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21Vianet Group, Inc. Reports Unaudited Second Quarter 2018 Financial Results
Source: Nasdaq GlobeNewswire / 16 Aug 2018 21:30:25 Europe/London
Adjusted EBITDA up 103.6% YoY to RMB221.1 million
Adjusted EBITDA margin expanded to 26.7%
Raised full year guidance for both net revenues and adjusted EBITDABEIJING, Aug. 17, 2018 (GLOBE NEWSWIRE) -- 21Vianet Group, Inc. (Nasdaq: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 second quarter ended June 30, 2018. The Company will hold a conference call at 8:00 pm on Thursday, August 16, 2018, U.S. Eastern Time to discuss the financial results. Dial-in details are provided at the end of this release.
Second Quarter 2018 Financial Highlights (including hosting and related services & MNS1 business)
- Revenues from hosting and related services increased by 11.4% year over year to RMB828.3 million (US$125.2 million).
- Adjusted cash gross margin expanded to 43.9% from 38.2% in the same period of 2017.
- Operating profit improved to RMB51.5 million from an operating loss of RMB80.6 million in the same period of 2017.
- Adjusted EBITDA increased by 103.6% year over year to RMB221.1 million (US$33.4 million). Adjusted EBITDA margin expanded to 26.7% from 12.4% in the same period of 2017.
- Net cash generated from operating activities was RMB111.4 million (US$16.8 million) in the second quarter of 2018 compared to RMB87.2 million in the same period of 2017.
The financial results of the same period 2017 included those from both the hosting and related services business and the MNS business. The year-over-year improvement was partially driven by the disposal of the MNS business in September 2017.
Second Quarter 2018 Operational Highlights
- Hosting MRR2 per cabinet increased to RMB8,271 in the second quarter of 2018 compared to RMB7,697 in the second quarter of 2017 and RMB7,905 in the first quarter of 2018.
- Total cabinets under management increased slightly to 29,149 as of June 30, 2018 from 29,035 as of March 31, 2018. As of June 30, 2018, the Company had 24,167 cabinets in its self-built data centers and 4,982 cabinets in its partnered data centers.
- Utilization rate was 71.1% in the second quarter of 2018 compared to 70.0% in the first quarter of 2018.
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1MNS: Refers to managed network services.
2Hosting MRR: Refers to Monthly Recurring Revenues for the hosting business.Mr. Alvin Wang, Chief Executive Officer and President of the Company, stated, “Our strategy of focusing entirely on our core hosting and related services business continued to drive revenue and profitability growth. During the second quarter, we further improved our operational efficiency and achieved an adjusted EBITDA margin of 26.7%. Also we expanded our data center capacity, garnered new significant client wins in the Internet and financial services sectors, and expanded the order size from our existing clients. In addition, we have methodically entered into the promising wholesale data center market. We are confident that our commitment to network safety, availability, reliability, neutrality, and quality shall enable us to continuously gain market share and solidify our industry leadership.”
Ms. Sharon Liu, Chief Financial Officer of the Company, commented, “During the second quarter of 2018, we sustained solid growth in revenue and continued rapid improvement in adjusted EBITDA margin. Our net revenues from hosting and related services increased by 11.4% year over year to RMB828.3 million, while our adjusted EBITDA grew by 29.1% to RMB221.1 million. As we keep close track of our business development and maintain stringent internal control, we have been able to achieve or exceed our own guidance three quarters in a row. For the remainder of 2018, we expect continuous improvement in economy of scale and operational efficiency to result in EBITDA growth outpacing revenue growth and EBITDA margin expanding further.”
Second Quarter 2018 Financial Results
To fully reflect the Company’s performance, all analysis between “REVENUES” and “ADJUSTED EBITDA” presents 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 11.4% to RMB828.3 million (US$125.2 million) in the second quarter of 2018 from RMB743.4 million in the same period of 2017 and increased by 3.4% from RMB800.8 million in the first quarter of 2018. The increase was primarily due to continuously increasing demand from the Company’s new and existing customers.
GROSS PROFIT: Gross profit increased by 3.6% to RMB229.4 million (US$34.7 million) in the second quarter of 2018 from RMB221.4 million in the same period of 2017 and increased by 0.7% from RMB227.9 million in the first quarter of 2018. Gross margin decreased slightly to 27.7% in the second quarter of 2018 from 29.8% in the same period of 2017 but remained relatively stable compared to the first quarter of 2018. The decrease was mainly due to an increase in depreciation.
ADJUSTED CASH GROSS PROFIT, which excludes depreciation, amortization, and share-based compensation expenses, increased by 14.4% to RMB364.0 million (US$55.0 million) in the second quarter of 2018 from RMB318.2 million in the same period of 2017 and increased by 4.8% from RMB347.5 million in the first quarter of 2018. Adjusted cash gross margin expanded to 43.9% in the second quarter of 2018 from 42.8% in the same period of 2017 and 43.4% in the previous quarter. The increase was a result of the Company’s efficient management of cabinet capacity, power usage efficiency and human resources in the second quarter of 2018. Since the second quarter of 2018, the Company eliminated approximately 214 lower-margin cabinets in partnered data centers, bringing the total number of partnered cabinets to 4,982 in the second quarter of 2018 from 5,768 in the same period of 2017.
OPERATING EXPENSES: Total operating expenses increased by 3.0% to RMB177.9 million (US$26.9 million) in the second quarter of 2018 from RMB172.7 million in the same period of 2017 and increased by 3.8% from RMB171.5 million in the first quarter of 2018. As a percentage of net revenues, total operating expenses was 21.5% in the second quarter of 2018, compared to 23.2% in the same period of 2017 and 21.4% in the first quarter of 2018.
Adjusted operating expenses, which exclude share-based compensation expenses and changes in the fair value of contingent purchase consideration payable, increased by 1.2% to RMB161.9 million (US$24.5 million) in the second quarter of 2018 from RMB160.0 million in the same period of 2017 but decreased by 3.2% from RMB167.2 million in the first quarter of 2018. As a percentage of net revenues, adjusted operating expenses decreased to 19.5% in the second quarter of 2018 from 21.5% in the same period of 2017 and 20.9% in the previous quarter. The decrease was primarily due to the successful implementation and execution of the Company’s cost control measures.
Sales and marketing expenses were RMB41.8 million (US$6.3 million) in the second quarter of 2018, compared to RMB45.0 million in the same period of 2017 and from RMB41.2 million in the first quarter of 2018.
Research and development expenses were RMB22.2 million (US$3.3 million) in the second quarter of 2018 compared to RMB23.9 million in the same period of 2017 and RMB22.0 million in the first quarter of 2018.
General and administrative expenses were RMB109.1 million (US$16.5 million) in the second quarter of 2018 compared to RMB104.8 million in the same period of 2017 and RMB112.3 million in the first quarter of 2018.
ADJUSTED EBITDA: Adjusted EBITDA for the second quarter of 2018 increased by 29.1% to RMB221.1 million (US$33.4 million) from RMB171.3 million in the same period of 2017 and increased by 12.8% compared to the first quarter of 2018. Adjusted EBITDA for the second quarter of 2018 excludes share-based compensation expenses of RMB10.8 million (US$1.6 million) and changes in the fair value of contingent purchase consideration payable, which was a loss of RMB5.5 million (US$0.8 million). Adjusted EBITDA margin expanded to 26.7% in the second quarter of 2018 from 23.0% in the same period of 2017 and 24.5% in the first quarter of 2018.
NET PROFIT/LOSS: Net loss for the second quarter of 2018 was RMB95.5 million (US$14.4 million) compared to net loss of RMB119.3 million in the same period of 2017 and net profit of RMB34.7 million in the first quarter of 2018. The quarter-over-quarter change was mainly due to foreign exchange fluctuation.
PROFIT/LOSS PER SHARE: Basic and diluted loss per share was RMB0.14 (US$0.02) in the second quarter of 2018, which represents the equivalent of RMB0.84 (US$0.12) per American Depositary Share ("ADS"). Each ADS represents six ordinary shares. Diluted profit per share is calculated using net profit divided by the weighted average number of shares.
As of June 30, 2018, the Company's cash and cash equivalents, restricted cash and short-term investments were RMB2.66 billion (US$401.6 million).
Net cash generated from operating activities was RMB111.4 million (US$16.8 million) in the second quarter of 2018.
Recent Developments
In August 2018, the Company secured over 1,000 datacenter cabinets in Shanghai, China. The newly added cabinets are consistent with the Company’s capacity expansion strategy. The Company expects these additional cabinets to be delivered in two batches by the end of 2018.
In August 2018, the Company and a subsidiary of Tus Holdings entered into a long-term lease agreement for the Company’s rights to use over 20,000m2 property in Beijing, China. The new property is expected to add 3,000 to 4,000 additional cabinet to the Company’s datacenter network. The first batch of cabinets is estimated to be delivered in the second half of 2019.
On July 19, 2018, the Company announced that its wholly-owned subsidiary Shanghai Blue Cloud Technology Co., Ltd. (“21V Blue Cloud”) has entered into distribution agreements with four world-class cloud service providers including Unify Cloud, AvePoint, Agile Point and Fadada.com who officially authorized 21V Blue Cloud as a distributor of their products and services in mainland China.
Financial Outlook
For the third quarter of 2018, the Company expects net revenues to be in the range of RMB840 million to RMB860 million. Adjusted EBITDA is expected to be in the range of RMB230 million to RMB250 million.
Based on solid first half 2018 results, the Company is raising its full year 2018 guidance for both net revenues and adjusted EBITDA. For the full year, the Company now expects net revenues to be in the range of RMB3.28 billion to RMB3.38 billion. Adjusted EBITDA for the full year is expected to be in the range of RMB800 million to RMB880 million.
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 Thursday, August 16, 2018 U.S. Eastern Time, or 8:00 am on Friday, August 17, 2018 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: 4288535 The replay will be accessible through August 24, 2018 by dialing the following numbers: United States Toll Free: +1-855-452-5696 International: +61-2-9003-4211 Conference ID: 4288535 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 RMB6.6171 to US$1.00, the noon buying rate in effect on June 29, 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, 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 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.comJulia Jiang
+86 10 8456 2121
IR@21Vianet.comICR, Inc.
Jack Wang
+1 (646) 405-4922
IR@21Vianet.com21VIANET GROUP, INC. CONSOLIDATED BALANCE SHEETS (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”)) As of As of December 31,
2017June 30,
2018RMB RMB US$ (Audited) (Unaudited) (Unaudited) Assets Current assets: Cash and cash equivalents 1,949,631 2,150,173 324,942 Restricted cash 242,494 285,590 43,159 Accounts and notes receivable, net 455,811 536,642 81,099 Short-term investments 548,890 218,370 33,001 Inventories 710 174 26 Prepaid expenses and other current assets 933,750 1,057,177 159,765 Amount due from related parties 114,256 121,922 18,425 Total current assets 4,245,542 4,370,048 660,417 Non-current assets: Property and equipment, net 3,319,424 3,392,168 512,637 Intangible assets, net 401,115 372,375 56,275 Land use rights, net 163,671 149,287 22,561 Goodwill 989,530 989,530 149,541 Long-term investments 510,926 505,299 76,363 Amount due from related parties 20,210 20,385 3,081 Restricted cash 3,344 3,389 512 Deferred tax assets 172,818 129,249 19,533 Other non-current assets 81,581 143,416 21,674 Total non-current assets 5,662,619 5,705,098 862,177 Total assets 9,908,161 10,075,146 1,522,594 Liabilities and Shareholders' Equity Current liabilities: Short-term bank borrowings 50,000 69,999 10,579 Accounts and notes payable 252,892 287,987 43,522 Accrued expenses and other payables 657,133 582,317 88,002 Deferred revenue 55,753 41,465 6,266 Advances from customers 403,244 475,541 71,865 Income taxes payable 13,309 29,650 4,481 Amounts due to related parties 55,675 54,795 8,281 Current portion of long-term bank borrowings 70,289 60,643 9,165 Current portion of capital lease obligations 201,315 217,271 32,835 Current portion of deferred government grant 4,574 4,574 691 Current portion of bonds payable 11,139 11,729 1,773 Total current liabilities 1,775,323 1,835,971 277,460 Non-current liabilities: Long-term bank borrowings 187,638 169,331 25,590 Amounts due to related parties - 46,416 7,015 Unrecognized tax benefits 16,511 22,322 3,373 Deferred tax liabilities 190,873 184,829 27,932 Non-current portion of capital lease obligations 600,882 673,336 101,757 Non-current portion of deferred government grant 17,861 14,314 2,163 Bonds payable 1,918,069 1,947,608 294,330 Total non-current liabilities 2,931,834 3,058,156 462,160 Shareholders' equity Treasury stock (337,683 ) (337,683 ) (51,032 ) Ordinary shares 46 46 7 Additional paid-in capital 8,980,407 9,004,633 1,360,813 Accumulated other comprehensive loss (2,673 ) 17,854 2,698 Statutory reserves 38,736 39,441 5,960 Accumulated deficit (3,629,300 ) (3,691,375 ) (557,854 ) Total 21Vianet Group, Inc. shareholders’ equity 5,049,533 5,032,916 760,592 Noncontrolling interest 151,471 148,103 22,382 Total shareholders' equity 5,201,004 5,181,019 782,974 Total liabilities and shareholders' equity 9,908,161 10,075,146 1,522,594 21VIANET GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) Three months ended Six months ended June 30,
2017March 31,
2018June 30,
2018June 30,
2017June 30,
2018RMB RMB RMB US$ RMB RMB US$ (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net revenues Hosting and related services 743,398 800,765 828,317 125,178 1,450,109 1,629,082 246,193 Managed network services 135,281 - - - 290,747 - - Total net revenues 878,679 800,765 828,317 125,178 1,740,856 1,629,082 246,193 Cost of revenues (690,716 ) (572,863 ) (598,884 ) (90,506 ) (1,372,416 ) (1,171,747 ) (177,079 ) Gross profit 187,963 227,902 229,433 34,672 368,440 457,335 69,114 Operating expenses Sales and marketing (70,880 ) (41,232 ) (41,816 ) (6,319 ) (136,712 ) (83,048 ) (12,551 ) Research and development (43,108 ) (22,030 ) (22,163 ) (3,349 ) (81,495 ) (44,193 ) (6,679 ) General and administrative (139,113 ) (112,340 ) (109,091 ) (16,486 ) (274,916 ) (221,431 ) (33,463 ) (Allowance) reversal for doubtful debt (16,449 ) 1,855 627 95 (31,914 ) 2,482 375 Changes in the fair value of contingent purchase consideration payable 1,032 2,284 (5,494 ) (830 ) 3,899 (3,210 ) (485 ) Total operating expenses (268,518 ) (171,463 ) (177,937 ) (26,889 ) (521,138 ) (349,400 ) (52,803 ) Operating (loss) profit (80,555 ) 56,439 51,496 7,783 (152,698 ) 107,935 16,311 Interest income 7,188 8,527 8,961 1,354 15,440 17,488 2,643 Interest expense (40,033 ) (51,542 ) (51,328 ) (7,757 ) (77,060 ) (102,870 ) (15,546 ) Gain on deconsolidation of subsidiaries - - 4,843 732 - 4,843 732 Other income 1,458 22,161 20,386 3,081 6,284 42,547 6,430 Other expense (2,636 ) (1,526 ) (565 ) (85 ) (4,198 ) (2,091 ) (316 ) Foreign exchange (loss) gain (10,372 ) 44,841 (73,360 ) (11,086 ) (15,853 ) (28,519 ) (4,310 ) (Loss) gain before income taxes and gain (loss) from equity method investments (124,950 ) 78,900 (39,567 ) (5,978 ) (228,085 ) 39,333 5,944 Income tax (expenses) benefits (1,387 ) (34,080 ) (44,305 ) (6,696 ) (17,514 ) (78,385 ) (11,846 ) Gain (loss) from equity method investments 7,080 (10,089 ) (11,659 ) (1,762 ) 9,505 (21,748 ) (3,287 ) Net (loss) profit (119,257 ) 34,731 (95,531 ) (14,436 ) (236,094 ) (60,800 ) (9,189 ) Net loss (profit) attributable to noncontrolling interest 22,444 (1,891 ) 1,321 200 39,487 (570 ) (86 ) Net (loss) profit attributable to ordinary shareholders (96,813 ) 32,840 (94,210 ) (14,236 ) (196,607 ) (61,370 ) (9,275 ) (Loss) profit per share Basic (0.18 ) 0.05 (0.14 ) (0.02 ) (0.35 ) (0.09 ) (0.01 ) Diluted (0.18 ) 0.05 (0.14 ) (0.02 ) (0.35 ) (0.09 ) (0.01 ) Shares used in (loss) profit per share computation Basic* 670,534,467 672,741,909 675,062,068 675,062,068 674,556,313 673,908,526 673,908,526 Diluted* 670,534,467 677,158,404 675,062,068 675,062,068 674,556,313 673,908,526 673,908,526 (Loss) profit per ADS (6 ordinary shares equal to 1 ADS) Basic (1.08 ) 0.30 (0.84 ) (0.12 ) (2.10 ) (0.54 ) (0.06 ) Diluted (1.08 ) 0.30 (0.84 ) (0.12 ) (2.10 ) (0.54 ) (0.06 ) * Shares used in (loss) profit 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$”)) Three months ended Six months ended June 30,
2017March 31,
2018June 30,
2018June 30,
2017June 30,
2018RMB RMB RMB US$ RMB RMB US$ Gross profit 187,963 227,902 229,433 34,672 368,440 457,335 69,114 Plus: depreciation and amortization 147,905 119,562 134,282 20,293 228,231 253,844 38,362 Plus: share-based compensation expenses 42 14 293 44 (180 ) 307 46 Adjusted cash gross profit 335,910 347,478 364,008 55,009 596,491 711,486 107,522 Adjusted cash gross margin 38.2% 43.4% 43.9% 43.9% 34.3% 43.7% 43.7% Operating expenses (268,518 ) (171,463 ) (177,937 ) (26,889 ) (521,138 ) (349,400 ) (52,803 ) Plus: share-based compensation expenses 11,563 6,555 10,547 1,594 16,108 17,102 2,585 Plus: changes in the fair value of contingent purchase consideration payable (1,032 ) (2,284 ) 5,494 830 (3,899 ) 3,210 485 Adjusted operating expenses (257,987 ) (167,192 ) (161,896 ) (24,465 ) (508,929 ) (329,088 ) (49,733 ) Operating (loss) profit (80,555 ) 56,439 51,496 7,783 (152,698 ) 107,935 16,311 Plus: depreciation and amortization 178,591 135,290 153,313 23,169 349,544 288,603 43,615 Plus: share-based compensation expenses 11,605 6,569 10,840 1,638 15,928 17,409 2,631 Plus: changes in the fair value of contingent purchase consideration payable (1,032 ) (2,284 ) 5,494 830 (3,899 ) 3,210 485 Adjusted EBITDA 108,609 196,014 221,143 33,420 208,875 417,157 63,042 Adjusted EBITDA margin 12.4% 24.5% 26.7% 26.7% 12.0% 25.6% 25.6% 21VIANET GROUP, INC. SUPPLEMENTARY DISCLOSURE FOR HOSTING AND RELATED SERVICES (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”)) Three months ended Six months ended June 30,
2017March 31,
2018June 30,
2018June 30,
2017June 30,
2018GAAP Disclosure RMB RMB RMB US$ RMB RMB US$ Net revenues 743,398 800,765 828,317 125,178 1,450,109 1,629,082 246,193 Cost of revenues (522,024 ) (572,863 ) (598,884 ) (90,506 ) (1,022,454 ) (1,171,747 ) (177,079 ) Gross profit 221,374 227,902 229,433 34,672 427,655 457,335 69,114 Sales and marketing (44,980 ) (41,232 ) (41,816 ) (6,319 ) (78,995 ) (83,048 ) (12,551 ) Research and development (23,884 ) (22,030 ) (22,163 ) (3,349 ) (46,090 ) (44,193 ) (6,679 ) General and administrative (104,825 ) (112,340 ) (109,091 ) (16,486 ) (203,039 ) (221,431 ) (33,463 ) (Allowance) reversal for doubtful debt (80 ) 1,855 627 95 (2,520 ) 2,482 375 Changes in the fair value of contingent purchase consideration payable 1,032 2,284 (5,494 ) (830 ) 3,899 (3,210 ) (485 ) Total operating expenses (172,737 ) (171,463 ) (177,937 ) (26,889 ) (326,745 ) (349,400 ) (52,803 ) Operating profit 48,637 56,439 51,496 7,783 100,910 107,935 16,311 Non-GAAP disclosure Gross profit 221,374 227,902 229,433 34,672 427,655 457,335 69,114 Plus: depreciation and amortization 96,754 119,562 134,282 20,293 184,900 253,844 38,362 Plus: share-based compensation expenses 66 14 293 44 (72 ) 307 46 Adjusted cash gross profit 318,194 347,478 364,008 55,009 612,483 711,486 107,522 Adjusted cash gross margin 42.8% 43.4% 43.9% 43.9% 42.2% 43.7% 43.7% Operating expenses (172,737 ) (171,463 ) (177,937 ) (26,889 ) (326,745 ) (349,400 ) (52,803 ) Plus: share-based compensation expenses 13,769 6,555 10,547 1,594 16,588 17,102 2,585 Plus: changes in the fair value of contingent purchase consideration payable (1,032 ) (2,284 ) 5,494 830 (3,899 ) 3,210 485 Adjusted operating expenses (160,000 ) (167,192 ) (161,896 ) (24,465 ) (314,056 ) (329,088 ) (49,733 ) Operating profit 48,637 56,439 51,496 7,783 100,910 107,935 16,311 Plus: depreciation and amortization 109,868 135,290 153,313 23,169 210,500 288,603 43,615 Plus: share-based compensation expenses 13,835 6,569 10,840 1,638 16,516 17,409 2,631 Plus: changes in the fair value of contingent purchase consideration payable (1,032 ) (2,284 ) 5,494 830 (3,899 ) 3,210 485 Adjusted EBITDA 171,308 196,014 221,143 33,420 324,027 417,157 63,042 Adjusted EBITDA margin 23.0% 24.5% 26.7% 26.7% 22.3% 25.6% 25.6% 21VIANET GROUP, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”)) Three months ended June 30,
2017March 31,
2018June 30,
2018RMB RMB RMB US$ (Unaudited) (Unaudited) (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) profit (119,257 ) 34,731 (95,531 ) (14,436 ) Adjustments to reconcile net (loss) profit to net cash generated from operating activities: Depreciation and amortization 178,591 135,290 153,313 23,169 Stock-based compensation expenses 11,573 6,569 10,840 1,638 Others 9,226 (47,256 ) 93,201 14,085 Changes in operating assets and liabilities Accounts and notes receivable 30,509 (49,722 ) (29,540 ) (4,464 ) Prepaid expenses and other current assets (82,143 ) (92,181 ) (14,088 ) (2,129 ) Accounts and notes payable (5,560 ) 40,243 (4,819 ) (728 ) Accrued expenses and other payables 71,956 (25,300 ) 25,971 3,925 Deferred revenue (19,417 ) (20,505 ) 6,217 940 Advances from customers 36,406 73,995 (1,698 ) (257 ) Others (24,723 ) 39,989 (32,468 ) (4,907 ) Net cash generated from operating activities 87,161 95,853 111,398 16,836 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (144,092 ) (91,027 ) (91,256 ) (13,791 ) Purchases of intangible assets (5,466 ) (1,887 ) (3,756 ) (568 ) Payments for investments (36,247 ) (14,473 ) (39,098 ) (5,909 ) Payments for assets acquisition, net of cash acquired (10,000 ) - - - Proceeds from other investing activities 486,357 26,654 357,302 53,997 Net cash generated from (used in) investing activities 290,552 (80,733 ) 223,192 33,729 CASH FLOWS FROM FINANCING ACTIVITIES Repayments of 2017 bonds (420,600 ) - - - Proceeds from bank borrowings 43,662 69,999 - - Repayments of bank borrowings (30,349 ) (50,000 ) (27,953 ) (4,224 ) Payments for capital lease (60,552 ) (29,287 ) (95,183 ) (14,384 ) Payment for shares repurchase plan (41,880 ) - - - Payments for other financing activities (31,800 ) (19,650 ) 38,801 5,863 Contribution from noncontrolling interest in a subsidiary 22,962 - - - Net cash used in financing activities (518,557 ) (28,938 ) (84,335 ) (12,745 ) Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash (31,317 ) (73,414 ) 80,660 12,189 Net (decrease) increase in cash, cash equivalents and restricted cash (172,161 ) (87,232 ) 330,915 50,009 Cash, cash equivalents and restricted cash at beginning of period 2,848,230 2,195,469 2,108,237 318,604 Cash, cash equivalents and restricted cash at end of period 2,676,069 2,108,237 2,439,152 368,613 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 June 30, 2017 by excluding the movement of restricted cash of RMB150.5 million.
