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

BEIJING, Aug. 22, 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 second quarter ended June 30, 2017. The Company will hold a conference call at 8:00 p.m. Eastern Time on Tuesday, August 22, 2017. Dial-in details are provided at the end of the release.

Mr. Steve Zhang, Chief Executive Officer of the Company, stated, “Our business realignment continued to generate fruitful results in the second quarter of 2017. In particular, our core hosting and related services maintained its growth trajectory. To meet strong market demand, we will increase our data center capacity through a variety of channels, including building cabinets ourselves and entering into strategic joint ventures. This past quarter, we increased the total number of cabinets under management to 27,361. Our cooperation with Warburg Pincus remained on track, as we’ve almost completed transferring another one of the 4 high-quality data center assets into our initial joint venture. In our managed network service (MNS) business, we saw fierce competition and pricing pressure in the market, especially with the effect of public clouds on our CDN business and telecom operators on our Aipu business. To further optimize the network business, we have been actively implementing various cost control measures. Going forward, we will continue our business realignment. We will allocate more resources to our core hosting and related services business, seek to further improve our operating leverage, and gradually transform ourselves into an asset-light business. At the same time, we will continue to explore various strategic alternatives for our MNS business.”

Mr. Terry Wang, Chief Financial Officer of the Company, further commented, "In the second quarter of 2017, our total net revenue declined slightly by 3.5% year-over-year to RMB878.7 million, but was still within the range of our guidance. Our core hosting and related services, which accounted for roughly 85% of total revenues, grew by 10.9% year-over-year. Moreover, because we prudently controlled our costs and reduced expenses, our gross profit increased by 8.7% year-over-year to RMB188.0 million, and our gross margin expanded to 21.4% in the second quarter from 19.0% in the prior year period. Our adjusted EBITDA increased to RMB108.6 million. In addition, we intensified our cash collection efforts and as a result, our accounts receivable declined year-over-year to RMB673.9 million as of June 30, 2017. We are pleased that net cash from operating activities improved to RMB68.9 million in the second quarter. These achievements all exemplified the effectiveness of our business realignment. Going forward, we will continue managing our cost structure efficiently while striving to revive our total revenue growth.”

Second Quarter 2017 Financial Results

REVENUES: Net revenues were RMB878.7 million (US$129.6 million) in the second quarter of 2017 compared to RMB910.8 million in the comparative period in 2016. The increase in revenues from hosting and related services was offset by the decrease in revenues from MNS.

Net revenues for hosting and related services increased by 10.9% to RMB743.4 million (US$109.7 million) in the second quarter of 2017 compared to RMB670.5 million in the comparative period in 2016. The increase was primarily due to an increase in the Company’s IDC and VPN business.

Net revenues for MNS were RMB135.3 million (US$20.0 million) in the second quarter of 2017, compared to RMB240.4 million in the comparative period in 2016. The decrease was primarily due to intensifying competition and pricing pressure.

GROSS PROFIT: Gross profit increased by 8.7% to RMB188.0 million (US$27.7 million) in the second quarter of 2017 as compared to RMB172.9 million in the comparative period in 2016. Gross margin increased to 21.4% in the second quarter of 2017 from 19.0% 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, increased by 9.2% to RMB219.3 million (US$32.3 million) in the second quarter of 2017 compared to RMB200.8 million in the comparative period in 2016. Adjusted gross margin increased to 25.0% in the second quarter of 2017 compared to 22.0% in the comparative period in 2016.

OPERATING EXPENSES: Total operating expenses decreased by 10.6% to RMB268.5 million (US$39.6 million) in the second quarter of 2017 from RMB300.5 million in the comparative period in 2016.

Adjusted operating expenses, which exclude share-based compensation expenses and changes in the fair value of contingent purchase consideration payable, decreased by 17.7% to RMB258.0 million (US$38.1 million) in the second quarter of 2017 from RMB313.4 million in the comparative period in 2016. As a percentage of net revenues, adjusted operating expenses decreased to 29.4% in the second quarter of 2017 from 34.4% in the comparative period in 2016.

Sales and marketing expenses decreased by 15.1% to RMB70.9 million (US$10.5 million) in the second quarter of 2017 compared to RMB83.5 million in the comparative period in 2016. The decrease was primarily due to a decrease in third party sales commissions

General and administrative expenses decreased by 10.1% to RMB139.1 million (US$20.5 million) in the second quarter of 2017 compared to RMB154.8 million in the comparative period in 2016. The decrease was primarily driven by a reduction in headcount.

Research and development expenses were RMB43.1 million (US$6.4 million) in the second quarter of 2017 compared to RMB33.0 million in the comparative period in 2016. The increase was primarily driven by increasing research staff for our core data center business.

Bad debt provisions decreased by 63.1% to RMB16.4 million (US$2.4 million) in the second quarter of 2017 compared to RMB44.6 million in the comparative period in 2016.

Changes in the fair value of contingent purchase consideration payable decreased by 93.3% to RMB1.0 million (US$0.2 million) in the second quarter of 2017 compared to RMB15.3 million in the comparative period in 2016.

ADJUSTED EBITDA: Adjusted EBITDA, which excludes share-based compensation expenses and changes in the fair value of contingent purchase consideration payable, increased to RMB108.6 million (US$16.0 million) in the second quarter of 2017 compared to RMB15.5 million in the comparative period in 2016. Adjusted EBITDA margin increased to 12.4% in the second quarter of 2017 compared to 1.7% in the comparative period in 2016.

Adjusted EBITDA for hosting and related services was RMB171.3 million (US$25.3 million) in the second quarter of 2017 compared to RMB108.3 million in the comparative period in 2016.

Adjusted EBITDA for MNS was negative RMB62.7 million (US$9.2 million) in the second quarter of 2017 compared to negative RMB92.9 million in the comparative period in 2016.

NET PROFIT/LOSS: Net loss narrowed by 3.7% to RMB119.3 million (US$17.6 million) in the second quarter of 2017 compared to RMB123.8 million in the comparative period in 2016.

Adjusted net loss, which excludes share-based compensation expenses, amortization of intangible assets derived from acquisitions, and changes in the fair value of contingent purchase consideration payable and related deferred tax impact, narrowed by 28.1% to RMB83.5 million (US$12.3 million) in the second quarter of 2017 compared to RMB116.2 million in the comparative period in 2016. Adjusted net margin improved to negative 9.5% in the second quarter of 2017 compared to negative 12.8% in the comparative period in 2016.

LOSS PER SHARE: Diluted loss per share narrowed by 18.2% to RMB0.18 in the second quarter of 2017, which represents the equivalent of RMB1.08 (US$0.18) per American Depositary Share ("ADS"). Each ADS represents six ordinary shares.

Adjusted diluted loss per share narrowed by 35.0% to RMB0.13 in the second quarter of 2017, which represents the equivalent of RMB0.78 (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 June 30, 2017, the Company had a total of 675.0 million ordinary shares outstanding, or the equivalent of 112.5 million ADS.

BALANCE SHEET: As of June 30, 2017, the Company's cash and cash equivalents and short-term investment were RMB757.8 million (US$111.8 million).

Second quarter 2017 Operational Highlights

• Total Monthly Recurring Revenues ("MRR") per cabinet was RMB8,311 in the second quarter of 2017, compared to RMB8,363 in the first quarter of 2017.
• Monthly Recurring Revenues for our hosting business (“Hosting MRR”) per cabinet was RMB7,697 in the second quarter of 2017, compared to RMB7,746 in the second quarter of 2016, and RMB7,598 in the first quarter of 2017.
• Total cabinets under management increased to 27,361 as of June 30, 2017 from 26,394 as of March 31, 2017, with 20,971 cabinets in the Company's self-built data centers and 6,390 cabinets in its partnered data centers.
• Utilization rate was 75.2% in the second quarter of 2017, compared to 75.8% in the first quarter of 2017.
• Hosting churn rate, which is based on the Company’s core IDC business, decreased to 0.24% in the second quarter of 2017, compared to 0.48% in the first quarter of 2017.

Recent Developments

As previously announced in the press release dated August 10, 2017, the Company has priced the offering of USD200 million in aggregate principal amount of the USD-denominated notes due 2020 with an interest rate of 7.00% per annum (the "Notes"). The deal closed on August 17, 2017. The Notes are being offered outside the United States in reliance on Regulation S under the Securities Act of 1933, as amended. Interest on the Notes is payable semi-annually in arrears on, or nearest to, August 17 and February 17 each year, beginning on August 17, 2017. The Notes are not rated. The holders of the Notes will have the right, at their option, to require the Company to repurchase for cash all of their Notes or any portion of the principal thereof that is equal to US$200,000 or integral multiples of US$1,000 in excess thereof on August 17, 2019.

The Company intends to use the proceeds from its Notes offering to refinance outstanding indebtedness, fund future capital needs, and for general corporate purposes.

Financial Outlook

For the third quarter of 2017, the Company expects net revenues to be in the range of RMB860 million to RMB900 million, compared to RMB968.0 million in the prior year period. Adjusted EBITDA is expected to be in the range of RMB108 million to RMB122 million, compared to RMB67.9 million in the prior year period.

Conference Call

The Company will hold a conference call on Tuesday, August 22, 2017 at 8:00 pm U.S. Eastern Time, or Wednesday, August 23, 2017 at 8:00 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:	58283697
The replay will be accessible through August 30, 2017, by dialing the following numbers:
United States Toll Free:	+1-855-452-5696
International:	+61-2-9003-4211
Conference ID:	58283697

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 RMB6.7793 to US$1.00, the noon buying rate in effect on June 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, 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 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.

 

21VIANET GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))
	As of		As of
	December 31, 2016		June 30, 2017
	RMB		RMB		US$
	(Audited)		(Unaudited)		(Unaudited)
Assets
Current assets:
Cash and cash equivalents	1,297,418		757,819		111,784
Restricted cash	1,963,561		1,914,778		282,445
Accounts and notes receivable, net	655,459		673,900		99,406
Short-term investments	277,946		-		-
Inventories	4,431		4,308		635
Prepaid expenses and other current assets	777,131		930,946		137,324
Amount due from related parties	182,615		192,663		28,419
Total current assets	5,158,561		4,474,414		660,013
Non-current assets:
Property and equipment, net	3,781,613		3,936,256		580,629
Intangible assets, net	977,341		906,307		133,687
Land use rights, net	167,646		165,725		24,446
Deferred tax assets	100,676		100,922		14,887
Goodwill	1,755,970		1,755,970		259,019
Long term investments	298,871		341,308		50,346
Restricted cash	33,544		3,472		512
Other non-current assets	147,302		128,684		18,982
Total non-current assets	7,262,963		7,338,644		1,082,508
Total assets	12,421,524		11,813,058		1,742,521
Liabilities and Shareholders' Equity
Current liabilities:
Short-term bank borrowings	1,683,676		1,640,676		242,013
Accounts and notes payable	529,569		584,499		86,218
Accrued expenses and other payables	787,916		741,400		109,362
Deferred revenue	320,023		265,766		39,203
Advances from customers	201,397		349,702		51,584
Income taxes payable	21,899		15,100		2,227
Amounts due to related parties	121,928		119,782		17,669
Current portion of long-term bank borrowings	39,303		62,254		9,183
Current portion of capital lease obligations	243,723		296,395		43,721
Current portion of deferred government grant	5,107		4,811		710
Current portion of bonds payable	419,316		-		-
Total current liabilities	4,373,857		4,080,385		601,890
Non-current liabilities:
Long-term bank borrowings	268,221		263,647		38,890
Deferred revenue	62,531		54,297		8,009
Unrecognized tax benefits	28,689		31,762		4,685
Deferred tax liabilities	274,700		267,128		39,403
Non-current portion of capital lease obligations	536,623		537,743		79,321
Non-current portion of deferred government grant	25,886		27,162		4,007
Total non-current liabilities	1,196,650		1,181,739		174,315
Redeemable noncontrolling interests	700,000		700,000		103,255
Shareholders' equity
Treasury stock	(204,557	)	(309,897	)	(45,712	)
Ordinary shares	45		45		7
Additional paid-in capital	9,015,846		9,051,232		1,335,128
Accumulated other comprehensive gain	118,290		60,263		8,889
Statutory reserves	64,622		66,729		9,843
Accumulated deficit	(2,869,031	)	(3,067,745	)	(452,515	)
Total 21Vianet Group, Inc. shareholders’ equity	6,125,215		5,800,627		855,640
Noncontrolling interest	25,802		50,307		7,421
Total shareholders' equity	6,151,017		5,850,934		863,061
Total liabilities, redeemable noncontrolling interests and shareholders' equity	12,421,524		11,813,058		1,742,521

21VIANET GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)
	Three months ended									Six months ended
	June 30, 2016		March 31,2017		June 30, 2017					June 30, 2016		June 30, 2017
	RMB		RMB		RMB		US$			RMB		RMB		US$
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)			(Unaudited)		(Unaudited)		(Unaudited)
Net revenues
Hosting and related services	670,498		706,711		743,398		109,657			1,266,982		1,450,109		213,902
Managed network services	240,351		155,466		135,281		19,955			506,139		290,747		42,888
Total net revenues	910,849		862,177		878,679		129,612			1,773,121		1,740,856		256,790
Cost of revenues	(737,946	)	(681,700	)	(690,716	)	(101,886	)		(1,431,238	)	(1,372,416	)	(202,442	)
Gross profit	172,903		180,477		187,963		27,726			341,883		368,440		54,348
Operating expenses
Sales and marketing	(83,455	)	(65,832	)	(70,880	)	(10,455	)		(160,770	)	(136,712	)	(20,166	)
Research and development	(32,976	)	(38,387	)	(43,108	)	(6,359	)		(74,833	)	(81,495	)	(12,021	)
General and administrative	(154,756	)	(135,803	)	(139,113	)	(20,520	)		(288,562	)	(274,916	)	(40,552	)
Bad debt provision	(44,612	)	(15,465	)	(16,449	)	(2,426	)		(44,607	)	(31,914	)	(4,708	)
Changes in the fair value of contingent purchase consideration payable	15,306		2,867		1,032		152			13,825		3,899		575
Total operating expenses	(300,493	)	(252,620	)	(268,518	)	(39,608	)		(554,947	)	(521,138	)	(76,872	)
Operating loss	(127,590	)	(72,143	)	(80,555	)	(11,882	)		(213,064	)	(152,698	)	(22,524	)
Interest income	3,641		8,252		7,188		1,060			12,523		15,440		2,278
Interest expense	(52,755	)	(37,027	)	(40,033	)	(5,905	)		(108,447	)	(77,060	)	(11,367	)
Other income	3,367		4,826		1,458		215			4,473		6,284		927
Other expense	(12,510	)	(1,562	)	(2,636	)	(389	)		(13,614	)	(4,198	)	(619	)
Foreign exchange gain (loss)	24,224		(5,481	)	(10,372	)	(1,530	)		18,981		(15,853	)	(2,338	)
Loss before income taxes and gain from equity method investments	(161,623	)	(103,135	)	(124,950	)	(18,431	)		(299,148	)	(228,085	)	(33,643	)
Income tax benefit (expense)	18,400		(16,127	)	(1,387	)	(205	)		3,406		(17,514	)	(2,583	)
Gain from equity method investments	19,374		2,425		7,080		1,044			20,575		9,505		1,402
Net loss	(123,849	)	(116,837	)	(119,257	)	(17,592	)		(275,167	)	(236,094	)	(34,824	)
Net loss attributable to noncontrolling interest	26,874		17,043		22,444		3,311			35,392		39,487		5,825
Net loss attributable to ordinary shareholders	(96,975	)	(99,794	)	(96,813	)	(14,281	)		(239,775	)	(196,607	)	(28,999	)
Loss per share
Basic	(0.22	)	(0.17	)	(0.18	)	(0.03	)		(0.50	)	(0.35	)	(0.05	)
Diluted	(0.22	)	(0.17	)	(0.18	)	(0.03	)		(0.50	)	(0.35	)	(0.05	)
Shares used in loss per share computation
Basic*	578,617,002		678,649,016		670,534,467		670,534,467			551,875,790		674,556,313		674,556,313
Diluted*	578,617,002		678,649,016		670,534,467		670,534,467			551,875,790		674,556,313		674,556,313
Loss per ADS (6 ordinary shares equal to 1 ADS)
Basic	(1.32	)	(1.02	)	(1.08	)	(0.18	)		(3.00	)	(2.10	)	(0.30	)
Diluted	(1.32	)	(1.02	)	(1.08	)	(0.18	)		(3.00	)	(2.10	)	(0.30	)
* 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$”) except for number of shares and per share data)
	Three months ended									Six months ended
	June 30, 2016		March 31,2017		June 30, 2017					June 30, 2016		June 30, 2017
	RMB		RMB		RMB		US$			RMB		RMB		US$
Gross profit	172,903		180,477		187,963		27,726			341,883		368,440		54,348
Plus: share-based compensation expense	(11,073	)	(222	)	42		6			(7,148	)	(180	)	(27	)
Plus: amortization of intangible assets derived from acquisitions	38,967		31,372		31,258		4,611			77,164		62,630		9,238
Adjusted gross profit	200,797		211,627		219,263		32,343			411,899		430,890		63,559
Adjusted gross margin	22.0	%	24.5	%	25.0	%	25.0	%		23.2	%	24.8	%	24.8	%
Operating expenses	(300,493	)	(252,620	)	(268,518	)	(39,608	)		(554,947	)	(521,138	)	(76,872	)
Plus: share-based compensation expense	2,355		4,545		11,563		1,706			35,823		16,108		2,377
Plus: changes in the fair value of contingent purchase consideration payable	(15,306	)	(2,867	)	(1,032	)	(152	)		(13,825	)	(3,899	)	(575	)
Adjusted operating expenses	(313,444	)	(250,942	)	(257,987	)	(38,054	)		(532,949	)	(508,929	)	(75,070	)
Net loss	(123,849	)	(116,837	)	(119,257	)	(17,592	)		(275,167	)	(236,094	)	(34,824	)
Plus: share-based compensation expense	(8,718	)	4,323		11,605		1,712			28,675		15,928		2,350
Plus: amortization of intangible assets derived from acquisitions	38,967		31,372		31,258		4,611			77,164		62,630		9,238
Plus: changes in the fair value of contingent purchase consideration payable and related deferred tax impact	(15,306	)	(2,867	)	(1,032	)	(152	)		(13,330	)	(3,899	)	(575	)
Plus: tax impact for the reconciliation adjustments(1)	(7,256	)	(6,113	)	(6,101	)	(900	)		(14,512	)	(12,214	)	(1,802	)
Adjusted net loss	(116,162	)	(90,122	)	(83,527	)	(12,321	)		(197,170	)	(173,649	)	(25,613	)
Adjusted net margin	-12.8	%	-10.5	%	-9.5	%	-9.5	%		-11.1	%	-10.0	%	-10.0	%
Net loss	(123,849	)	(116,837	)	(119,257	)	(17,592	)		(275,167	)	(236,094	)	(34,824	)
Minus: Provision for income taxes	18,400		(16,127	)	(1,387	)	(205	)		3,406		(17,514	)	(2,583	)
Minus: Interest income	3,641		8,252		7,188		1,060			12,523		15,440		2,278
Minus: Interest expenses	(52,755	)	(37,027	)	(40,033	)	(5,905	)		(108,447	)	(77,060	)	(11,367	)
Minus: Exchange gain (loss)	24,224		(5,481	)	(10,372	)	(1,530	)		18,981		(15,853	)	(2,338	)
Minus: Gain from equity method investment	19,374		2,425		7,080		1,044			20,575		9,505		1,402
Minus: Other income	3,367		4,826		1,458		215			4,473		6,284		927
Minus: Other expenses	(12,510	)	(1,562	)	(2,636	)	(389	)		(13,614	)	(4,198	)	(619	)
Plus: depreciation	118,195		129,609		137,577		20,294			227,135		267,186		39,412
Plus: amortization	48,892		41,344		41,014		6,050			95,114		82,358		12,148
Plus: share-based compensation expense	(8,718	)	4,323		11,605		1,712			28,675		15,928		2,350
Plus: changes in the fair value of contingent purchase consideration payable	(15,306	)	(2,867	)	(1,032	)	(152	)		(13,825	)	(3,899	)	(575	)
Adjusted EBITDA	15,473		100,266		108,609		16,022			124,035		208,875		30,811
Adjusted EBITDA margin	1.7	%	11.6	%	12.4	%	12.4	%		7.0	%	12.0	%	12.0	%
Adjusted net loss	(116,162	)	(90,122	)	(83,527	)	(12,321	)		(197,170	)	(173,649	)	(25,613	)
Less: Net loss attributable to noncontrolling interest	26,874		17,043		22,444		3,311			35,392		39,487		5,825
Adjusted net loss attributable to the Company’s ordinary shareholders	(89,288	)	(73,079	)	(61,083	)	(9,010	)		(161,778	)	(134,162	)	(19,788	)
Adjusted loss per share
Basic	(0.20	)	(0.13	)	(0.13	)	(0.02	)		(0.35	)	(0.26	)	(0.04	)
Diluted	(0.20	)	(0.13	)	(0.13	)	(0.02	)		(0.35	)	(0.26	)	(0.04	)
Shares used in adjusted loss per share computation:
Basic(2)	578,617,002		678,649,016		670,534,467		670,534,467			551,875,790		674,556,313		674,556,313
Diluted(2)	578,617,002		678,649,016		670,534,467		670,534,467			551,875,790		674,556,313		674,556,313
Adjusted loss per ADS (6 ordinary shares equal to 1 ADS)
Basic	(1.20	)	(0.78	)	(0.78	)	(0.12	)		(2.10	)	(1.56	)	(0.24	)
Diluted	(1.20	)	(0.78	)	(0.78	)	(0.12	)		(2.10	)	(1.56	)	(0.24	)
(1) We have presented the income tax effects as a separate line in the non-GAAP adjustments. These adjustments are a combination of the tax effects on amortization of intangible assets derived from acquisitions and on impairment of long-lived assets.
(2) 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$”) except for number of shares and per share data)
	Three months ended									Six months ended
	June 30, 2016		March 31,2017		June 30, 2017					June 30, 2016		June 30, 2017
	RMB		RMB		RMB		US$			RMB		RMB		US$
Hosting and related services
Operating profit	46,760		52,273		48,637		7,175			38,039		100,910		14,885
Plus: depreciation and amortization	83,927		100,633		109,868		16,207			158,273		210,500		31,050
Plus: share-based compensation expense	(7,075	)	2,681		13,835		2,041			20,585		16,517		2,437
Plus: changes in the fair value of contingent purchase consideration payable	(15,277	)	(2,867	)	(1,032	)	(152	)		(14,474	)	(3,899	)	(575	)
Adjusted EBITDA	108,335		152,720		171,308		25,271			202,423		324,028		47,797
Managed network services
Operating profit	(174,350	)	(124,416	)	(129,192	)	(19,057	)		(251,103	)	(253,608	)	(37,409	)
Plus: depreciation and amortization	83,160		70,320		68,723		10,137			163,976		139,044		20,510
Plus: share-based compensation expense	(1,643	)	1,642		(2,230	)	(329	)		8,090		(589	)	(87	)
Plus: changes in the fair value of contingent purchase consideration payable	(29	)	-		-		-			649		-		-
Adjusted EBITDA	(92,862	)	(52,454	)	(62,699	)	(9,249	)		(78,388	)	(115,153	)	(16,986	)

21VIANET GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))
	March 31, 2017		June 30, 2017
	RMB		RMB		US$
	(Unaudited)		(Unaudited)		(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	(116,837	)	(119,257	)	(17,591	)
Adjustments to reconcile net loss to net cash generated from operating activities:
Foreign exchange loss	5,481		10,372		1,530
Changes in the fair value of contingent purchase consideration payable	(2,867	)	(1,032	)	(152	)
Depreciation of property and equipment	129,609		137,577		20,294
Amortization of intangible assets	41,344		41,014		6,050
Provision for doubtful accounts and other receivables	15,465		16,449		2,426
Share-based compensation expense	4,323		11,573		1,707
Deferred income taxes expense (benefit)	240		(8,058	)	(1,189	)
Gain from equity method investment	(2,425	)	(7,080	)	(1,044	)
Gain from cost method investments	-		(1,425	)	(210	)
Changes in operating assets and liabilities
Restricted cash	(24,102	)	(8,217	)	(1,212	)
Inventories	(154	)	277		41
Accounts and notes receivable	(80,864	)	30,509		4,500
Unrecognized tax benefits	1,092		1,981		292
Prepaid expenses and other current assets	(85,428	)	(82,143	)	(12,117	)
Amounts due from related parties	(1,082	)	(9,616	)	(1,418	)
Accounts and notes payable	60,490		(5,560	)	(820	)
Accrued expenses and other payables	(4,161	)	61,956		9,139
Deferred revenue	(43,074	)	(19,417	)	(2,864	)
Advances from customers	111,899		36,406		5,370
Income taxes payable	6,709		(13,508	)	(1,992	)
Amounts due to related parties	7,892		(6,139	)	(905	)
Deferred government grants	(1,302	)	2,282		337
Net cash generated from operating activities	22,248		68,944		10,172
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(99,432	)	(144,092	)	(21,255	)
Purchases of intangible assets	(9,386	)	(5,466	)	(806	)
Payment for asset acquisition	(15,053	)	(10,000	)	(1,475	)
Payments for short-term investments	(207,003	)	17		3
Proceeds received from maturity of short-term investments	-		484,932		71,531
Proceeds from cost method investment	-		1,425		210
Payments for long-term investments	-		(36,264	)	(5,349	)
Restricted cash	-		144,176		21,267
Net cash (used in) generated from investing activities	(330,874	)	434,728		64,126
CASH FLOWS FROM FINANCING ACTIVITIES
Restricted cash	(48,515	)	25,513		3,763
Proceeds from exercise of stock options	555		13		2
Proceeds from long-term bank borrowings	9,038		23,662		3,490
Proceeds from short-term bank borrowings	50,000		20,000		2,950
Repayments of short-term bank borrowings	(95,000	)	(18,000	)	(2,655	)
Repayments of long-term bank borrowings	(1,974	)	(12,349	)	(1,822	)
Repayments of 2017 Bonds	-		(420,600	)	(62,042	)
Payments for shares repurchase plan	(41,192	)	(41,880	)	(6,178	)
Rental prepayments and deposits for sales and leaseback transactions	(33,886	)	(31,813	)	(4,693	)
Payments for capital leases	(32,055	)	(60,552	)	(8,932	)
Contribution from noncontrolling interest in a subsidiary	-		22,962		3,387
Net cash used in financing activities	(193,029	)	(493,044	)	(72,730	)
Effect of foreign exchange rate changes on cash and short   term investments	(16,250	)	(32,322	)	(4,768	)
Net decrease in cash and cash equivalents	(517,905	)	(21,694	)	(3,200	)
Cash and cash equivalents at beginning of period	1,297,418		779,513		114,984
Cash and cash equivalents at end of period	779,513		757,819		111,784

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

Source: 21Vianet Group, Inc.