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21Vianet Group, Inc. Reports Fourth Quarter and Full Year 2014 Unaudited Financial Results

4Q14 Net Revenues Up 56.4% YOY to RMB853.9 Million

4Q14 Adjusted EBITDA Up 55.7% YOY to RMB160.1 Million

Live Conference Call to be Held at 8:00 PM U.S. Eastern Time, March 9, 2015

BEIJING, March 9, 2015 (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 fourth quarter and full year of 2014. The Company will hold a conference call at 8:00 p.m. Eastern Time on March 9, 2015. Dial-in details are provided at the end of the release.

Fourth Quarter 2014 Financial Highlights

  • Net revenues increased by 56.4% to RMB853.9 million (US$137.6 million) from RMB545.9 million in the comparative period in 2013.
  • Adjusted EBITDA1 increased by 55.7% to RMB160.1 million (US$25.8 million) from RMB102.9 million in the comparative period in 2013.

Full Year 2014 Financial Highlights

  • Net revenues increased by 46.3% to RMB2.88 billion (US$463.6 million) from RMB1.97 billion in 2013.
  • Adjusted EBITDA increased by 52.9% to RMB558.9 million (US$90.1 million) from RMB365.6 million in 2013.

Mr. Josh Chen, Founder, Chairman and Chief Executive Officer of the Company, stated, "We ended 2014 on a strong note, as we saw continued strong growth momentum in our internet data center (IDC), content delivery network (CDN), and cloud businesses. We further expanded our IDC portfolio as we added an additional 3,378 cabinets, allowing our total cabinet count to grow to 21,522, a 53% year-over-year increase. Furthermore, we welcomed new strategic investments from Kingsoft and Xiaomi, and additional investments by Temasek. Our cooperation with Kingsoft calls for at least 5,000 new cabinets to be leased over the next three years, which will serve as an incremental source of demand for our IDC business. We are excited to see leading global technology companies inside and outside of China that share our vision and believe that their investments offer significant strategic value to both our core operations and new business opportunities. Looking ahead at 2015, we expect demand drivers for our business to remain robust, supported by increased Internet usage and penetration in China, additional demand for cloud services, the continued growth of mobile Internet traffic, and increased demand from financial institutions. These drivers will fuel our growth and allow us to continue executing on our strategies, strengthening our position as a leading integrated Internet infrastructure services provider."

Mr. Shang-Wen Hsiao, Chief Financial Officer of the Company, commented, "We finished 2014 with another quarter marked by consistent and steady growth, with total revenues growing by 56.4% year-over-year and adjusted EBITDA growing by 55.7% year-over-year. In addition, we were able to significantly increase our data center capacity while maintaining our targeted utilization rate. We also saw continued improvement in our accounts receivables metric, as the days-sales-outstanding (DSO) decreased further from 92 days in the third quarter to 78 days in the fourth quarter. As we move forward, we are confident that we will be able to build upon the strong financial and operating performance of 2014 and continue to execute our strategies to capitalize on the trends taking place in China's dynamic and evolving data center and cloud services markets."

Fourth Quarter 2014 Financial Results

REVENUES: Net revenues for the fourth quarter of 2014 increased by 56.4% to RMB853.9 million (US$137.6 million) from RMB545.9 million in the comparative period in 2013.

Net revenues from hosting and related services increased by 63.8% to RMB596.2 million (US$96.1 million) in the fourth quarter of 2014 from RMB364.0 million in the comparative period in 2013, primarily due to an increase in the total number of cabinets under management, an increase in demand for the Company's CDN and cloud computing services, as well as contributions from acquisitions, partially offset by the transition to a Value Added Tax (VAT) system. Net revenues from managed network services increased by 41.6% to RMB257.7 million (US$41.5 million) in the fourth quarter of 2014 from RMB181.9 million in the comparative period in 2013 primarily driven by the contributions from acquisitions, which was partially offset by network grooming efforts and the transition to a VAT system.

GROSS PROFIT: Gross profit for the fourth quarter of 2014, increased by 65.0% to RMB238.0 million (US$38.4 million) from RMB144.2 million in the comparative period in 2013. Gross margin for the fourth quarter of 2014 was 27.9%, compared with 26.4% in the comparative period in 2013. The increase in gross margin was primarily due to higher margin revenue contributions from acquisitions and cloud services.

Adjusted gross profit, which excludes share-based compensation expenses and amortization of intangible assets derived from acquisitions, increased by 83.4% to RMB290.7 million (US$46.9 million) from RMB158.5 million in the comparative period in 2013. Adjusted gross margin increased to 34.0% in the fourth quarter of 2014 from 29.0% in the comparative period in 2013.

OPERATING EXPENSES: Total operating expenses increased by 162.6% to RMB344.3 million (US$55.5 million) from RMB131.1 million in the comparative period in 2013. Adjusted operating expenses, which exclude share-based compensation expenses and the changes in the fair value of contingent purchase consideration payable, increased to RMB234.4 million (US$37.8 million) from RMB102.0 million in the comparative period in 2013. As a percentage of net revenue, adjusted operating expenses were 27.5%, compared with 18.7% in the comparative period in 2013 and 25.5% in the third quarter of 2014.

Sales and marketing expenses increased by 107.0% to RMB100.1 million (US$16.1 million) from RMB48.3 million in the comparative period in 2013, primarily due to expansion of the sales and service personnel in the Company's overall business and acquisitions with higher sales and marketing expenses.

General and administrative expenses increased by 192.5% to RMB159.6 million (US$25.7 million) from RMB54.6 million in the comparative period in 2013, primarily due to increased headcount associated with the growth in the Company's overall business and acquisitions with higher general and administrative expenses.

Research and development expenses increased by 89.6% to RMB39.9 million (US$6.4 million) from RMB21.0 million in the comparative period in 2013, which reflected the Company's efforts to further strengthen its research and development capabilities and expand its cloud computing and CDN service offerings.

Change in the fair value of contingent purchase consideration payable was a loss of RMB44.8 million (US$7.2 million) in the fourth quarter of 2014, compared with a loss of RMB7.2 million in the comparative period in 2013.

ADJUSTED EBITDA: Adjusted EBITDA for the fourth quarter of 2014 increased by 55.7% to RMB160.1 million (US$25.8 million) from RMB102.9 million in the comparative period in 2013. Adjusted EBITDA margin for the quarter was 18.8% compared with 18.8% in the comparative period in 2013 and 19.8% in the third quarter of 2014. Adjusted EBITDA in the fourth quarter of 2014 excludes share-based compensation expenses of RMB68.9 million (US$11.1 million) and changes in the fair value of contingent purchase consideration payable of RMB44.8million (US$7.2 million).

NET PROFIT/LOSS: Net loss for the fourth quarter of 2014 was RMB155.5 million (US$25.1 million), compared with a net loss of RMB3.9 million in the comparative period in 2013.

Adjusted net profit for the fourth quarter of 2014 was RMB7.1 million (US$1.1 million) compared with RMB41.0 million in the comparative period in 2013. Adjusted net profit in the fourth quarter of 2014 excludes share-based compensation expenses of RMB68.9 million (US$11.1 million), amortization of intangible assets derived from acquisitions of RMB49.0 million (US$7.9 million), changes in the fair value of contingent purchase consideration payable and related deferred tax impact of RMB44.8 million (US$7.2 million) in the aggregate. Adjusted net margin was 0.8%, compared with 7.5% in the comparative period in 2013 and 2.1% in the third quarter of 2014.

EARNING/LOSS PER SHARE: Diluted loss per ordinary share for the fourth quarter of 2014 was RMB0.44, which represents the equivalent of RMB2.64 (US$0.43) per American Depositary Share ("ADS"). Each ADS represents six ordinary shares. Adjusted diluted loss per share for the fourth quarter of 2014 was RMB0.03, which represents the equivalent of RMB0.18 (US$0.03) per ADS. Adjusted loss per share is calculated using adjusted net loss as discussed above divided by the weighted average number of shares.

As of December 31, 2014, the Company had a total of 396.2 million ordinary shares outstanding, or the equivalent of 66.0 million ADSs.

BALANCE SHEET: As of December 31, 2014, the Company's cash and cash equivalents and short-term investment were RMB1.56 billion (US$250.7 million). Taking into consideration the equity investment transactions with Kingsoft, Xiaomi and Temasek for a total amount of US$296 million, which closed on January 15, 2015, our cash, cash equivalents and short-term investments on a pro forma basis totaled approximately RMB 3.4 billion (US$546.7 million).

Fourth Quarter 2014 Operational Highlights

  • Monthly Recurring Revenues ("MRR") per cabinet was RMB10,400 in the fourth quarter of 2014, compared with RMB10,433 in the third quarter of 2014.
  • Total cabinets under management increased to 21,522 as of December 31, 2014, from 18,144 as of September 30, 2014, with 14,572 cabinets in the Company's self-built data centers and 6,950 cabinets in its partnered data centers.
  • Utilization rate was 70.2% in the fourth quarter of 2014, compared with 70.5% in the third quarter of 2014.
  • Hosting churn rate, which is based on the Company's core IDC business, was 0.25% in the fourth quarter of 2014, compared with 0.47% in the third quarter of 2014.

Full Year 2014 Financial Performance

For the full year of 2014, net revenue increased by 46.3% to RMB2.88 billion (US$463.6 million) from RMB1.97 billion in the prior year. Adjusted EBITDA for the full year increased by 52.9% to RMB558.9 million (US$90.1 million) from RMB365.6 million in the prior year. Adjusted EBITDA margin was 19.4%, compared with 18.6% in the prior year. Adjusted EBITDA for the full year excludes share-based compensation expense of RMB233.7 million (US$37.7 million) and changes in the fair value of contingent purchase consideration payable of RMB22.6 million (US$3.6 million). Adjusted net profit for the full year was RMB79.4 million (US$12.8 million), compared with RMB120.5 million in the prior year. Adjusted net profit in the full year excludes share-based compensation expense of RMB233.7 million (US$37.7 million), amortization of intangible assets derived from acquisitions of RMB106.9 million (US$17.2 million), and changes in the fair value of contingent purchase consideration payable and related deferred tax assets of RMB25.6 million (US$4.1 million). Adjusted diluted earnings per share for the full year of 2014 was RMB0.14 (US$0.02), which represents the equivalent of RMB0.84 (US$0.12) per ADS.

Recent Developments

In December 2014, 21Vianet entered into definitive share purchase agreements with Kingsoft Corporation Limited ("Kingsoft"), a leading internet based software developer, distributor and service provider, Xiaomi Corporation ("Xiaomi"), a leading designer, manufacturer and marketer of mobile devices and other electronic equipment and a provider of internet services and Temasek, a Singapore based investment company, for a total amount of US$296 million. Pursuant to the agreements, Kingsoft, Xiaomi, and Temasek will own 11.6%, 3.4%, and 13.1%, respectively, of the equity ownership in 21Vianet. The transaction closed on January 15, 2015.

Financial Outlook

For the first quarter of 2015, the Company expects net revenues to be in the range of RMB883 million to RMB925 million, representing approximately 54% growth year-over-year at the mid point. Adjusted EBITDA is expected to be in the range of RMB162 million to RMB182 million, representing approximately 52% growth year-over-year at the mid point. For the full year 2015, the Company now expects net revenues to be in the range of RMB3.91 billion to RMB4.11 billion, representing approximately 39% growth over 2014 at the mid point. Adjusted EBITDA for the full year 2015 is expected to be in the range of RMB760 million to RMB860 million, representing approximately 45% growth over 2014 at the mid point. These forecasts reflect the Company's current and preliminary view, which may be subject to change.

Conference Call

The Company will hold a conference call on Monday, March 9, 2015 at 8:00 pm Eastern Time, or Tuesday, March 10, 2015 at 8:00 am Beijing Time to discuss the financial results.

Participants may access the call by dialing the following numbers:

United States: +1-845-675-438
International Toll Free: +1-855-500-8701
China Domestic: 400-1200654
Hong Kong: +852-3018-6776
Conference ID: # 83036849

The replay will be accessible through March 16, 2015 by dialing the following numbers:

United States Toll Free: +1-855-452-5696
International: +61-2-90034211
Conference ID: # 83036849

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 measures 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 RMB6.2046 to US$1.00, the noon buying rate in effect on December 31, 2014 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 40 cities throughout China, servicing a diversified and loyal base of more than 2,000 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, the outlook for the first quarter and full year of 2015 and 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 fourth 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.

1 Adjusted EBITDA is a non-GAAP financial measure, which is defined as EBITDA excluding share-based compensation expenses and changes in the fair value of contingent purchase consideration payable and EBITDA is defined as net profit (loss) from operations before income tax expense (benefit), foreign exchange gain, other expenses, other income, interest expense, interest income and depreciation and amortization.

21VIANET GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Amount in thousands of Renminbi ("RMB") and US dollars ("US$"))
As of As of
December 31, 2013 December 31, 2014
RMB RMB US$
(Audited) (Unaudited) (Unaudited)
Assets
Current assets:
Cash and cash equivalents 1,458,856 644,415 103,861
Restricted cash 193,020 161,649 26,053
Accounts receivable, net 610,413 739,040 119,112
Short-term investments 1,101,826 911,242 146,866
Inventories -- 10,059 1,621
Notes receivable -- 905 146
Prepaid expenses and other current assets 154,875 309,441 49,869
Deferred tax assets 17,816 35,002 5,641
Amount due from related parties 67,498 54,867 8,843
Total current assets 3,604,304 2,866,620 462,012
Non-current assets:
Property and equipment, net 1,402,177 3,102,882 500,094
Intangible assets, net 336,889 1,404,453 226,357
Deferred tax assets 14,149 42,573 6,862
Goodwill 410,500 1,755,970 283,011
Long term investments 106,726 126,307 20,357
Restricted cash 219,056 121,415 19,569
Amount due from related parties -- 98,500 15,875
Other non-current assets 37,761 121,461 19,576
Total non-current assets 2,527,258 6,773,561 1,091,701
Total assets 6,131,562 9,640,181 1,553,713
Liabilities and Shareholders' Equity
Current liabilities:
Short-term bank borrowings 173,726 160,181 25,816
Accounts payable 188,217 369,844 59,608
Notes payable -- 16,230 2,616
Accrued expenses and other payables 292,421 599,491 96,620
Deferred revenue 32,558 347,441 55,997
Advances from customers 546 97,679 15,743
Income taxes payable 11,476 35,013 5,643
Amounts due to related parties 147,699 355,642 57,319
Current portion of long-term bank borrowings 197,000 955,647 154,022
Current portion of capital lease obligations 14,600 71,939 11,594
Current portion of deferred government grant -- 6,150 991
Deferred tax liabilities 3,115 2,696 435
Total current liabilities 1,061,358 3,017,953 486,404
Non-current liabilities:
Long-term bank borrowings 965,740 61,673 9,940
Deferred revenue -- 74,044 11,934
Amounts due to related parties 78,321 280,728 45,245
Non-current portion of capital lease obligations 337,139 511,679 82,468
Unrecognized tax benefits 18,559 20,453 3,296
Deferred tax liabilities 78,593 310,340 50,018
Non-current portion of deferred government grant 18,046 27,422 4,420
Bonds payable 998,505 2,264,064 364,901
Mandatorily redeemable noncontrolling interests 100,000 100,000 16,117
Total non-current liabilities 2,594,903 3,650,403 588,339
Redeemable noncontrolling interests -- 773,706 124,699
Shareholders' equity
Treasury stock (8,917) (213,665) (34,437)
Ordinary shares 26 26 4
Additional paid-in capital 3,944,764 4,196,191 676,303
Accumulated other comprehensive income loss (82,589) (65,754) (10,598)
Statutory reserves 35,178 52,263 8,423
Accumulated deficit (1,429,410) (1,794,975) (289,297)
Total 21Vianet Group, Inc. shareholders' equity 2,459,052 2,174,086 350,398
Non-controlling interest 16,249 24,033 3,873
Total shareholders' equity 2,475,301 2,198,119 354,271
Total liabilities and shareholders' equity 6,131,562 9,640,181 1,553,713
21VIANET GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amount in thousands of Renminbi ("RMB") and US dollars ("US$") except for number of shares and per share data)
Three months ended Year Ended
December 31, 2013 September 30, 2014 December 31, 2014 December 31, 2013 December 31, 2014
RMB RMB RMB US$ RMB RMB US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net revenues
Hosting and related services 363,957 513,212 596,221 96,093 1,259,260 1,980,688 319,229
Managed network services 181,920 265,313 257,689 41,532 707,457 895,759 144,370
Total net revenues 545,877 778,525 853,910 137,625 1,966,717 2,876,447 463,599
Cost of revenues (401,644) (547,666) (615,877) (99,261) (1,449,845) (2,066,304) (333,028)
Gross profit 144,233 230,859 238,033 38,364 516,872 810,143 130,571
Operating expenses
Sales and marketing (48,338) (85,947) (100,075) (16,129) (154,479) (287,229) (46,293)
General and administrative (54,565) (90,383) (159,576) (25,719) (186,907) (493,309) (79,507)
Research and development (21,049) (31,435) (39,906) (6,432) (77,831) (121,676) (19,611)
Changes in the fair value of contingent purchase consideration payable (7,188) 64,895 (44,789) (7,219) (55,882) (22,629) (3,647)
Total operating expenses (131,140) (142,870) (344,346) (55,499) (475,099) (924,843) (149,058)
Operating profit (loss) 13,093 87,989 (106,313) (17,135) 41,773 (114,700) (18,487)
Interest income 21,992 20,227 12,862 2,073 48,503 67,904 10,944
Interest expense (47,055) (67,950) (66,531) (10,723) (136,775) (232,020) (37,395)
Loss on debt extinguishment -- -- -- -- -- (41,581) (6,702)
(Loss) Income from equity method investment (116) (509) 78 13 (1,372) (671) (108)
Other income 4,551 7,300 15,413 2,484 6,232 26,560 4,281
Other expense (81) (804) (70) (11) (2,112) (1,040) (168)
Foreign exchange (loss) gain (4,747) (1,861) (8,756) (1,411) 7,072 (16,256) (2,620)
(Loss) Profit before income taxes (12,363) 44,392 (153,317) (24,710) (36,679) (311,804) (50,255)
Income tax benefit (expense) 8,444 (6,493) (2,168) (349) (10,324) (16,673) (2,687)
Consolidated net (loss) profit (3,919) 37,899 (155,485) (25,059) (47,003) (328,477) (52,942)
Net (profit) loss attributable to non-controlling interest (388) 1,704 (18,603) (2,998) (1,223) (20,003) (3,224)
Net (loss) profit attributable to ordinary shareholders (4,307) 39,603 (174,088) (28,057) (48,226) (348,480) (56,166)
(Loss) Earnings per share
Basic (0.01) 0.10 (0.44) (0.07) (0.13) (0.87) (0.14)
Diluted (0.01) 0.09 (0.44) (0.07) (0.13) (0.87) (0.14)
Shares used in (loss) earnings per share computation
Basic* 391,398,775 404,495,442 400,031,170 400,031,170 364,353,974 401,335,788 401,335,788
Diluted* 391,398,775 418,601,672 400,031,170 400,031,170 364,353,974 401,335,788 401,335,788
(Loss) Earnings per ADS (6 ordinary shares equal to 1 ADS)
Basic (0.06) 0.60 (2.64) (0.43) (0.78) (5.22) (0.84)
Diluted (0.06) 0.54 (2.64) (0.43) (0.78) (5.22) (0.84)
* Shares used in (loss) earnings 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$") except for number of shares and per share data)
Three months ended Year Ended
December 31, 2013 September 30, 2014 December 31, 2014 December 31, 2013 December 31, 2014
RMB RMB RMB US$ RMB RMB US$
Gross profit 144,233 230,859 238,033 38,364 516,872 810,143 130,571
Plus: share-based compensation expense 2,617 (117) 3,722 600 8,054 7,163 1,154
Plus: amortization of intangible assets derived from acquisitions 11,681 33,793 48,953 7,890 43,744 106,922 17,233
Adjusted gross profit 158,531 264,535 290,708 46,854 568,670 924,228 148,958
Adjusted gross margin 29.0% 34.0% 34.0% 34.0% 28.9% 32.1% 32.1%
Operating expenses (131,140) (142,870) (344,346) (55,499) (475,099) (924,843) (149,058)
Plus: share-based compensation expense 21,986 9,348 65,144 10,499 59,715 226,572 36,517
Plus: changes in the fair value of contingent purchase consideration payable 7,188 (64,895) 44,789 7,219 55,882 22,629 3,647
Adjusted operating expenses (101,966) (198,417) (234,413) (37,781) (359,502) (675,642) (108,894)
Net (loss) profit (3,919) 37,899 (155,485) (25,059) (47,003) (328,477) (52,942)
Plus: share-based compensation expense 24,603 9,231 68,866 11,099 67,769 233,735 37,671
Plus: amortization of intangible assets derived from acquisitions 11,681 33,793 48,953 7,890 43,744 106,922 17,233
Plus: changes in the fair value of contingent purchase consideration payable and related deferred tax impact 8,646 (64,895) 44,789 7,219 55,956 25,613 4,128
Plus: loss on debt extinguishment -- -- -- -- -- 41,581 6,702
Adjusted net profit 41,011 16,028 7,123 1,149 120,466 79,374 12,792
Adjusted net margin 7.5% 2.1% 0.8% 0.8% 6.1% 2.8% 2.8%
Net (loss) profit (3,919) 37,899 (155,485) (25,059) (47,003) (328,477) (52,942)
Minus: Provision for income taxes 8,444 (6,493) (2,168) (349) (10,324) (16,673) (2,687)
Minus: Interest income 21,992 20,227 12,862 2,073 48,503 67,904 10,944
Minus: Interest expenses (47,055) (67,950) (66,531) (10,723) (136,775) (232,020) (37,395)
Minus: loss on debt extinguishment -- -- -- -- -- (41,581) (6,702)
Minus: Exchange (loss) gain (4,747) (1,861) (8,756) (1,411) 7,072 (16,256) (2,620)
Minus: (Loss) gain from equity method investment (116) (509) 78 13 (1,372) (671) (108)
Minus: Other income 4,551 7,300 15,413 2,484 6,232 26,560 4,281
Minus: Other expenses (81) (804) (70) (11) (2,112) (1,040) (168)
Plus: depreciation 40,958 79,637 93,240 15,028 141,286 278,986 44,964
Plus: amortization 17,009 41,961 59,536 9,595 58,903 138,288 22,288
Plus: share-based compensation expense 24,603 9,231 68,866 11,099 67,769 233,735 37,671
Plus: changes in the fair value of contingent purchase consideration payable 7,188 (64,895) 44,789 7,219 55,882 22,629 3,647
Adjusted EBITDA 102,851 153,923 160,118 25,806 365,613 558,938 90,083
Adjusted EBITDA margin 18.8% 19.8% 18.8% 18.8% 18.6% 19.4% 19.4%
Adjusted net profit 41,011 16,028 7,123 1,149 120,466 79,374 12,792
Less: Net (profit) loss attributable to non-controlling interest (388) 1,704 (18,603) (2,998) (1,223) (20,003) (3,224)
Adjusted net profit (loss) attributable to the Company's ordinary shareholders 40,623 17,732 (11,480) (1,849) 119,243 59,371 9,568
Adjusted earnings (loss) per share
Basic 0.10 0.04 (0.03) (0.00) 0.33 0.15 0.02
Diluted 0.10 0.04 (0.03) (0.00) 0.31 0.14 0.02
Shares used in adjusted earnings (loss) per share computation:
Basic* 391,398,775 404,495,442 400,031,170 400,031,170 364,353,974 401,335,788 401,335,788
Diluted* 409,435,985 418,601,672 400,031,170 400,031,170 378,572,051 416,528,735 416,528,735
Earnings (loss) per ADS (6 ordinary shares equal to 1 ADS)
Basic 0.60 0.24 (0.18) (0.03) 1.98 0.90 0.12
Diluted 0.60 0.24 (0.18) (0.03) 1.86 0.84 0.12
* Shares used in adjusted earnings (loss) per share/ADS computation were computed under weighted average method.
21VIANET GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amount in thousands of Renminbi ("RMB") and US dollars ("US$"))
Three months ended
September 30, 2014 December 31, 2014
RMB RMB US$
(Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit 37,899 (155,485) (25,059)
Adjustments to reconcile net profit to net cash generated from operating activities:
Foreign exchange loss 1,861 8,756 1,411
Changes in the fair value of contingent purchase consideration payable (64,895) 44,789 7,219
Depreciation of property and equipment 79,637 93,240 15,028
Amortization of intangible assets 41,961 59,536 9,595
Loss (gain) on disposal of property and equipment (2,512) (133) (21)
Provision for doubtful accounts and other receivables 3,508 5,946 958
Stock based compensation expense 9,231 68,866 11,099
Deferred income taxes benefit (4,956) (13,500) (2,176)
Loss (gain) from equity method investment 509 (78) (13)
Changes in operating assets and liabilities
Restricted cash 3,226 (28,139) (4,535)
Inventories (425) (1,682) (271)
Accounts receivable 132,683 8,298 1,337
Notes receivables (25) 144 23
Unrecognized tax expense (151) 7,072 1,140
Other current assets (40,613) 62,870 10,133
Amounts due from related parties (59) (2,844) (458)
Accounts payable 17,483 1,203 194
Notes payable 12,842 (4,524) (729)
Accrued expenses and other payables 3,185 (44,215) (7,126)
Deferred revenue (3,338) (7,305) (1,177)
Advances from customers 38,589 18,114 2,919
Income taxes payable 9,119 (9,897) (1,595)
Amounts due to related parties 250 3,879 625
Deferred government grants 158 (3,133) (505)
Net cash generated from operating activities 275,167 111,778 18,016
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (265,695) (191,087) (30,798)
Purchases of intangible assets (5,421) (18,181) (2,930)
Proceeds from disposal of property and equipment 9,351 6,980 1,125
Rental payment of capital leases -- (30,716) (4,951)
Loans to third parties (15,245) (21) (3)
Loans to related parties (118,441) (185) (30)
Receipt of loans to related parties 5,688 -- --
Payments for short-term investments (11,732) -- --
Proceeds received from maturity of short-term investments 147,832 55,877 9,006
Payments for acquisitions, net of cash acquired (22,949) 118 19
Payments for long-term investments (22,770) -- --
Net cash used in investing activities (299,382) (177,215) (28,562)
CASH FLOWS FROM FINANCING ACTIVITIES
Restricted cash (3,544) (5,105) (823)
Proceeds from exercise of stock options 443 384 62
Proceeds from shareholders -- -- --
Proceeds received on behalf of selling shareholders -- -- --
Proceeds from long-term bank borrowings (88) 38,952 6,278
Proceeds from short-term bank borrowings 42,265 61,000 9,831
Repayments of short-term bank borrowings (123,933) (119,866) (19,319)
Repayments of long-term bank borrowings (593) (12,204) (1,967)
Consideration paid to selling shareholders -- -- --
Payments for acquisitions (562,997) (503,370) (81,129)
Repurchase of ordinary shares (213,665) -- --
Net cash used in financing activities (862,112) (540,209) (87,067)
Effect of foreign exchange rate changes on cash and short term investments (2,133) (68) (11)
Net decrease in cash and cash equivalents (888,460) (605,714) (97,624)
Cash and cash equivalents at beginning of period 2,138,589 1,250,129 201,485
Cash and cash equivalents at end of period 1,250,129 644,415 103,861

CONTACT: Investor Relations Contacts: 21Vianet Group, Inc. Eric Chu, CFA +1 908 707 2062 IR@21Vianet.com Joseph Cheng +86 10 8456 2121 IR@21Vianet.com ICR, Inc. Calvin Jiang +1 (646) 405-4922 IR@21Vianet.comSource:21Vianet Group, Inc.