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 of As of
     
  December 31, 2016 September 30, 2017
  RMB  RMB US$
  (Audited)  (Unaudited) (Unaudited)
Assets      
Current assets:      
Cash and cash equivalents 1,297,418   1,484,936   223,188  
Restricted cash 1,963,561   1,861,717   279,819  
Accounts and notes receivable, net 655,459   476,728   71,653  
Short-term investments 277,946   338,499   50,877  
Inventories 4,431   111   17  
Prepaid expenses and other current assets 777,131   1,696,904   255,046  
Amount due from related parties 182,615   374,423   56,276  
Total current assets 5,158,561   6,233,318   936,876  
Non-current assets:            
Property and equipment, net 3,781,613   3,291,656   494,740  
Intangible assets, net 977,341   418,857   62,955  
Land use rights, net 167,646   164,633   24,745  
Deferred tax assets 100,676   55,466   8,337  
Goodwill 1,755,970   989,530   148,728  
Long term investments 298,871   411,351   61,827  
Restricted cash 33,544   3,399   511  
Other non-current assets 147,302   78,318   11,771  
Total non-current assets 7,262,963   5,413,210   813,614  
Total assets 12,421,524   11,646,528   1,750,490  
Liabilities and Shareholders' Equity            
Current liabilities:            
Short-term bank borrowings 1,683,676   1,570,000   235,973  
Accounts and notes payable 529,569   291,733   43,848  
Accrued expenses and other payables 787,916   653,961   98,292  
Deferred revenue 320,023   47,079   7,076  
Advances from customers 201,397   426,927   64,168  
Income taxes payable 21,899   20,145   3,028  
Amounts due to related parties 121,928   284,324   42,734  
Current portion of long-term bank borrowings 39,303   52,289   7,859  
Current portion of capital lease obligations 243,723   220,179   33,093  
Current portion of deferred government grant 5,107   4,601   692  
Current portion of bonds payable 419,316   10,732   1,613  
Total current liabilities 4,373,857   3,581,970   538,376  
Non-current liabilities:            
Long-term bank borrowings 268,221   273,509   41,109  
Deferred revenue 62,531   -   -  
Unrecognized tax benefits 28,689   24,474   3,678  
Deferred tax liabilities 274,700   199,616   30,003  
Non-current portion of capital lease obligations 536,623   548,294   82,409  
Non-current portion of deferred government grant 25,886   23,013   3,459  
Bonds payable -   1,947,084   292,649  
Derivative liabilities -   676,629   101,698  
Total non-current liabilities 1,196,650   3,692,619   555,005  
             
Redeemable noncontrolling interests 700,000   -   -  
             
Shareholders' equity            
Treasury stock (204,557 ) (337,683 ) (50,754 )
Ordinary shares 45   45   7  
Additional paid-in capital 9,015,846   8,966,096   1,347,616  
Accumulated other comprehensive gain 118,290   16,032   2,410  
Statutory reserves 64,622   39,009   5,863  
Accumulated deficit (2,869,031 ) (4,414,790 ) (663,549 )
Total 21Vianet Group, Inc. shareholders' equity 6,125,215   4,268,709   641,593  
Noncontrolling interest 25,802   103,230   15,516  
Total shareholders' equity 6,151,017   4,371,939   657,109  
Total liabilities, redeemable noncontrolling interests and shareholders' equity 12,421,524   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, 2016 June 30, 2017 September 30, 2017   September 30, 2016 September 30, 2017
  RMB RMB RMB US$   RMB RMB US$
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)   (Unaudited) (Unaudited) (Unaudited)
Net revenues                
Hosting and related services 698,502   743,398   759,255   114,117     1,965,484   2,209,364   332,070  
Managed network services 269,504   135,281   126,780   19,055     775,643   417,527   62,755  
Total net revenues 968,006   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 profit 186,882   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 payable 12,285   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 income 6,783   -   5,439   817     6,783   5,439   817  
Operating loss (120,116 ) (80,555 ) (1,223,635 ) (183,915 )   (333,180 ) (1,376,333 ) (206,866 )
Interest income 3,716   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 income 19,090   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 investments 7,656   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 interest 37,579   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, 2016 June 30, 2017 September 30, 2017   September 30, 2016 September 30, 2017
  RMB RMB RMB US$   RMB RMB US$
Gross profit 186,882   187,963   189,801   28,527     528,765   558,241   83,904  
Plus: share-based compensation expense 1,173   42   (181 ) (27 )   (5,975 ) (361 ) (54 )
Plus: amortization of intangible assets derived from acquisitions 36,504   31,258   30,848   4,636     113,668   93,478   14,050  
Adjusted gross profit 224,559   219,263   220,468   33,136     636,458   651,358   97,900  
Adjusted gross margin 23.2 %   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 expense 32,208   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 expense 33,381   11,605   15,800   2,375     62,056   31,728   4,769  
Plus: amortization of intangible assets derived from acquisitions 36,504   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 extinguishment 29,841   -   -   -     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 income 3,716   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 investment 7,656   7,080   26,546   3,990     28,231   36,051   5,419  
Minus: Other income 19,090   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: depreciation 122,484   137,577   132,240   19,876     349,619   399,426   60,034  
Plus: amortization 44,452   41,014   41,352   6,215     139,566   123,710   18,594  
Plus: share-based compensation expense 33,381   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 EBITDA 67,916   108,609   135,007   20,291     191,951   343,882   51,685  
Adjusted EBITDA margin 7.0 %   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 interest 37,579   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, 2016 June 30, 2017 September 30, 2017   September 30, 2016 September 30, 2017
  RMB RMB RMB US$   RMB RMB US$
Hosting and related services                
Operating profit 14,138   48,637   47,927   7,203     52,177   148,837   22,370  
Plus: depreciation and amortization 89,982   109,868   111,510   16,760     248,255   322,010   48,398  
Plus: share-based compensation expense 24,563   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 EBITDA 124,785   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 amortization 76,954   68,723   62,082   9,331     240,930   201,126   30,230  
Plus: share-based compensation expense 8,818   (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 loss 10,372   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 equipment 137,577   132,240   19,876  
Amortization of intangible assets 41,014   41,352   6,215  
Provision for doubtful accounts and other receivables 16,449   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 expense 11,573   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  
Inventories 277   (658 ) (99 )
Accounts and notes receivable 30,509   36,562   5,495  
Unrecognized tax benefits 1,981   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 payables 61,956   120,015   18,038  
Deferred revenue (19,417 ) (11,598 ) (1,743 )
Advances from customers 36,406   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 grants 2,282   (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 investments 17   (337,137 ) (50,672 )
Proceeds received from maturity of short-term investments 484,932   -   -  
Proceeds from disposal of cost method investment 1,425   -   -  
Dividend received from cost method investment -   396   60  
Payments for long-term investments (36,264 ) (61,898 ) (9,303 )
Restricted cash 134,176   -   -  
Net cash generated from (used in) investing activities 424,728   (535,414 ) (80,472 )
CASH FLOWS FROM FINANCING ACTIVITIES            
Restricted cash 35,513   37,920   5,699  
Proceeds from exercise of stock options 13   171   26  
Proceeds from long-term bank borrowings 23,662   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 borrowings 20,000   -   -  
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 subsidary 22,962   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