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21Vianet Group, Inc. Investor Presentation
June 2014
2 2
Disclaimer
This presentation does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire securities of 21Vianet Group, Inc. (the “Company”) in any jurisdiction or an inducement to enter into investment activity, nor may it or any part of it form the basis of or be relied upon in connection with any contract or commitment whatsoever. Specifically, this presentation does not constitute a “prospectus” within the meaning of the U.S. Securities Act of 1933, as amended.
This presentation does not contain all relevant information relating to the Company or its securities, particularly with respect to the risks and special considerations involved with an investment in the securities of the Company. No part of this document shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. No securities of the Company may be sold in the United States without registration with the United States Securities and Exchange Commission or an exemption from such registration. Any decision to purchase securities in the proposed offering should be made solely on the basis of the information contained in the statutory prospectus in relation to the proposed offering.
This presentation has been prepared by the Company solely for use at this presentation. The information contained in this presentation has not been independently verified. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of the Company or any of its affiliates, advisors, representatives or underwriters will be liable (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation.
This presentation contains statements that constitute forward-looking statements. These statements include descriptions regarding the intent, belief or current expectations of the Company or its officers with respect to the consolidated results of operations and financial condition of the Company. These statements can be recognized by the use of words such as “expects,” “plans,” “will,” “estimates,” “projects,” “intends,” or words of similar meaning. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those in the forward-looking statements as a result of various factors and assumptions. The Company or any of its affiliates, advisors, representatives or underwriters has no obligation and does not undertake to revise forward-looking statements to reflect future events or circumstances.
In evaluating our business, we use certain non-GAAP measures as supplemental measures to review and assess our operating performance. These non-GAAP financial measures have limitations as analytical tools, and when assessing our operating performances, investors should not consider them in isolation, or as a substitute for net income (loss) or other consolidated statements of operation data prepared in accordance with U.S. GAAP.
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3
Snapshot of 21Vianet
Leading Internet infrastructure services provider in China
– #1 carrier-neutral Internet data center services provider in
China1
80+ data centers and over 15,000 cabinets under management
in more than 40 cities in China
Plan to reach 35,000 cabinets by the end of 2015
Our network is interconnected with networks operated by all
of China’s telecom carriers, major non-carriers and local ISPs
Over 2,000 customers with low monthly Hosting churn rate of
approx. 1.27%2, Top 20 customers’ churn rate remained at 0%
Partnering with Microsoft and IBM to offer cloud services in
China
Providing Cloud CDN through the acquisition of Fastweb
Products including: Managed Hosting, MNS, Cloud Computing
& CDN 1. According to IDC
2. As measured by monthly recurring revenue (MRR)
4
Section 1
Company Overview
Products of 21Vianet
5
Hosting and Related
Services
- managed hosting services,
interconnectivity services and
value-added services
Managed Network Services
– hosting area network
services, route optimization
and extensive data
transmission network
Cloud Computing
- Public cloud with Microsoft
Azure and Office 365
- Private cloud with IBM
Content Delivery Network -
proprietary CloudCDN
platform software and cloud
enabling technology solutions
21Vianet
6
Challenges of China’s Internet Infrastructure
2 Major Carrier Networks with Different Geographic Coverage
— Each with over 31 independently operated provincial entities
3 overloaded NAPs in China: Beijing, Shanghai and Guangzhou
China’s Internet Infrastructure Key Characteristics
VNET VNET VNET VNET VNET
Nationwide network coverage is rare due to
carriers’ decentralized network management
– Two major carrier networks with respective
geographical coverage (China Telecom in the
South, China Unicom in the North)
– Carriers’ provincial subsidiaries operate
independently in 31 provinces
Inadequacy of network interconnectivity
– Interconnection between the North and South
predominantly through three overloaded network
access points (NAPs)
– Limited inter-provincial network connections within
the same network
Operating data center requires regulatory
approval
– Foreign entities are prohibited from owning more
than 50% of a value added telecommunication
provider
– Very difficult to obtain national licenses
Requires large capital to achieve scale
– Significant time and investment required to develop
nationwide interconnection
– 21Vianet spent more than 10+ years to reach more
than 80 data centers.
7
Interconnection in China is Slow
China’s Connection Speed
Rank Province Avg. Mbps
1 Shanghai 4.3
2 Fujian 3.4
3 Zhejiang 3.2
4 Shandong 3.2
5 Jiangsu 3.1
6 Jiangxi 3.1
7 Anhui 3.0
8 Beijing 3.0
9 Sichuan 2.9
>10 Guangzhou 2.9
China Average 2.9
Source: CCINDEX
Rank Country / Region Avg. Mbps
1 South Korea 14.0
2 Japan 10.8
3 Hong Kong 9.3
4 Latvia 8.9
5 Switzerland 8.7
6 Netherlands 8.6
7 Czech Republic 8.1
8 United States 7.4
9 Sweden 7.3
10 Finland 7.1
Global Connection Speed
Source: Akamai
Connectivity challenges in China
– China’s national average connection speed of 2.9 Mbps is well below global top 10 countries
7
8
Our Inter-Cloud Express Network And Service Platform
21 Vianet’s Data Center 21 Vianet Inter-Cloud Express Network
As a well diversified carrier-neutral player, we believe we are well positioned in the data center
services market today and the cloud infrastructure services market in the future
Our Advantages
Largest carrier
neutral provider in
China
Turn-key solutions for
bandwidth, computing,
storage and content
delivery
Leverage our existing
and expanding
infrastructure purpose
built for cloud
services
Largest Carrier-neutral IDC Provider in China
Source: IDC, Oct 2013.
Note: Market share data as of year end 2012.
China IDC Market Share China Carrier-Neutral IDC Market Share
China Telecom
39%
China Unicom 20% China Mobile
3%
21ViaNet 11%
Other Carrier-Neutral
26%
21ViaNet 31%
Others 69%
9
Fast-growing Data Traffic Driving High Demand for IDC Providers
59.2% 54.5%
40.8%
45.5% $1.25
$1.70
0.0
0.5
1.0
1.5
2.0
2011 2012
Telecom Carriers Carrier- Neutral
$1.70
$2.11
$2.68
$3.43
$4.52
$5.93
0.0
2.0
4.0
6.0
8.0
2012A 2013E 2014E 2015E 2016E 2017E
Source: IDC China Internet Datacenter Forecast and Analysis.
(US$ Bn)
Growing Market Share of the Carrier Neutral IDC
Services Provider
(US$ Bn)
Strong Growth of the IDC Market in China
Source: IDC China Internet Datacenter Forecast and Analysis.
10
11
Growing Demand for Internet Traffic in China
Petabytes (1,000 Terabytes)
35.8%
26.4% 24.0%
20.3%
16.4%
0%
10%
20%
30%
40%
50%
China Japan Germany UK USA
High Growth in China Internet Traffic Growth Leader Compared to Developed Countries
3,237
4,691
6,709
8,825
11,012
0
2,000
4,000
6,000
8,000
10,000
12,000
2012A 2013E 2014E 2015E 2016E
Source: Cisco VNI Forecast
2012 – 2016 CAGR of Internet Traffic
12
Increasing Internet Penetration & Usage Globally
Social Networking Sites Online Gaming E-Commerce Online Video
SNS Market (RMB Bn)
1.2
5.7
9.6
0
2
4
6
8
10
12
2008 2012E 2014E
21
4654
0
20
40
60
80
2008 2012E 2014E
Online Gaming Market (RMB Bn) Online Video Market (RMB Bn) E- Commerce Market (RMB Tn)
29
101
206
0
50
100
150
200
250
2008 2012E 2014E
1.3
9.1
16.0
0
5
10
15
20
2008 2012E 2014E
Source: IResearch.
(MM) (MM) (%)
11%
37%
46%
46%
48%
58%
80%
78%
83%
83%
84%
0% 20% 40% 60% 80% 100%
India
Mexico
China
Brazil
Russia
Italy
France
US
Canada
Germany
UK
28.5
35.8
42.0
52.2
52.7
68.0
67.5
88.5
137.0
245.2
618
0.0 300.0 600.0
Canada
Italy
Mexico
France
UK
Russia
Germany
Brazil
India
US
China
211
300
386 460
513
609
675 729
769 807
0
100
200
300
400
500
600
700
800
900
2007 2010 2013E 2016E
Source: CNNIC at Dec 31, 2013 Source: www.internetworldstats.com as at
Dec 31, 2013
Source: Frost & Sullivan.
Internet Penetration Internet Users China Internet Users
12
Strategic Partnerships with Huawei & Foxconn for Data Center Projects
■Helps to improve enterprise data center
market access.
■Speeds up data center construction and
lower costs of equipment purchases.
■Cooperation will bolster the company’s
cloud capability.
April 2014
Date Products/Services Products Information
13
Strategic Agreement with
Foxconn
Strategic Agreement
with Huawei
December
2013
baofeng.com
taobao.com
Diversified and Loyal Customer Base
14
15
Web Services Internet Media
Online Gaming Web 2.0
Government & Corporate Operator / Service Provider Network Audio Visual
Ecommerce Mobile Internet
2013 Q4 Revenue Breakdown 2014 Q1 Revenue Breakdown
Revenue Break Down by Verticals
Internet Related Customers: 72.7%
TOP 5 CUSTOMERS % to Total Rev
5.2%
3.4%
2.1%
1.9%
1.6%
Total 14.2%
Financial Industry
TOP 5 CUSTOMERS % to Total Rev
5.1%
3.2%
2.2%
1.9%
1.7%
Total 14.1%
Internet Related Customers: 72.5%
5.3%
17.6%
15.4%
4.0% 9.1%
10.4%
11.0%
18.1%
8.3%
0.9%
5.2%
16.9%
15.4%
3.5%
8.4%
11.0%
11.3%
19.0%
8.5%
0.9%
Public Cloud Services With Microsoft
16
SaaS
PaaS
IaaS
Office 365
Microsoft Azure
■Public preview of Office 365 available in China
on August 8, 2013. Generally available to all paying
customers in China on April 15th, 2014.
■Office 365 offers cloud versions of Office Professional
Plus, Exchange Online, SharePoint Online, and Lync
Online.
■Customer base includes: Small & Medium Enterprises
(SMEs), Multi-National Corporations (MNCs) and
government agencies
■Public preview of Microsoft Azure service available
in China on June 6, 2013. Generally available to all
paying customers in China on March 26th, 2014.
■21Vianet helps Microsoft to be the first multinational in
the world to bring public cloud services to China
■Microsoft Azure provides public cloud computing
platform services including computing, storage,
database, integration and networking services
■GE, Coca Cola, Samsung Mobile, Siemens, Huawei,
Lenovo, and Shanghai Municipal Government are
current users
2010-2016 Public Cloud Services Market Size in China
1.6
2.7
3.7
5.1
6.5
8.5
10.5
0
2
4
6
8
10
12
2010 2011 2012 2013 2014 2015 2016
US$Bn
Source : Gartner
17
Private Cloud Service with IBM
IBM’s Managed
Private Cloud
■Private cloud service is expected to be
available to the public in Mid 2014.
■Introduces IBM's premier private cloud
infrastructure service and accelerate high
value managed private cloud services
to China.
■Offers IBM SmartCloud Enterprise+. SCE+ is a
customizable cloud infrastructure service built
on open standards for the most demanding
workloads.
■SCE+ uses a virtual private network to provide
access to the cloud infrastructure.
Dec 2013
Date Products/Services Products Information
18
19
Josh Chen
Founder,
Chairman
& CEO
■ Built the first carrier-neutral IDC in China
■ Founded Beijing Taixing Data Engineering and A-1 Netcom China, one of the
pioneering and most influential private ISPs in China
■ B.S. in Electrical Engineering from Tsinghua University Internet search
engines 15 23
Years with
21Vianet
Years of
Experience
Experienced and Stable Management Team
Shang Hsiao
CFO
■ Served as CFO of Memsic Inc. (NASDAQ: MEMS)
■ Served as SVP & CFO of Great Dream
■ Served as senior manager of Arthur Andersen in Philadelphia and Shanghai
■ Independent director of Camelot (NYSE:CIS)
■ J.D. (Rutgers) and AICPA
Internet
search
engines 4 26
Edward Liu
CSO
Internet
search
engines 1 27
■ Served as Director of Business Development at Akamai Technologies, Inc.
(NASDAQ: AKAM)
■ Served as VP of Research and Strategy at Speedera Networks
■ Technical Co-founder of Resonate
Frank Meng
President
Internet
search
engines < 1 30
■ Served as SVP and President of Qualcomm, Inc ("Qualcomm") in the
greater China region
■ Served on the board of directors for Unicom-BREW Telecommunication
Technologies, the joint venture between China Unicom and Qualcomm
■ SVP and President of Greater China for Motorola Mobility, LLC
Experienced and Stable Management Team (Cont’d)
20
Philip Lin
EVP of Strategy &
Development
■ Served as Chairman of Prime Networks, a CDN services provider
■ Served as a senior executive at Kluge & Company, the private equity arm for
John Kluge and Metromedia
■ Graduated from Cornell University and Columbia University (MBA) Internet search
engines 3 19
Feng Xiao
SVP of Hosting
Services
■ Joined 21Vianet since its inception
■ Served as planning manager of HeDe Group Company
Internet search
engines 14 18
Ningning Lai
SVP of Network
Services
■ Joined 21Vianet in March 2000
■ Worked with Capital Information development Co. Ltd. Network Engineering
Internet search
engines 13 13
Years with
21Vianet
Years of
Experience
Wing-Dar Ker
President of
Microsoft Cloud
Operation
■ Served as General Manager of Customer Service and Support (CSS) for the Asia
Pacific and Greater China (APGC) Region at Microsoft
■ Served as Finance Controller for APGC at Microsoft
■ Served as Manager and Group Head of the Business Systems Consulting (BSC)
group of Andersen Consulting
Internet search
engines <1 19
21
Section 2
Financial Overview
22
Q1 2014 Financial Performance
• Revenue growth of 34.5% to RMB 586.0M (US$ 94.3M) from RMB 435.7M in
the prior year period. Quarterly revenue growth of 7.3% to RMB 586.0M (US$
94.3M) in Q1, 2014 from RMB 545.9M (US$ 90.2M) in Q4, 2013.
High Growth
• Adjusted EBITDA margin was 19.3% in Q1, 2014, compared to 18.8% in Q4,
2013.
• Adjusted net margin was 5.6% in Q1, 2014, compared to 7.5% in Q4, 2013.
Stable Profitability
• Hosting Churn rate was 1.27% in Q1, 2014 compared to 0.99% in Q4, 2013.
Top 20 customers’ churn rate remained at 0%.
• Low customer concentration – largest customer accounted for 5.2% of total
net revenue.
• Utilization rate was 73.8% in Q1, 2014.
High Visibility
Notes: 1) Adjusted EBITDA is defined as EBITDA excluding share-based compensation expenses and changes in the fair value of contingent purchase consideration
payable. 2) Adjusted net income is defined as net income(loss) from continuing operations excluding share-based compensation expenses, amortization expenses of
intangible assets derived from acquisitions, changes in the fair value of contingent purchase consideration payable and related deferred tax assets and unrecognized tax benefits, tax incentive receipt and outside basis difference.
436 471 514 546 586
0
100
200
300
400
2013Q1 2013Q2 2013Q3 2013Q4 2014Q1
23
126 136 149 159 171
28.8% 28.8% 28.9% 29.0% 29.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
0
20
40
60
80
100
120
140
160
2013Q1 2013Q2 2013Q3 2013Q4 2014Q1
23
___________________________ Source: Company management accounts. Notes: 1) Adjusted Gross Profit = GAAP Gross Profit + SBC Expenses + Acquisition Related Amortization 2) Adjusted EBITDA = EBITDA + SBC Expenses + Change in Fair Value of Contingent Consideration Payables 3) Adjusted Net Income = Net Income + SBC Expense + Acquisition Related Amortization + Change in Fair Value of Contingent Consideration Payables and Related Deferred Tax assets
RMB MM
Net Revenues Adjusted Gross Profit(1)
Adjusted EBITDA(2) Adjusted Net Income(3)
RMB MM
RMB MM RMB MM
Financial Performance (Cont’d)
Adjusted Gross Profit Margin Adjusted Gross Profit
31
19
30
4133
7.1%
4.0%
5.7%
7.5%
5.6%
0.0%
4.0%
8.0%
12.0%
16.0%
20.0%
0
10
20
30
40
50
2013Q1 2013Q2 2013Q3 2013Q4 2014Q1
Adjusted Net Income Adjusted Net Margin
Adjusted EBITDA Adjusted EBITDA Margin
80 87 95 103 113
18.4% 18.5%18.6% 18.8%
19.3%
0.0%
5.0%
10.0%
15.0%
20.0%
0
20
40
60
80
100
2013Q1 2013Q2 2013Q3 2013Q4 2014Q1
Hosting Business Benchmarks
43%
65%
57%
35%
0
2000
4000
6000
8000
10000
12000
14000
16000
2009 2014 Q1
Self-built/ Partnered cabinets mix ratio
self-built partner
15,074
24
4,157
7,017
10,753
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2009 2014 Q1
Notes: 1) Defined as average MRR divided by average number of cabinets over the
period.
Hosting MRR per Cabinet
Thank You