     676,361,072     676,361,072     672,836,226     674,732,130     674,732,130  
Diluted*   675,505,879     676,327,014     676,361,072     676,361,072     672,836,226     674,732,130     674,732,130  
                                           
Profit (loss) per ADS (6 ordinary shares equal to 1 ADS)                                          
Basic   7.14     (0.24 )   (1.02 )   (0.12 )   (8.16 )   (1.80 )   (0.24 )
Diluted   7.08     (0.24 )   (1.02 )   (0.12 )   (8.16 )   (1.80 )   (0.24 )
                                           
* Shares used in profit (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$”))
                                           
    Three months ended    Twelve months ended 
    December 31, 2017
  September 30, 2018
  December  31, 2018
  December 31, 2017
  December 31, 2018
    RMB
  RMB
  RMB     US$     RMB
  RMB     US$  
Gross profit   200,169     241,195     246,341     35,829     758,410     944,871     137,425  
Plus: depreciation and amortization   119,814     150,056     161,201     23,446     559,963     565,101     82,191  
Plus: share-based compensation expenses   84     689     1,672     243     (277 )   2,668     388  
Adjusted cash gross profit   320,067     391,940     409,214     59,518     1,318,096     1,512,640     220,004  
Adjusted cash gross margin   41.8%     45.0%     45.4%     45.4%     38.9%     44.5%     44.5%  
                                           
Operating expenses   (192,374 )   (176,550 )   (181,442 )   (26,389 )   (2,126,948 )   (707,392 )   (102,887 )
Plus: share-based compensation expenses   15,317     12,240     27,528     4,004     47,406     56,870     8,271  
Plus: changes in the fair value of contingent purchase consideration payables   3,834     1,413     (18,528 )   (2,695 )   937     (13,905 )   -2,022  
Plus: impairment of long-lived assets   -     -     -     -     401,808     -     -  
Plus: Goodwill impairment   -     -     -     -     766,440     -     -  
Adjusted operating expenses   (173,223 )   (162,897 )   (172,442 )   (25,080 )   (910,357 )   (664,427 )   (96,638 )
                                           
Operating profit (loss)   7,795     64,645     64,899     9,440     (1,368,538 )   237,479     34,538  
Plus: depreciation and amortization   143,966     166,244     179,759     26,145     667,102     634,606     92,300  
Plus: share-based compensation expenses   15,401     12,929     29,200     4,247     47,129     59,538     8,659  
Plus: changes in the fair value of contingent purchase consideration payables   3,834     1,413     (18,528 )   (2,695 )   937     (13,905 )   -2,022  
Plus: impairment of long-lived assets   -     -     -     -     401,808     -     -  
Plus: Goodwill impairment   -     -     -     -     766,440     -     -  
Adjusted EBITDA   170,996     245,231     255,330     37,137     514,878     917,718     133,475  
Adjusted EBITDA margin   22.3%     28.2%     28.3%     28.3%     15.2%     27.0%     27.0%  
                                           
                                           

 

21VIANET GROUP, INC.
SUPPLEMENTARY DISCLOSURE FOR HOSTING AND RELATED SERVICES
(Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))
                 
  Three months ended    Twelve months ended 
  December 31, 2017
  September 30, 2018
  December  31, 2018
  December 31, 2017
  December 31, 2018
GAAP Disclosure RMB
  RMB
  RMB
  US$     RMB
  RMB   US$  
Net revenues 765,814     870,068     901,887     131,174     2,975,178     3,401,037   494,660  
Cost of revenues (565,645 )   (628,873 )   (655,546 )   (95,345 )   (2,130,279 )   (2,456,166 ) (357,235 )
Gross profit 200,169     241,195     246,341     35,829     844,899     944,871   137,425  
Other operating income -     -     5,027     731     5,439     5,027   731  
Sales and marketing (42,702 )   (39,918 )   (49,210 )   (7,157 )   (171,761 )   (172,176 ) (25,042 )
Research and development (29,340 )   (24,333 )   (23,583 )   (3,430 )   (97,597 )   (92,109 ) (13,397 )
General and administrative (115,351 )   (110,243 )   (130,963 )   (19,048 )   (417,154 )   (462,637 ) (67,288 )
(Allowance) reversal for doubtful debt (1,147 )   (643 )   (1,241 )   (180 )   (6,257 )   598   87  
Changes in the fair value of contingent purchase consideration payables (3,834 )   (1,413 )   18,528     2,695     (937 )   13,905   2,022  
Total operating expenses (192,374 )   (176,550 )   (181,442 )   (26,389 )   (688,267 )   (707,392 ) (102,887 )
Operating profit 7,795     64,645     64,899     9,440     156,632     237,479   34,538  
                                       
Non-GAAP Disclosure                                      
Gross profit 200,169     241,195     246,341     35,829     844,899     944,871   137,425  
Plus: depreciation and amortization 119,814     150,056     161,201     23,446     403,407     565,101   82,191  
Plus: share-based compensation expenses 84     689     1,672     243     (162 )   2,668   388  
Adjusted cash gross profit 320,067     391,940     409,214     59,518     1,248,144     1,512,640   220,004  
Adjusted cash gross margin 41.8%     45.0%     45.4%     45.4%     42.0%     44.5%   44.5%  
                                       
Operating expenses (192,374 )   (176,550 )   (181,442 )   (26,389 )   (688,267 )   (707,392 ) (102,887 )
Plus: share-based compensation expenses 15,317     12,240     27,528     4,004     47,406     56,870   8,271  
Plus: changes in the fair value of contingent purchase consideration payables 3,834     1,413     (18,528 )   (2,695 )   937     (13,905 ) (2,022 )
Adjusted operating expenses (173,223 )   (162,897 )   (172,442 )   (25,080 )   (639,924 )   (664,427 ) (96,638 )
                                       
Operating profit 7,795     64,645     64,899     9,440     156,632     237,479   34,538  
Plus: depreciation and amortization 143,966     166,244     179,759     26,145     465,976     634,606   92,300  
Plus: share-based compensation expenses 15,401     12,929     29,200     4,247     47,244     59,538   8,659  
Plus: changes in the fair value of contingent purchase consideration payables 3,834     1,413     (18,528 )   (2,695 )   937     (13,905 ) (2,022 )
Adjusted EBITDA 170,996     245,231     255,330     37,137     670,789     917,718   133,475  
Adjusted EBITDA margin 22.3%     28.2%     28.3%     28.3%     22.5%     27.0%   27.0%  
                                       
                                       

 

21VIANET GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))
           
     Three months ended 
    December 31, 2017     September 30, 2018     December  31, 2018
     RMB       RMB       RMB       US$   
     (Unaudited)       (Unaudited)       (Unaudited)       (Unaudited)   
CASH FLOWS FROM OPERATING ACTIVITIES                         
Net profit (loss)   797,569     (27,894 )   (98,042 )   (14,260 )
Adjustments to reconcile net profit (loss) to net cash generated from operating activities:                         
Depreciation and amortization   143,966     166,244     179,759     26,145  
Stock-based compensation expenses   15,513     12,929     29,200     4,247  
Gain from disposal of subsidiaries   (677,084 )   -     -     -  
Others   (148,681 )   41,616     95,122     13,835  
                         
Changes in operating assets and liabilities                         
Accounts and notes receivable   32,070     (34,113 )   44,566     6,482  
Prepaid expenses and other current assets   (23,235 )   (37,448 )   (117,604 )   (17,105 )
Accounts and notes payable   (38,841 )   37,690     (31,734 )   (4,616 )
Accrued expenses and other payables   92,272     (19,359 )   96,432     14,025  
Deferred revenue   8,674     11,154     5,135     747  
Advances from customers   (23,683 )   114,528     79,968     11,631  
Others   (21,413 )   (4,632 )   (45,802 )   (6,662 )
Net cash generated from operating activities      157,127       260,715       237,000       34,469  
                         
CASH FLOWS FROM INVESTING ACTIVITIES                         
Purchases of property and equipment   (74,603 )   (123,027 )   (129,910 )   (18,895 )
Purchases of intangible assets   (4,062 )   (4,032 )   (8,199 )   (1,192 )
Payments for investments   (275,766 )   (196,319 )   (101,796 )   (14,806 )
Proceeds from other investing activities   100,000     18,061     97,917     14,241  
Net cash used in investing activities      (254,431 )     (305,317 )     (141,988 )     (20,652 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES                         
Proceeds from issuance of 2020 bonds   619,180     -     -     -  
Repayment of long-term bank borrowings   (67,871 )   -     (42,690 )   (6,209 )
Repayment of short-term bank borrowings   (1,520,000 )   -     (19,999 )   (2,909 )
Payments for capital lease   (67,239 )   (50,996 )   (104,420 )   (15,187 )
Collection of prepayment for shares repurchase plan   -     42,710     -     -  
Payment for shares repurchase plan   60     -     -     -  
(Payments for) proceeds from other financing activities   (65,756 )   89,810     (17,324 )   (2,520 )
Contribution from noncontrolling interest in a subsidiary   49,314     196,281     -     -  
Net cash (used in) generated from financing activities      (1,052,312 )     277,805       (184,433 )     (26,825 )
                         
 Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash    (4,967 )   63,580     14,507     2,113  
 Net (decrease) increase in cash, cash equivalents and restricted cash    (1,154,583 )   296,783     (74,914 )   (10,895 )
 Cash, cash equivalents and restricted cash at beginning of period      3,350,052       2,439,152       2,735,935       397,925  
 Cash, cash equivalents and restricted cash at end of period      2,195,469       2,735,935       2,661,021       387,030  
                         
 Notes:                         
The Company adopted Accounting Standards Update (“ASU”) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash on January 1, 2018 and retrospectively adjusted the condensed consolidated statement of cash flows for the three months ended December 31, 2017 by excluding the movement of restricted cash of RMB1,619.3 million.