VNET - Earnings call transcript Q1 2024

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Operator

Hello, ladies and gentlemen. Thank you for standing by for the First Quarter 2024 Earnings Conference Call for VNET Group, Inc. [Operator Instructions]

Management from -- our management today include Mr. Gavin Shen, rotating President; Mr. Officer; Financial Chief Wang, Ms. Qiyu Relations Xinyuan the of Liu, Investor company. Director is that today's note being conference Please call recorded.

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

Xinyuan Liu

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

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

of U.S. statements safe harbor the note today's Private Litigation Please Securities under that call made will XXXX. Reform Act of contain the forward-looking provisions

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

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

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

a As is recorded. being this reminder, conference

a addition, on call will ir.vnet.com. this webcast conference available at website our also be of In

today's start Shen. introduce Mr. we Before let me presentation, briefly Gavin

experience, IDC as Beginning General group's rotating nearly years and business centers. in serving XXXX, Senior IT President, role Manager became this planning, Vice of the as management in while strategic of Gavin bringing also XX of President Gavin May President joined Group. in XXXX has undertaken Strategic cloud business the computing VNET Vice Business the our January and operations XXXX,

over Please to go Gavin. ahead. will I turn the call now

Gavin Shen

joining our morning, and good today. Thank everyone. evening, you Good you, for Thank Xinyuan. call

from refinement last that of for quarter, performance, the we report metrics separately. enhance I'd transparency call revenues we business best and business. the first total will mentioned our [ to the like into Starting retail operational our our quarter remind understand wholesale diving public and information our this help to and in you ] going Before

go the will over Qiyu, CFO, details. Our

quarter first to initiatives and business on move our let's Now progress.

result quarter this start first a marked good for year. Solid

development, by effective continued demonstrate of base leveraging operating to our in business We demand area the and AI. execute our evolving high-quantity results again grow new strategies financial even ability our the to our cost while a capture to robust pursuing cost once

], computing industry is of for work widely government government treatment power caused policies and components market China as [ as which report environment whole. performance the development foster decide creating for Computing seen rating crucial per [ [ our Weiss a to Michael us ] public sort the with power are IDC and XXXX, mayor more ] network. a national-wide the high-quality of favorable the

has will initiatives The infrastructure manage further data initiatives optimize telecom empower relation. and systems regulator, resource cost meet and for efficiently compute the huge more center computing best allocate We MIIT, market demand are the us power to believe to strengthened policy high-performance and those power.

greener under is in solutions rise. interest computing Additionally,

the digitalization In class. signed a supercomputing development local together parties ]. to with government Wolantap and The the [ we [ AI green Hi-Speed X we Wolantap promote April, Shandong to data green agreement Holdings and build a center strategic work cooperating of ]

our confident the and were as take hold. trades competitiveness data green are We our [indiscernible] center need market with customers those business

how ], the solution industries computing percentage wholesale automotive, landscape, XX education. our ] AI AI-related first [ focus, high-density the center data and quarter, remains like AI-driven the our [ in streaming needs. continue data to aware is high-performance we While trail IDC to development is high-performance design, and meet seamlessly see rapidly of high-power capacity service increased Meanwhile, of service from By logic to density. over and growing to us were end financial cheap we demand enable our power keenly computing the capabilities primary of for reshaping quality customers demand centers

of massive As apart pioneer, enterprise market infrastructure, Internet opportunities. are enforcing transition power computing workload data few ] development actively infrastructure require our savage can [ this purchasing environment. center, infrastructure from enterprise a investment, own, AIDC, power a advantage technology their and an most top AI power given enterprise GPU-based to in CPU-based their capital while other AI outsourcing ] with computing upgrading capture the [ current to high exploring industry challenges computing we small AI outright. and our for enterprise GPU limited upgrade resource channels and are we midsized and the minimize cost needs GPU AIDCs significant in meet

the Now on IDC front. go let updates through me some

both for new the orders during quarter. business We to continued wholesale and retail win

On we wholesale of new call, side, approximately completed order be extreme exciting a to secured scheduled for we as clients XXXX. one last the mentioned XX-megawatt our within on from

also China's an our X.X approximately data their Yangtze in We new won strong one of largest region of megawatts Delta customer, center River order for in companies.

and the Beijing attract exciting manufacturing and local in sector. X.X of new financial in deepen service, for an a service center retail a continued area won we relationships. in On [ customer, service positive in ] we player Greater side, the leading Notably, megawatts local exciting order data new to our customers a

long to our business, progress also our service. Moving IDC with we VPN made

quarter a first integrated The Points-of-Presence coverage more in in provide carrier Our our Dubai global wholly security service, network in DYX-led expanded has the recently. to source will VPN its with broadened established them customers opportunities. on VPN global capitalize owned subsidiary PoPs successfully markets and and emerging comprehensive over enable enterprise our global [ service ] new expansion new the and network network PoPs Mexico carriers cloud and with service new in

now annual ] Company issued ] ratified [ [ and Works first include ESG In XXXX Turning results. our carbon we Progress in performance. declaring inventory Sustainability April, our report to ESG

and We employee power During XXXX, execute we continued shared equity. across performance energy sustainability and system to our diversity and engagement efficient achieved consumption. various

as achievements efficiency usage power also X.XX. annual our highlighted We average of such

XX increase in year our percentage percentage. about an to Our ] and purchase of our total in during employees grade power XX.X of hours kilowatt female management position [ the

to value and stakeholders coordinated will advancing digital the our ESG-based sustainability integrating the associates. company-wide, practice dedicated of our Moving forward, remain economy for green development and and economy driving we creating

solid in a our service, and underscores capabilities of development To innovative and broad first conclude, our density expanding growing area year low outstanding customer quarter our base. high-power IDC performance and cost

our continue we new business and strategy digital will ahead, to economy. goals development Looking China's drive core of everyone. the pursue advising Thank high-quality you, while

the financial turn now and to more will discuss about operating I call Qiyu to over performance. our

Qiyu Wang

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

with of We provide financial quarter start shareholders as with metrics will starting we discussion metrics operational detailed please detailed note we disclosures these insight just Before new our mentioned, greater business. our performance, Gavin our the have more and enhanced quarter. believe into this that, first

retail of IDC on beginning our nature was Specifically, based in of wholesale and types was subdivided of business the the customer XXXX, scale first subdivision and our business the XXXX, center based on contracts. IDC business IDC projects. the data to quarter into Prior the

all for You our operating retail we a list detailed IR metrics, and in may them find wholesale this have wholesale separately. by quarter. of projects presented Accordingly, presentation for

of wholesale metrics will of reflect the meaningfully terms For which development. instead business, business the our more are cabinets, in power believe we mirrored capacity

held capacity including business. for in a potential more In is the high-growth states, comprehensive present and and different of X construction clear provide their service wholesale additional, of will we our across capacity, picture and wholesale believe our future wholesale development which boosting our

subdivided business, from includes revenue consists have non-IDC net For financial wholesale revenues revenues revenues retail cloud which business, of our from VPN business. and we revenue which our IDC metrics, and into and

we renminbi the with that, are Now financial financials all operating otherwise year-over-year also in on the Please present revenue today quarter our on first Furthermore, and XXXX the and solid terms. basis. note results. to let's stated, growth unless of move and first off are all results. rates are for kick quarter a We XXXX

Capacity by IDC N-ORXX, end N-HBXX E-JSXX wholesale XXX to megawatts megawatts utilized by as for business by customer continued rapid service the Capacity in increased and driven movements. quarter, momentum, customer first in driven of by customers increased the first XXX data primarily Our the demand to XX megawatts in of gain center. was quarter.

with utilization rate improved for As capacity the a capacity XX%. wholesale the and around capacity rate mature reaching XX% ramp-up reaching around the of the XX% result, to utilization

under health and XXX In XX% construction was megawatts XXX around pre-commitment capacity of addition, future megawatts. was rate capacity development the for the with

was For remaining CNY and X,XXX cabinets for capacity quarter rate retail for compared for utilization with business, around mature X,XXX X,XXX CNY rates quarter, cabinets to in last around quarter XX,XXX for the last stable MRR to utilization XX%. flat was the our period capacity and with in year. last service first reaching compared CNY same XX% at the retail

growth of performance. CNY mainly increased on the on core remain our positive by billion, business. Moving outcomes, and We continue to generate financial the efforts business, driven by continued revenue high-quality X.X our our revenue net to X.X% our focus

by XX B, by E-JS Campus our million, and highlight, to X, CNY increased E-JS XXX contributed Campus To Phase XX E-JS and XX.X% wholesale revenue centers. Campus mainly data XX, E-JSXX N-HBXX

On the CNY consolidation VNET EBITDA CNY of million. loss quarter with hand, million, Adjusted to several was X.X% margin redevelopment revenue other CNY XX.X%. of by XXX.X our XXX.X the of retail and second decreased centers due million mainly XXXX. XXX data since attributable was to of Net EBITDA adjusted

sheet. billion. was equivalents, million. generated the of operating At cash achieved the Meanwhile, first cash X.X company's cash our to balance was net of XXX.X cash Turning amount CNY the end total and restricted from quarter, CNY

million. XXX.X Our CapEx CNY was

February financing, X, relating For of in business we on total as the commitment updates fundamentals mentioned amount XXXX, principal development. convertible completed long-term to strategic XXX this environment, our on the the notes capital million. last In our current resilient and payments quarter, to our market sustainable senior reflects move our due XXXX repurchase we USD

in expect CNY be representing guidance our previous of X.X% X.X a billion, Now to unchanged to for This adjusted representing to increase billion, of of the year-over-year XX.X%. year to CNY X.X% moving full in of billion year-over-year be net increase revenue guidance. CNY the from our X.XX CNY to EBITDA range and we a to XXXX, X.XX X range billion to X.X%

to is to from from XXX range previously of market according CNY increased to the our our the last previous unchanged conditions, X.X is megawatts billion. This expected be CapEx to we further XXX to Given X.X stated XXX market in and increase XXX to conditions. delivered may billion CNY plan have guidance megawatts.

capabilities by on enhance focus remain will ahead, core growth, to due and high-quality effective strategy boom. capture care opportunities our further our the market to which driven we AI execute Looking our continue

prepared Operator, now concludes ready remarks for today. for we are questions. our This

Operator

Edison comes The Instructions] [Operator Lee question from from Jefferies. first

Yu Lee

disclosure. Thank one presentation the good wholesale. very have management and Number questions. for the and definition X you about a retail of I is

investors actually today definition previously disclosed. than for of is historical would lot lower because like what are are to retail you the MRR a know think that exactly I presenting the numbers

to that's definition. would get I the So why on clarification like a

cash redevelopment? retail operating is And 'XX on it is lower be power? retail higher is cabinets these are actually still or comment And redevelopment? flow and outcome flow. two how Number operating So XQ the cabinet number Can become tell cash Does the us what on 'XX? by affected of you explain being much cabinets they Can actually will mean three XQ so will you can your much why many than will be also the wholesale with that for that? you redevelopment.

Chinese. Language] So [Foreign let me repeat in

Qiyu Wang

I'll Mandarin the Edison. you, let English. and [Foreign to Thank translate translator Okay. me the in help question Language] to answer

Unknown Attendee

development, understanding add you for indicators. the of you the well of question net as transparency purpose a well more information I from to of business metrics began new and capital with company want share better for Thank disclosure the we up the information XXXX, our boost a to as quarter of as X market, new to [Interpreted] starting a lot, as

also construction them For and wholesale, classified have non-IDC. operational with the the the a the we as for X added according held same better to business retail into classes, instance, under in-service wholesale, and a for hashtag, megawatts we your the major new time, understanding. as including development we've At for indicators future also including revenue put

Qiyu Wang

[Foreign Language]

Unknown Attendee

terms you of to first we you question redefined noticed [Interpreted] wholesale as have already definition the that re-explanation a want I wholesale retail, did before. as and the For give we retail of have already and the X of the

better major transparency, into I customers capital while to big as boost we the put the the up clients small say. well made did serve now clients, wholesale to the change information as the a into retail as market we but Before, the small

project. in of XX Right And literally terms size megawatts. in base-type the into into wholesale, them translated now, make the more the Chinese than of

clients wholesale long projects, the and as to customers. their those projects For in expand the those land, they the targeting major potential are most In of the run terms well in the have of cases, power the as supply. the buildings capacities

translated However, cities, clients. and the side, middle-sized them on of the them, many retail and be literally we city-type a are also which Shanghai, selling And part Beijing, and will small located including the projects, the other of in core proportion sector. enterprises projects to Shenzhen the Guangdong into

total expanding for its megawatts most the is without targeting smaller projects potential stacks be enterprises. the noted, cases, the low of as retail the than ensure speaking, projects any capacity we satisfy usually also provide cabinets. to to to needs Generally major size the And of the XX clients But stand to please small those and the and offering medium-sized big well the are to the -- latency. and are

is offering you been MRR the in fact records. included. and of why our due the a numbers seeing to As you not data redeveloped the committed projects to that of are that disclosed in the have the are already clients, proportion is numbers larger cabinets noted small and the XX% have That the retail discrepancy

Qiyu Wang

Language] [Foreign

Unknown Attendee

[Interpreted] why XXXX, cash operational flow. for a of than raised question company XXXX, observed and two, in the stable in QX, question in that was a speaking, capital And you smaller the QX XXXX. of normal for Generally the

the XXXX, QX, QX there government the did not projects, from by one-off the such ' as VAT. items However, back XX. in happen as certain as grants some incentivized projects X well Those in in were payback

Qiyu Wang

Language] [Foreign

Gavin Shen

[Foreign Language]

Unknown Attendee

better those third operating the would total market also to changes. CFO. the manner, cabinets and constant demands. a is due observed better the the capacity the database upcoming we power [Interpreted] will be you was question, sense, of decline. and are a in cabinets. the numbers months, For to meet from make requirements. retail market XXXX, sources And the In answered into certain the to on the the stably power maximizing developing that cabinets the high-density In speaking, question This we low-density already by normally have Generally purpose QX on the adjustment utilizing our the meet are to

local certain For the and instance, to of the new demand the increase market. according cabinet number we will market, to serve redevelop better

Operator

from next Our question Morgan Yang comes Stanley. Liu from

Yang Liu

the which opportunity two disclosure, have us. for thanks great is helpful for Thanks to questions. more I and very the

outlook. X growth is one the first The regarding business

clearly, of year full and the behind X% first of think, will looks growth be I driver lines? X% the the X question. what to a is wholesale business the retail key current my rate or the quantify Management the a X guidance around dragger. in like That's of business growth

second year-over-year. expense, big The is is question that and saw that sustainable? we or G&A whether a pretty a increase What is one-off behind is

Language] [Foreign

Qiyu Wang

[Foreign Language]

Unknown Attendee

growth. the [Interpreted] Thank the In very and the for for on as side. a revenue will I wholesale, XX% have of information we question, give you the retail, remained it you more observed, flat lines you light And has non-IDC the maintained X%. different for about

Qiyu Wang

Language] [Foreign

Unknown Attendee

the to due providing cost information fact flat, It's better And but that is us revenue retail [Interpreted] strategies the on to the to -- the job compared about for is I and very instance, EBITDA give a revenue, more growing. want EBITDA. controls. you figure did our the the operations a cost better it despite It remains

Qiyu Wang

[Foreign Language]

Unknown Attendee

GA. you QX, the reasons the that, service are GM [Interpreted] as In year, paid due And the explanations of different debt. And fees the out of the have follows. the a why XXXX, in the agency on of large to out beginning this their was amount outcome for the company in I seeing

was The the employees. other event the for stock expenditures

Operator

Bank next America of Li the Our Securities. Daley comes from question line of of

Huiqun Li

X to I great disclosure have the about more see segment questions. it's Firstly, breakdown.

kind outlook color? management of the about is How demand? we better And the clients see for have center demand data to IDC more overall year last? seen The this give China for first what compared And could could have demand could overall management one the market.

Maybe management My the Language] a we moving third question clients have the let [Foreign have. plan business. target expansion in expansion for us discussed total the about for the and wholesale following could this me earlier Management And progress the the quick year. from translation. update quarters

Gavin Shen

Language] [Foreign

Unknown Attendee

especially can conventional we the translating raised the are demands. the of from the question, it requirements capacities IDC we growing trend We [Interpreted] For stably, our business. market the now our you are was from development, meet clients, first and business that the say collecting to and

For a most increase demand they their capacities. of them, have AI to strong

Gavin Shen

[Foreign Language]

Unknown Attendee

quarter the XXXX, on end demand the driving AI-related from services. [Interpreted] are agencies, requirements logistic of the almost is the comes relating They demand the strong autonomous the this At side, the which high of the using companies, power have In X% the service the side, companies high-density the educational of developing well AI-related sectors, and of manufacturing in as first wholesale as the to on industries and financial cabinets firms. light needs. demand, chip

Gavin Shen

[Foreign Language]

Unknown Attendee

now potential that. According [Interpreted] made you plan to on comments also and expanded to standing now, raised and follow XXXX. plans before, our And CapEx we capacities in the questions will targets our the do targeting our XXXX, the and

negotiating still clients our are are to with wholesale new of improve plans, that And might and as deliver. potential we targeting determined. already targets many However, our also we have clients, projects we the

Gavin Shen

Language] [Foreign

Unknown Attendee

[Interpreted] And you questions the company. about for wholesale the asked clients also

As models, we contract X to business-as-usual before also the last to total are a years the X will will going calculate fees. --

up clients, finished be new year. installment signing within cabinets half we under the of are a However, which could contract, that also new

Operator

Goldman Sachs. question the next of Zhao line Our from comes Timothy from

Timothy Zhao

on And think line, the year. of was think for wondering this terms an growth the assuming we to rest the I quarter results, acceleration you first questions are helpful. quite quarter, X compared revenue in on your I the, more of I especially think, year I also full Great. on have thank is One think, the transparent I for here. guidance, is this which I top

just segment, also the retail which the in quarters? coming what growing be elaborate breakdown the faster wondering IDC management line can in between Just key IDC is could wholesale, and if driver on the and

I management just of by or secondly, And breakdown any or year-end given retail follow-up if transparent that target be the like is terms wholesale a like think mid-term? question quarter, has -- revenue this think the sounds or the And more capacity in very I in wondering it goal a versus would helpful.

Let myself. [Foreign me Language] translate quickly

Qiyu Wang

[Foreign Language]

Unknown Attendee

answer [Interpreted] revenues. our main follows: source The of wholesale is The business as is a

seen a As the business on declining in we also and we the see already and have retail plan, retail are projects basis. that year-over-year the

began on end starting the which this by as our verification the we we and from more revenue retail However, QX, see up QX, as of cabinets. year high-density deploy side may completed, from retail And power this ratification that all last QX be well. to ratification project will the pick

Qiyu Wang

[Foreign Language]

Unknown Attendee

light [Interpreted] the the revenues, the the X:X. standing retail wholesale from at the standing is from figures. the is In In the make retail ratio to approximately wholesale light cabinet of Still, revenue calculations. of ratio, the X:X capacity light of the in against ratio major the these numbers of and retail of proportion using the at the is taking and

Operator

Seeing questions, our and no for for ladies concludes participating. today. more Thank conference gentlemen, you that

may your lines. disconnect now You

VNET (VNET) 30 May 242024 Q1 Earnings call transcript