Earnings call transcript Q4 2022

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Operator

Hello, ladies and gentlemen. Thank you for standing by for the Fourth Quarter and Full Year 2022 Earnings Conference Call for VNET Group Inc. [Operator Instructions] Participants from our management include Mr. Jeff Dong, Chief Executive Officer; Mr. Tim Chen, Chief Financial Officer; and Ms. Director company. Relations Investor Liu, of the Xinyuan Please today’s conference recorded. is being note that

turn to call today, will the I now over Liu. go Ms. Please your ahead. Xinyuan speaker first

Xinyuan Liu

fourth conference call. Hello, welcome everyone Thank full you, earnings to operator. our XXXX year quarter and and

our was services. on website earnings a release you find as earlier distributed Our as and well today can copy IR Newswire on

Act Safe Private today that contain forward-looking Reform the the Securities under U.S. the discussion will XXXX. Harbor note of Please made provisions of Litigation statements

Forward-looking our statements risks to and uncertainties results to that actual are subject may differ current cause materially from expectations.

For and uncertainties, please other discussions refer report with these filed annual SEC. the latest detailed risks documents of to and our

under applicable Please that to not release release this as GAAP earnings contains a financial note undertake and VNET’s measures laws. press of obligation financial unaudited VNET’s unaudited well as press does GAAP call unaudited of any unaudited any non-GAAP matters. non-GAAP disclosure the required measures. the include forward-looking matters the conference update also VNET as to statements, reconciliation except earnings

conference being As this is reminder, recorded. a

In our website our ir.vnet.com. this will will conference addition, over I call turn IR now the CEO, at available be Jeff. a to webcast also of on call

Jeff Dong

approximately total approximately from customers compared ago. ago. cabinets to of XX,XXX the year X,XXX approximately had XX,XXX a to self-built by Amid headwinds strategy. morning macroeconomic you, of our challenging grown the and and joining environment, our approximately XX,XXX by COVID-related excellent to full achieved operational execution everyone. XXXX Thank fourth By XX,XXX this Good results and our with XXXX financial ending Thank management and disruptions, by Xinyuan. utilized an We quarter sequentially call. we conference fourth X,XXX our quarter, under delivery year approximately evening good X you end year increased Dual-Core Meanwhile, year. extraordinary Leading through for cabinets target delivered XXXX solid was earnings cabinets.

Our utilization rate overall was XX%.

the retail We quarter, In XXXX RMBX,XXX million, adjusted revenue a increased of and the with our third RMBX,XXX year-over-year X.X% quarter. per MRR company quarter to in of million. in concluded RMBXXX of fourth increase an fourth addition, RMBX,XXX from up EBITDA resilient

year, adjusted X.X% to million. grew XX.X% full EBITDA the our increased and to million RMBX,XXX For RMBX,XXX revenue

this deeper the business Before last our growth to we for for year’s some I’d climate target issued get from China X%. on fourth to central X% into broader a the set touch XXXX quarter, up details government GDP report for this of year, government in month, According earlier context. work like macro around

to accelerate In addition, and government the enterprises. small industries traditional will of continue the transformation medium-sized digital and

platform also supporting the the development are We economy. of

confidence vitality to demand and In play rebound. Encouraged giants XXXX, to central believe empower infrastructure. the technology of economy industry’s gradually and month, data recover we across to and unleashing on improving their markets. plan out highlights digital supportive positive the Digital measures focus China which these we a signals, Last to expect resources particular, and build government to in internet business rolled expanding digital by the country’s by greater development strengths the will the

we are new leading IDC well-positioned provider, As capture China’s ahead. opportunities service growth to

China. platform our In will megawatts. services the a largest we our the data generate sales fourth This in capacity extended of approximately let’s we continue updates. Dual-Core front, prove gain wholesale social wholesale Now, with momentum and business contract our in strategy closer On two QX the look despite markets. existing orders leading of continues effective order of our with IDC a Execution strongly take to retail extended challenges. macro XX quarter, major both to at customers, robust center wholesale one

giants. new won recently the a customer, the in China’s business multiple services IDC phases we to expansion support Internet for bid encouragingly, More deploy one to of

significant IDC we customer services the phase, providing This companies megawatts for track Yangtze record China’s to with represents powerhouse first River Delta our through located of a across and Internet proven provide assets region. opportunity expect the industry. collaboration in over capacity our During development of IDC XXX us to into

mobility, to meaningful business, of retail we including services financial Moving connectivity demands leading sectors, premium our increasing and extend gaming In continue spectrum services, attract to meeting and supported our offerings capabilities. quarter, into the expansion traditional progress a on public a in have transportation, healthcare, continue public customers, wide services, base our our variety as by our on make testament new customers including value-added online existing some another to cloud to and we our services, and interconnectivity from co-location fourth industries, industry particular, service services of to local well industries. tapped customer as our

I beauty highlight on retailer. the transformation provided service, digital IT for enhances infrastructure like we We complete services and a well air Asian a our our and Next, to with would operational operations architecture, improve cloud maintenance fourth software customers’ hybrid In customer Watsons, of the as progress leading a to facilitated as successfully optimize health reliability, offerings. both as quarter, China and hardware the one-stop and business operations for solution Mainland efficiency.

capabilities. area service network Looking empower into continue ahead, by our will and leveraging we customers’ asset the to our digital transitions evolving IDC

Turning ESG initiatives. to our

as commitments long-term success. responsibilities have ongoing and environment to of industry, society We our foundation held a and always our our

We XXXX, in hard from to continuous today A ratings efforts the thanks and highest service Internet MSCI progress in are recognition renowned ESG infrastructure XXXX, improving represents paying agencies. rating dedication our in global off China’s us earning our in performance. ranking and the our December which in industry. to work made rating brought ESG great ESG Our upgraded company

reached companies ESG services XX measured the by our top among Assessment IT ranking S&P In Sustainability Corporate score globally. industry addition, the all the XX% in

of a effectiveness our CDP’s and the China. questionnaire while of submitted ESG that These which accolades change development strategy, clearly companies affirming grade, investment prospects. We participating XXXX long-term in XX% achieved climate exceeded and value of strongly also and B demonstrate in accomplishments our

growth economic way as the we a while on still realize the IDC China’s market XXXX, service long-term the confident potential rebound, of a into may is recovery as as whole. time and in need to industry Moving the remain well full

our service navigate sustainable opportunities, as help capitalize As result, policies plan believe will the will our capabilities keep and in to set a cabinets. multiple growth dynamics a creating XXXX you, agile long-term future and shareholders. dual industries China’s value shifting X,XXX we of recovery. We strategy and us the accelerate remain will leading our across of digitalization supportive core range we X,XXX on government everyone. market growth delivery our and proven its for market Thank

now Tim, discuss our to performance financial to for CFO, call the quarter I our our turn and the will business outlook.

Tim Chen

Good evening, and Jeff. morning you, everyone. Thank good

will the start present financials, measures we please that non-GAAP note our of Before we today. detailed discussions

our Our are reconciliation found also terms. which may in non-GAAP financials tables not included non-cash for stated, in our of note press unless part details the expenses, release. exclude certain of be are core the Please quarter fourth the operations. we that results present these expenses today of earnings The in XXXX all otherwise and

performance, XXXX a As of with Jeff just our which we execution. myriad to challenges, mentioned, external resilient admits operating and outstanding speaks concluded financial

scalable and all and the X.X% to due IDC both to from specified, IDC continued period reviewing year, increased from you increased In walk carrier fourth mainly growth our last well demand customer basis. same cloud-neutral for businesses and solutions as retail of services. our the as cloud the highly wholesale VPN our Unless billion fourth on are quarter, the Next, quarter rates RMBX.XX a otherwise through by let growth will I year-over-year our net results. financial me be revenue

and compensation the XXXX. excludes fourth same an Gross of expenses, RMBXXX.X was compared to depreciation, from period Adjusted was from a profit profit, the of increase amortization was million XX.X% same XXXX. the of period representing quarter XX.X% share-based in the RMBXXX.X margin Gross gross quarter fourth XX.X% same of fourth of in of the period the of X.X% in XXXX, XXXX, which in quarter cash decrease of million XXXX. XXXX

to investee in compared RMBXXX.X of and of deployment in gross cash and expenses, to were XXXX, of of exclude in the same loan quarter period receivable to period in RMBXXX.X XXXX. for of assets, post combination, impairment the acquisition, XX.X% expenses, XXXX same Adjusted Adjusted margin impairment compensation million XXXX. XX.X% was the potential share-based the operating quarter fourth compensation of long-lived million which fourth compared

a expenses fourth of operating period the the in and XXXX. quarter XX.X% revenues, to compared net in As same adjusted XX.X% of percentage XXXX of were

the period of Adjusted XXXX XXXX were of X.XX nary A attributable of The XXXX. ordinary both XX.X% XXXX. margin EBITDA represents per excluded of of RMBX.X period quarter loss – same of ADS. XXXX. quarter in loss the XXXX compared reversal decrease representing Class ordinary in million. of of quarter the million and shares. quarter fourth in RMBXX.X XXXX both RMBXXX.X RMBXX.X Basic net to and EBITDA a was period a same to X.X% in ADS expense the loss compared the the fourth share Adjusted XX.X% in the X.XX fourth diluted was X EBITDA of net to compensation Each shareholders in share-based Adjusted same of fourth million million, our per a from of was

to balance turning our sheet. Now

restricted of As was cash million in cash, equivalents to the the operating generated million cash XXXX the RMBX.XX aggregate billion. the period XXXX. in company’s fourth XX, cash RMBXXX.X of from XXXX, Net quarter and Meanwhile, compared of amount RMBXXX December activities same of was

the the RMBX.XX total in was for of XXXX CapEx quarter and CapEx the was full XXXX billion. RMBX.XX billion, Our year fourth

moving Now to outlook. our

X.X% to We to RMBX,XXX of year-over-year increase representing X.X% in of in to EBITDA of of a be RMBX,XXX representing the be to RMBX,XXX increase a full the XX.X%. expect million, range XXXX for to revenues and range to XX.X% adjusted million, of net million million year the year-over-year RMBX,XXX

remain forward, dual-core strategy well revenues. core as we execute on our focused growth continue higher on quality our to and as business will Looking

continue remarks questions. today. In concludes now capital our more are This addition, ready take our position. to to you. strengthen prepared we will to Operator, financial Thank we further resources explore for

Operator

comes Thank from Morgan [Operator question Stanley. Our Liu question. the your with you. of proceed first line of Please Instructions] Yang

Yang Liu

Two side. for you the from ask Thank to questions morning. opportunity Good my questions.

new color add is big and to is management X,XXX utilization if company expect by wholesale we customer? the that’s future? X,XXX your the wholesale a rate second And And cabinets. another contribution The in question end first we that is size. Thank see customer glad of from retail be to looks a Yes, share one you. the onboard be should with order moving will When first about moving. the Could the we what what financial the pretty visible question. like this the are should year-to-date, the year, the

Tim Chen

can Yang, me? hear you Hi,

Yang Liu

I Yes, can.

Tim Chen

Okay.

and on the question, Let me Jeff take the and the it the first pass then ramp-ups. back on I’ll second team to question

next early announced year. that take expecting – financial now, just customer end we’ve this new next we’re the to place the year, basically For of contribution

going it’s take obviously, deliver cabinets. time to So to us the

So helpful. time, all financial be XXXX. meaningful contribution hope by I takes place the that’s

Let been me pass and the of we’ve fourth to first team. the ramp-up first and seeing in in what quarter Jeff few of terms months the quarter

Jeff Dong

Hi, Yang, XX% We it’s regarding up Jeff. ramp-up of at the XXXX, wrap end utilization we rate. will be the –

you – QX. majority expect the given for certainly on this Tim let the It just actually And of me the new more available mentioned. We large customers, year. give colors in the is some cabinets

as players moving and see, you service than providers. is the very can faster we So, from expect good what Internet from cloud we mentioned,

of Given by the year. over as end contribution the this financials, terms year, in I say next see this will contract, our megawatts we XX of to would

and the and end financial be up by early So, next probably we substantially year. see year contributions large of this will come

Yang Liu

Thank you.

Operator

next One our moment for question.

of with Our your Please the next question. from Wang of UBS. comes Sara line question proceed

Sara Wang

Hi. to opportunity ask questions. Thank the for you the

one I question. So, have

and given us next especially plan for financing you. Thank please would So, the comfortable management outflows be this one also the cash bond for walk early and might year, inflows of major put the year. through

Tim Chen

started for we Sara It’s through last overall With the of end available the to the company. here. the plan, obviously regards already at financing question. alternatives to year the going Thanks Tim have

positive quite with are that the up. opening seen have news gradually We public markets

the inflows to quite continues CapEx, billion. Outflows and CapEx similar to which what a major to be moment, healthy and it at is the flow. sort RMBX.X this be operating obviously, are XXXX, expecting business cash mainly we generate to would of was between RMBX very in As to outflows, the billion

However, next then that out CapEx is I all committed contracted. is this point or would not

cash demand so ratchet of see the areas. have obviously, and in as have then One convertible the for quarter secondly, will to the flow customer is, would of we we is of XXXX our of of during us the dates, requirements bond do do terms XXXX. adjust the you first year, two as the back seen are customer planning delivery we also So, be course in and during really that for we if shift, course overall the they refinancing in also the the required. ability And year potential

we close main will that very debt would Obviously, be public where the the keeping instruments. we be year, to both peers, something we obviously mentioned a share hope So, and form on convertible we given of I for that’s reach. alternatives. are the various prices looking our and work Also something private financings already continue are question, your answers in eye at to mainly on us as looking that and onshore renminbi that and Sara. last

Sara Wang

Thank you. And quick follow-up. just a

for it cash the On XXXX, RMBX.X seems flow it operating was billion.

cash XXXX? So, how flow you. think about level operating for Thank shall we the

Tim Chen

will very, not I look, much. Yes. say would points working capital move very that, the

as a proxy. underlying So, good EBITDA you looking are at

have we some obviously, EBITDA. on So guidance given

that a where as use proxy on cash can we flow you go directionally think as to operating well. I expect

Sara Wang

That’s it. you. Thank clear. Got

Jeff Dong

Sara. you, Thank

Operator

[Operator Instructions] One please. moment

Our Edison the next your line of Jefferies. proceed comes Lee from question of with question. Please

Edison Lee

have Thank up and Number megawatt. Alright. on side, new one Tim Okay. is, two you for customer signed this for Jeff. XXX have Hi over presentation. the questions. I you. you Thank

data this comment orders that. automatically? that color that assume my bit into to the your venture number for with government and not the So, And on XXXX And it X,XXX center XXXX you possible also I that that the guys confirm want I joint could on based follow-on an or factored your question us your guidance same or give the that is earlier, being companies? to fund on is of two to also in for you in being is you. in customer, the are region a is, customer and some just into update your give related little guidance pricing same us potential factored how you on in Thank for [indiscernible] this much particular including is fact IPC

Jeff Dong

Edison. Hi

Let me your questions. answer

which The new in of included first the customer. X,XXX terms from first Yes, We the is year, this one, is. it customers. phase of new companies

Edison Lee

yes. Sorry,

contribution of So, will can I the cabinets this delivered X,XXX the towards financial in year, that’s why be the so confirm that XXXX… end

Tim Chen

correct. That’s That’s Yes. correct. It’s here. Tim

We are be delivered the will expecting that at the end of tail year. very these

at will financial really, the very contribution I don’t probably beginning any at side, it. quarter. least first so a And little expect, bit XXXX, of from in my But meaningful contribution be the meaningful

Edison Lee

with just follow-up related one also I Can Sorry. question.

XXX going will or be delivered So, this fully megawatts XXXX within it’s XXXX? to go into

Jeff Dong

be the to different going divided into It’s phases.

and like will year. The delivered the be first next year, this will remaining will the year sorry, in we phase – be one-third and early deliver next two-thirds

Edison Lee

be it in completely XXXX? So, will delivered

Tim Chen

No, sorry.

we going first see XXXX part But in the us the into first the The is up. phase, give early balance, to customer the be whether to part. the need will the will heads mainly

in If outer actually rate. their go into in very, could us ahead, would drag XXXX. So, case, years? But it give which their is may on earlier move-in they an it it strong, not, the be if very move-in depends rate yes,

Edison Lee

further think that’s I am I I want clarify point. an to important sorry, because

MOU So, contract this you XXX-megawatt the the already with signed customer.

timing of actually an understanding However, Is increase the specified the correct? in is MOU. not this

Tim Chen

Only part they of yes, The given and balance is specified is indications the yes, have it us correct. not. – that

Jeff Dong

for the the put the me this let fully customer. way. MOU be years delivered will within Edison, X we Tim, with

Edison Lee

is the the in All same And capacity right? in location, this location? same

Jeff Dong

location. Yes, Yes. same

Edison Lee

Thank Okay. you.

Jeff Dong

Yes.

the In second terms of question...

Edison Lee

please go Jeff, ahead. Sorry,

Jeff Dong

Okay.

questions of with the Changzhou. me in Let answer your JV terms

area project And with also the [ph] XXX already this Langfang from we JV million is portfolio. scale about actually have which an in SPA recently IT over and has achieve be XX,XXX will megawatts of we one largest the proportion, The also RMBXXX identified we on We more the committed than will signed – cabinets project, Langfang total. committed delivered cabinets capital. asset in one

So, so that’s done we far. what have

by up the other and also year, projects, some Beijing soon, also Dongguan And this with in Shenzhen, in probably Central discussion be are ramp will and we Changzhou end including areas. of closely

Edison Lee

you. Thank

follow-up. a Just

So, Langfang year. to this VNET be profitability will project contributing this

Jeff Dong

– divided see and contribute are The X, had Phase is the but also financials, Phase the Phase already maybe to different wouldn’t ramping X hopefully, we will next into regulatory customers will it and be X we has it’s license, VNET’s Phase I the phases. and a greenfield year the which by on full project X SPA a this and end with year. delivered signing of

Edison Lee

Okay. Thank you very much.

Operator

Ladies concludes and that gentlemen, participating. for Thank today. conference you our

disconnect. now may You

VNET (VNET) 21 Mar 232022 Q4 Earnings call transcript