Q2 2021 21Vianet Group Inc Earnings Call
[music].
Good morning, and good evening, ladies and gentlemen, thank you and welcome to 'twenty, one via an active second quarter.
2021 earnings conference call at this time, all participants are in a listen only mode. We will be hosting a question and answer session. After management's prepared remarks.
Today I have Mr. Scott Rowe Shan, Chief Executive Officer, and Executive Chairman, a brief L. I D C. Mr themed chat Chief Financial Officer.
Officer, and MS 10, Shuang, Liu Investor Relations director of the company I will now turn the call over to the first speaker today, Mr. Neil I, our director of 'twenty, One via net please go ahead ma'am.
Hello, everyone welcome to our second quarter 2021 earnings call before we start please note.
Note that this call may contain forward looking statements made pursuant to the safe Harbor provisions for the private Securities Litigation Reform Act of 1995.
These forward looking statements are based on management's current expectations and observations that involve known and I know what risks uncertainties and other factors.
Not under the company's control, which may cause actual results performance Oh to mess of the company to be materially different from the results performance or expectations implied by these forward looking statements.
All forward looking statements are expressly qualified in their entirety.
The cautionary statement risk factors and details of the Companys fighting with the SEC.
They're not undertakes no duty to revise or update any forward looking statements for selected events or circumstances. After the date of this earnings call I will now turn the call over to Mr. Samuelson.
It won't be enough.
Alright, Thank you Sharon good morning, and good evening everyone.
Thank you all for joining us on our earnings call today.
We're very pleased to announce another quarter of strong results.
Our revenue of roughly RMB, one 5 billion and adjusted EBITDA of.
RMB $425.1 million both exceeded the high end of our guidance.
Representing year over year growth of 38% and 38, 7% respectively.
Meanwhile, our adjusted EBITDA margin improved to 28, 4%.
<unk> from 26, 8% a year ago.
This robust growth.
<unk> to be driven by strong IDC market demand meticulous strategy execution, and our increasingly diversified customer base.
In the second quarter, the government released some new regulations, which were generally.
<unk> issued in support of fair competition.
Who has very little impact on our business today in.
In fact during the quarter, we continue to observe growing demand for our carrier and cloud neutral IDC services across various industries, including E Commerce.
Financial services logistics and automobiles.
The government continues to support the trend of digitalization and implement policies that are favorable to the IDC industry.
For example, the 14th five year plan, which was announced earlier in this year is promoting.
<unk> digital everything initiatives. This demonstrates that industry digitalization remain key strict strategy for China's industrial transformation.
Importantly in China. The concept of industrial digitalization is not merely focused on developing a digital.
<unk> industries, but also filling a transformation of traditional industries through digital technologies.
Such initiatives indicate that there will be more investments.
And new infrastructures going forward.
In July the Ministry of industry and information technology.
Acknowledging issued a notice for the country's three year plan to empower the digital economy.
According to the notice the government plans to implement and improve development pattern for new data centers to optimize data center layouts improved network quality accelerated.
<unk> computing capacity and lower carbon emissions, we believe that this initiative will benefit the industry leaders like US who have strong track records of ramping up IDC to mature levels within reasonable timeframes as well as effective systems for measuring and optimizing.
<unk> levels to ensure sustainable IDC growth.
On the back of these favorable conditions, our established market footwall, our scalable industry solutions, our pipeline and customer relationships have remained very strong.
Now turning to our business update for the second.
Quarter.
Our dual core growth engine strategy continued to fuel our organic expansion. We added approximately 7000 cabinets in the second quarter, while our cabinet deliveries in the first half of 2021 were in line with our expectations.
As a result, our new cabinet deliveries our compound utilization rate in the second quarter dropped to 59, 9% from 61, 7% in the prior quarter.
Our utilization rate for mature IDC delivered prior to and during 2019 improved.
276, 3% in the second quarter compared to 73, 9% in the previous quarter.
On the retail business front the growth momentum continued driven by highly demand from both existing and new customers.
Good variety of sectors for instance, during this quarter.
We have seen a leading global food company and a global logistics companies have ramp up their usage of our IDC solutions for Colocation connectivity and additional value added services.
Meanwhile, we witness increasing demand from customers and industry.
<unk>, such as artificial intelligence technology, local life services and financial services.
For our wholesale business, we continued to make steady progress during this quarter. For example, we expanded our geographic coverage to northern China.
And we expect.
To deliver approximately 30 megawatts in capacity to provide the data support for a leading content community and social platform in China.
In addition.
The June 18th Midyear shopping festival, we demonstrated our customer centricity by establishing a special team.
In preparing for our clients advanced deployment of infrastructure and customer services.
As a result, our e-commerce wholesale customers maintain smooth operations during the peak traffic period.
Our blue bar business after nearly a year cooperation with Microsoft.
In July we further extended our collaboration to become one of the first partners for the Microsoft connected the connected vehicle platform in China by providing our advanced cloud and each mobility services.
ESG initiatives have always been the driving force.
Sustainable development, therefore, it should not it should come as no surprise to everyone.
That we have been well prepared for the government's latest announcements are encouraging renewable energy enterprises to implement energy storage for peak load shifting.
Bye.
For our Sofia, the first quantitative requirements for the energy storage ratios of market oriented renewable projects. This announcement is of great value and importance to the industry's direction of development.
Through a collaboration with <unk> energy Internet innovation.
<unk> Institute.
We launched our data center energy storage projects in Foshan, Guangdong Province, which is one of the first successful applications of large scale energy storage technology for data centers in China.
To further promote our brand.
<unk> reached wellness, we have proposed to change the company's name from 'twenty, One Biomet Group, Inc. To <unk> Group, Inc.
The AGM to approve the change of land will be held on.
October 8th in Beijing.
The notice of the extra ordinary general meeting.
<unk> and form of proxy have been filed on form 6K, with the SEC and posted on our Investor Relations website.
As the government promotes new infrastructure initiatives enterprises fully realize that digital transformation.
<unk> is no longer a nice to have but a must have for business success and survival as such.
Enterprises are constantly searching for trustworthy providers capable of supporting the digitalization processes and migrations to the cloud.
Against this backdrop we.
We recently.
And now with our acquisition of <unk> cloud.
A leading cloud native application and data platform service providers in China.
Hence cloud will play an integral role in extending our suite of full stack solutions for public private and hybrid clouds.
Therefore, we.
We will be able to provide a full lifecycle support to our customers throughout their digital transformations and further enhance our leadership in our carrier and cloud neutral Idt's services market.
In summary, we remain well positioned to capitalize on the growing market.
Recently entities.
Rising from the trend of digitalization.
We remain confident in our full year target for the delivery of 25000 cabinets and a utilization rate of 60%.
We reiterate our dual core growth engine strategy and strong execution to acquire.
<unk> customers from various industries diversifying our revenue streams.
Sustain our growth trajectory and generate lasting shareholder value for the long term.
With that I will now turn the call over to Tim who will further discuss our financial results for the quarter as.
Mortgage his thoughts on our future growth Hi, Tim.
Thank you very much Samuel.
And good evening, everyone before we start our detailed financial discussion. Please note that we will present non-GAAP measures today.
Our non-GAAP results exclude certain noncash.
As well as us.
Which are not part of our core operations.
The details of these expenses may be found in the reconciliation tables included in our press release.
Please also note that unless otherwise stated all the financial numbers. We present today are for the second quarter of 2021.
And in Renminbi terms what percent.
Strangers are on a year over year basis.
We delivered stellar revenue growth and improvement.
Lighting margins in the second quarter.
Driven by our organic business development.
Core growth engine.
Suffice customer base and strong IDC market demand.
<unk> net revenues and adjusted EBITDA rose by 38% and 38, 7%, respectively. Both exceeding the high end of our previously announced guidance range.
Net revenue in the second quarter of 2021 increased by 38% to one 5 billion from $1.4 billion.
In the second quarter of 2020.
This increase was mainly due to increased customer demand for our highly scalable carrier and cloud neutral IDC solutions from both wholesale and retail IDC customers as well as the notable growth of our cloud business.
Gross profit in the second quarter of 2020.
It was $359.5 million, representing a year over year increase of 32% from $272.3 million in the same period of 2020, and a sequential increase of 11, 2% from $323.3 million in the first quarter of 2021.
<unk> gross margin in the second quarter of 2021 was 24% compared to 23, 8% in the same period of 2043, 3% in the first quarter of 2021.
The year over year increase in gross margin was primarily attributable to our continued efforts in optimizing our operating efficiency.
Adjusted cash gross profit, which excludes depreciation amortization and share based compensation expenses was $640.2 million in the second quarter of 2021 compared to 467.6 million in the same period of $2625.3 million in the first quarter.
2021.
Adjusted cash gross margin in the second quarter of 2021 was 42, 8% compared to 49% in the same period of 2063, 6% in the first quarter of 2021.
Adjusted operating expenses, which exclude share based.
Compensation expenses and impairment of balloon receivable to potential investors or $235.6 million in the second quarter of 2021.
Compared to $182.5 million in the same period of $2232.5 million in the first.
First quarter of 2021.
As.
A percentage of net revenues adjusted operating expenses in the second quarter of 2021 was 15, 7% compared to 15, 9% in the same period of 2035, 3% in the first quarter of 2021.
Adjusted EBITDA in the second quarter of 2021 was the 425.
$5.1 million, representing an increase of 38, 7% from $306.4 million in the same period of 2020, and an increase of two 4% from $41$5.1 million in the first quarter of 2021.
Adjusted EBITDA in the second quarter of.
Of 2021 excluded share based compensation expenses of $27.5 million.
Adjusted EBITDA margin in the second quarter of 2021 was 28, 4% compared to 26, 8% in the same period of 2049, 9% in the first quarter of 2021.
Our net profit attributable to ordinary shareholders in the second quarter of 2021 was $455.9 million compared to a net loss of 2.12 billion in the same period of 2020, the net loss of 87 point, sorry, $84.7 billion.
In the first quarter of 2021.
Basic and diluted profit was 0.52.04 per ordinary share respectively.
And $3, one two and 0.24 per ADR, respectively. Each a D. S represents six class a ordinary shares.
As for our balance sheet, the aggregate amount of the company's cash and cash equivalents restricted cash and short term investments as of June 32021 was five point O 3 billion, increasing by 1.63 billion from December 31st 2020.
Meanwhile, net cash.
Generated from operating activities in the second quarter of 2021 was $314.8 million compared with $161.8 million in the same period of $2294.5 million in the first quarter of 2021.
Looking forward, we will continue to leverage.
Our strong cash position as we execute our dual core growth strategy and further diversify our customer base to capitalize on growing IDC demand.
We are confident in our ability to build on our leading position in the IDC market two delivered continued growth to our shareholders.
For the third.
Each of 2021, we expect net revenues to be in the range of 153 billion to $1 five 5 billion.
And adjusted EBITDA to be in the range of $420 million to $440 million.
For the full year of 2021, we anticipate net revenues to be in.
Quarter of $6.1 billion to $6.3 billion and adjusted EBITDA to be in the range of 1.68 billion to $1 seven 8 billion.
The midpoint of the company's updated estimates imply a year on year increases of 28, 4% and 37% in Europe.
Canoes.
The range us at EBITDA, respectively.
This forecast reflects the company's current and preliminary views on the market and its operational conditions, which do not factor in any of the potential future impacts caused by COVID-19 pandemic or other factors and are subject to change.
This concludes our.
Our prepared remarks for today, operator, we're now ready to take questions.
It's a reminder to ask a question you will need to press star one on your telephone to withdraw your question. Please press the pound or Husky. Please stand by while we compile the Q&A roster.
Yeah.
Our first question comes from the line of Camille Xu from Morgan Stanley. Please ask your question.
Thank you management for the opportunity and congrats on a very good result.
My question is about regulation, we met the first one is on that.
Our clients are so do we see some recent regulation such as their data security reveal that may come across a little bit on the demand from the major internet customer and also for policies on our side is that the reason some regulation such as the pro quota allocation to Shanghai.
Tell me, a little bit more favorable to new entrants or Soe background or at least the nam the ie structure. It vendors and do we see this will further intensify the competition, especially in the area with a relatively more sufficient supply like in injunctive that will be my question.
Okay. Okay. This is samuel thanks, a lot for attending this session.
For your questions.
As we pointed out Tim and I mentioned.
To the to the investors.
In the second quarter the governor.
Government did relieve some of the new regulation.
But if you double click on that the regulation basically.
Issue to support a fair competition from a market perspective.
And to a certain degree.
Little impact.
Our business today.
And also <unk>.
Regarding the.
Security.
<unk>.
Inflammation.
The regulation on security protection for critical information infrastructure was basically a sign off on August 17th and that.
That would take effect on September one.
Then.
And specifically, we believe we have the highest standards.
For data Securities.
And we already have tens the related certification.
Just like ISO 27, one and also ISO 20000.
So both data security and service management.
For several years already.
So we believe where it should be one of the top.
<unk> compliance with government regulation, having said that what we're definitely keeping a close eye on the further implementation implementing regularly.
Once they are published.
As to the power of <unk>.
From Shanghai.
Literally we have today more than 60.
<unk> thousand cabinets under our management.
As of today and then.
In this.
Relation of some allocation in Shanghai, basically 3000 cabinets pickup for our company.
Well it will not have any material impact to our business operations.
And also development plan.
That being said we are actually.
Actively communicating with the Shanghai government.
Rounding at both city and district level, and hopefully that we can continue to explore the options allow us to secure the appropriate power cord and moving forward.
Thank you.
Thank you very helpful.
Our next question comes from the line of Edison Lee from Jefferies. Please ask your question.
Hi, good morning, Tim.
Congrats on the great.
Great results.
Two questions number one is that I saw that the MRO the retail MLR fell a little bit.
Central basis in Q2.
Comment on the trend.
And what are the drivers behind the MRO want me to.
Number two is that I want to see on your three year plan.
5000 cabinets growths Goodyear.
But if you are sticking to that and I.
I remember that.
In the last quarter, you said that 60% of resources have already been secured.
Could you please give us an update on that.
Uh huh.
The resources and what is your progress.
Two or three points. Thank you.
Okay.
Okay. The Edison Kim do you want to take these two questions.
Now of course.
Thanks Edison for for your questions are with regards to the retirement of our basically you know as you know the MLR is made up of a variety of services that we offer and so actually the 9000 plus <unk>.
<unk> is still within our expectations.
We've mentioned this before but I would caution investors to look too much into quarter to quarter.
Because there will be volatility as we take on new cabinets and offer different services and rather just focus on the medium to long term trend and we expect that to.
Basically can be made at the 9000 and particularly.
You grow a little bit as well as we expand the wallet share of each of our customers and expand the services that we offer to them.
With regards to your second question I think that was to the three year plan as.
As well as about a the 25000 cabinet targets you're correct.
We reiterate that we will be targeting 25000 cabinets per year.
In terms of the update for next year I think previously we had indicated around.
60% or so I think today based on the latest figures that we have we're probably closer to two thirds to 70%.
And.
As was the case last year as we get to the end of the year, we will provide a more detailed disclosure or a breakdown of the different projects that comprise it.
As you can appreciate we're in discussions with a number of different customers.
And as we do that we'll have a better idea of which projects will be lending within 22.
And which ones will be likely then moving to 23. So we'll have a better idea on that and I hope that answers your question.
Alright.
Can I have a follow up because I looked at Europe.
Hey.
And I think that Oh.
Campus.
And it's new relative to relative to the <unk> presentation.
Can you discuss a little bit.
Oh, yeah, well, it's a project that we've secured land and power and power quota. So it's something that again, we will be able to give you more details on exactly where it will fall we're expecting it to start.
Two in 'twenty two.
But we're still discussing with the sales team in terms of what the breakdown will be between 'twenty to 'twenty three 'twenty four so we'll give you more details on that but that is a new newly acquired a resource that's correct. It is.
Okay great.
Great.
Yeah.
Our next question comes from the line of James Huang from UBS. Please ask your question.
Good morning. Thank.
Thank you for your time today and congratulations on a good result.
First question just on your guidance.
This exceeded the top end of its guidance for the second quarter.
And I have kept yet.
On guidance I was just wondering whether you're being conservative Vale.
Some uncertain factors that could weigh on the second half that's the first question and the second question just still around regulation I'm sorry.
Share prices your company and the peers and they also will be unabated pressure recently and also the uncertainty around U.
U S listed Chinese companies.
E structure, so I'd, just love to get an understanding of how youre thinking about this risk.
The risks and your funding plan.
For the cabinet expansions over the next few years.
And the last question is just around <unk>.
The older and less efficient Edison itself.
But the government is looking to improve the PV and efficiencies of data centers in China, and there were discussions that older less efficient datacenters E. CBD areas may be forced to move outs.
They are giving you the industry for a long period, so can I get an understanding of the state of your existing debt.
In the CBD areas and if the government were to move the data centers, whether there will be adequate compensation splits such a move thank you.
Okay. Thanks, James I'll I'll take the first two and I'll probably pass the third one to Samuel and in Beijing.
In terms.
Data center or our guidance.
And the fact that we exceeded this quarter, but then kept the full year unchanged I wouldn't necessarily put it to being conservative more I think there's a recognition that.
There is revenue recognition between quarters, and so I think they're a little more of it ended up on.
In the second quarter side of the equation.
We basically have a very detailed discussions internally with all of our teams and map out the rest of the year and so at this point, we're still looking to maintain our guidance and it was just that in this instance, a the second quarter came in a little bit higher than what we had initially expected.
Hum.
On the sort of V I E an unlisted company.
Risks or managements views on that.
We've disclosed all of RV or use structures and risks obviously in the 20-F.
As is the case with many of our peers.
At this point in time, we have not seen any new laws or regulations.
From the PRC government since that time, and so before any new laws are actually adopted DVR REIT structure as it remains valid and so obviously, we will along with the rest of the market keep a very close eye on.
There have been a number of instances also where I think many.
Many of the banks have hurt.
Word from CSR C and some other government bodies are asked to their support for companies to a list at the place of their choice and so I think that would then also go to an overall positive view on this.
Issue.
So hopefully that answers the question.
Sorry, the last part.
The financing plans obviously the company has worked quite hard over the past year year, and a half to really grow the avenues or channels of capital sourcing and so we don't believe that this one issue is going to be a major problem in terms of our future growth.
We will continue to look at the full spectrum ranging from asset level project financing.
All the way through to you know offshore alternatives and that includes bonds CBS and in equity.
Hope that helps James.
I'll pass to assembled on the third question.
Sure.
Uh huh.
In terms of the your third.
First question is issue if you look at the past quarter.
Government information separate things first of all the 14th five year plan clearly articulate about the digital initiatives and then July timeframe.
Hey, Mike.
Issued a notice about the countries that three year plan to empower the digital economy, even mentioned about a new data center sort of initiative.
In vignette from our point of view first of all we do have a distinctive advantages.
Peer to peer companies in a way that we have for 25 years of great truck maker.
We have a full stack services and most importantly, we do have very diversified.
Hybrid ecosystem with six more than 6000 customers and whole bunch of partners and so to date great.
When government mentioned about some of the old data centers and focusing on that and continue.
The team took a few E. It gives us a great opportunity.
Holiday some of the industry. We're here for the long term and then honestly some of the players in the market space.
Given all of the limitations and things like that.
Probably we'll be in a great target to get consolidated.
So.
So that being said.
We've been working with the government very closely and will continue.
Double click on the.
The efforts, we put in and also looking for the opportunity to further consolidate some of the players in the market space. So hopefully that gives you some of the.
You know.
Colors about what we're going to do.
Okay.
Alright. Thank you. Thank you Samuel.
Our next question comes from the line Oh go on Wang from Daiwa. Please ask your question.
Thanks for the opportunity to risk.
Yes, I don't know I'm, a congratulations to the strong results. My question is regarding our new cloud commitments. So.
I know we have attracted a high show up here last quarter.
And we also care, a new or they didn't all come into play for me for this call. So I want to know any visibility.
Currently attaching new kind of ties to your know and want to have a bathroom in pressure on <unk>.
Our differentiated strategy.
Packaging, a wholesaler cancer so.
Gotcha.
I understand that some of our actual execution for the first half is basically in line with our expectation.
So looking into the second half or if any visibility or a possible issue management's thinking about too because it may impact our capacity if you've ever REIT. Thank you.
Yeah.
Okay.
Hi.
Yes.
Let me answer the questions and also then see if Sammy has anything to add to that in terms of new client.
And new customers that we've attracted over the past quarter Youre correct. I mean, we've made some very good progress.
You know I would say that.
When we first started.
But pushing ahead and starting our wholesale business at the end of 2019.
I think there were I guess questions about our ability to expand beyond our single customer and I think that we've proven over the past year and a half are very strong ability not only to attract new customers.
But also to a get a very diverse range of types of customers and that's been extremely.
<unk>.
How we've grown our overall wholesale business.
As to the execution.
Youre correct first half we didn't meet our what we had expected in terms of the capacity.
And.
But we don't expect any issues in terms of the second half obviously, they're are all things related to construction and so forth there may be times shifts backwards and forwards, but we still expect to be able to hit our what we've put out into the the slides are about 15000 cabinets.
And hit our 25000.
It hasn't catheter itself for the balance of the year. So I mean I didn't know if you wanted to add anything else in terms of the customer side.
Oh, yes.
So originally I think we mention about.
Not until like 2019, we started.
They do a core strategy and tourism to certain degree that's a that's.
As an industry, leading it fairly fairly distinctive compared to our peers and then originally we focus on the Hyperscale.
Which is basically the public cloud service providers and then we noticed some of the Big name Internet Company also has strong needs to.
To customize their data centers and then.
<unk> on the other hand from a retail side point of view.
Because the COVID-19, basically accelerated these with transformation. So we now have a lot of the traditional enterprise financial services industry automobiles logistics, and so and so forth. They are getting very serious about the build out their own data centers or have their specific.
And so.
Of that our scale retail customer is starting to.
Get increased and so it's not only about a five six.
Wholesale customers and we now have more than a dozen potential.
Wholesale customers and scale retail customers that we can go after and or even partner with.
And so so from our point of view.
These two aging originally it sounds very distinct.
But to some degree.
It also help us too.
Supporting each other's hedged at bats, and things like that and providing good air cover in corn support.
So hopefully that answers.
Courthouse questions. Thank you.
Yeah.
Yeah.
Thank you with all the management, so our matchup a check up with from Europe any updates on I mean.
Of these five supply issue in strong arrow for Beijing.
Got it.
Thank you.
Okay.
I'm sorry go ahead can you repeat your question again I'm sorry.
Oh, Okay sure.
Matt Cabral our attack.
So do we have any.
Colorado It sounds also intensify the supply issue in throwing area off of a bedroom maybe along for a thorough thank you.
Okay, and so for those for those areas.
As we mentioned.
To the industry, so far from our datacenter.
Any outsource.
Point of view, we focus on the tier one city.
Whereas the surrounding area, having said that we also pay equal attention on the remote areas.
Cases, like North China, the Western region.
Governments three years.
Directional guidance also.
<unk> received very good a framework.
In terms of the data center future directions, and things like that so you.
You know as Tim pointed out earlier.
For the first half we can secure some of your additional resources in Hubei Province.
That's a very good one because you know.
The way to give us Atlanta power to.
The power of quarter.
Sufficient enough to support those wholesale and our retail customers and we're going to continue debit down the efforts.
To do that.
Thank you.
Yeah.
Okay.
Sure.
Yeah.
Our next question comes from the line.
From credit Suisse. Please ask your question.
Hi management, Thank you for taking my.
My question I guess follow ups on competition I want to check I guess for second quarter on the M. R. R. A slight decline how much had oh, if any impact was from from the competition side.
Question said of the capacity new at that's my first question My second question do.
Do we have any update on the AR to spark a sell down thank you.
Thanks, Glenn let me take that question with regards to.
And from our.
Again, I would say that there there is no apples to apples comparison I wouldn't be able to point to one single factor. It. It is a mix of the different types of services that are being offered to the customers and so if a customer takes a service a and b and the other one takes a N C that could've actually also then changed them are so again I.
The urge investors to really focus on the sort of medium to longer term trend management again expects it to be around 9000.
And then slowly increasing as we increase the number of services, but.
But the quarter to quarter volatility.
I wouldn't make much of a small drop where small increase in a quarter to quarter basis.
With regards to clubs to your second question on the just park transaction actually the company. We don't have a timetable for the deal given the fact that it is a transaction between two shareholders.
But it is our understanding that the parties will file with the SEC in accordance with regulatory regulation. So.
Once there is I guess at an appropriate time, we will probably see the regulatory filings to the extent that we know anything else or a further update we'll let the market now.
Thank you.
Okay. Thank you very much.
Our next question comes from the line of.
Sure.
<unk> from Citi. Please ask your question.
Hi, Thanks.
Neil N T.
Here are two question.
It will come one by one the first question is would you my sure we say investor.
You were revenue in.
In terms of a percentage.
Each of our wholesale and retail are you know some of them. There are revenue a couple of niche.
And then for.
But the time horizon now and for the long term you are talking it. Thank you.
Hi, Arthur I'll I'll take this first question.
We actually don't provide breakdowns between the wholesale and retail at the moment just because the wholesale is a very very small component I can give you roughly 20% of our cabinets, our wholesale cabinets as compared to retail, but as we get through this year you will see then a gradual increase of that contribution.
Would say that from a revenue.
I know with you we're probably around two thirds IDC one third is the VPN and cloud business.
So again, you know well when we are at a point, where it can reveal more give more disclosures on the wholesale versus retail we will but at this point I think you would appreciate that there is a bit of a sensitivity with.
You pointed to a customer information here. So again, we will provide that in due course.
But you can look at sort of the split at the moment of the cabinet says as a rough indication 2018. Thank you.
And second question, even more like a long time target so.
We we also are seeing Europe, here's our analyst meeting and they maintain their long term target unchanged. So I wonder.
Our turnkey site, sometimes a carbonate per year increase how do you think of the your long term goal.
In our phase.
And also one of a small question here can you you mentioned this quarter you're at logistic our clients are pregnant and can you share more you know the the successful story of how you grow the client and how.
The demand will be.
I think that's my all questions.
Okay, Oh, so let me handle the first part of that question in terms of the the targets that we've set and then maybe I'll, let Samuel give you a little more color on how we how we've nurtured and grown our these are new customers of ours in terms.
Of the the target I would say that yes, we were still maintaining the 25000.
Per year for this year next year and a year. After following our increased last year from 15000 Cabinet is 25000 cabinet I think at this moment, we don't see any big transformative changes that will.
<unk> have us increasing our targets, yet again, and so I would say that we've maintained 25000 cabinets.
Samuel I'll pass to you in terms of the logistics and sort of how we've grown other clients or customers.
Oh, Yeah for sure. So thank you for the question.
We didn't mention about the second.
Quarter.
Thank you.
Customers from.
Various industries and the specific one that we talked about related to the logistics it.
It is J&J express.
That is a very fast growing.
Logistics company supporting a lot of the.
You know.
No e-commerce providers and not just from a domestic point of view. They also have a strong foothold in the core areas and then and so.
Jane Express and BNET or very strategic.
Partnership.
And not just from the data set point of view, but also from.
The first tax services point of view. So we're we're very pleased.
To be able to secure our customers.
And partner with them to support their future growth.
Thank you.
And can you quantify like how the growth rate.
Carnival kind we'd be.
We can't really provide the granular data.
But having said that I think it's very very important.
Look at the <unk> versus our peers.
As we mentioned to the industry that we do have a dual core of course agents in a way that so wildly.
Hyperscale their wholesale segments enjoyed the high double digit growth year over year, but we can underestimate the huge momentum from the traditional enterprise Internet companies.
You know things like that and so we fully leverage our retail engine to support companies like J&J Express.
Yes.
Because they are growing dramatically to support their customers to deliver the goods and services and so we're going to provide there.
We're going to provide them the digital era infrastructures. So we're happy to Dupont are with them.
The growth.
Thank you.
Thank you.
Our next question comes from the line.
Oh Chang from Goldman Sachs. Please ask your question.
Hi, Good morning management. This is Tina <unk> from Goldman Sachs.
So I have two questions. The first one is regarding <unk>.
Yes.
So the environment in the market. So for example.
In terms of winning these new customers what was the process like like for example, how many competitors do you need to bid against in winning some of the new customers and also what is the latest project or are you are getting in these new orders.
No particular, new animal use.
And then the second question is regarding our non-GAAP EBITDA margin. So I saw that based on our the midpoint of our full year guidance. The EBITDA margin is about 27, 9%. However in the first half we are trending above 29%. So does that mean.
How were going to come down to around 27% in the second half is that management being quite conservative or is there any reason that works, we should expect lower EBITDA margin in the second half such as.
A lower overall utilization rate or the ramping data center utilization rate in the.
Thank you.
Thank you Tina.
If you take the first one in the past to Tim to answer your second questions in terms of competition, yes, there's whole bunch of a competition in this specific new infrastructure market space in a way that because.
Not only from the traditional enterprises and carriers and also carrying mutual players. We also have a new commerce right and then so it's going to be a very I would say competitive fierce competition environment, but that being said we have the fairly fairly distinctive advantages.
Among the peers not only we have the 25 years of great track record. We also have a full stack services all the way from Colocation networking capabilities.
The amount of services in the hybrid cloud and.
Even include the latest acquisition called.
Cloud native capabilities and plus the O&M.
And so we're very very competent from the ability point of view and then the third one being 6000 very vibrant ecosystem.
So those are those are great assets give us.
The competitive advantages versus our peers.
Whether they are long term players in the short.
And so on and so forth and also from a market.
Business model point of view, they are only about a handful of customers.
Very much focused on.
No.
Customize their datacenters and supporting their base.
<unk> needs, but majority of our customers actually.
Leveraging the digital infrastructure to support their digital transformation.
So.
Unlike our peer companies.
Majority of them happen to either support the wholesale or supported retail, but we also haven't but we have we are the only one probably.
He is going to space to have a two dual engines. So so that's that's something where I would say, we're very very confident.
To do that.
And also <unk>.
Mentioned earlier, something we pay them extra attention is we do see the opportunity.
From the.
The cloud on ramp and also off ramp opportunities.
Primarily from Internet companies segment point of view.
So that will fuel our future growth.
In our opinion.
So Tim should I can I pass on the second question to.
Sure.
Well, let me I guess, just the second part of that question as well Peter I think you had a question with regards to whether or not Oh.
Ours are being affected and competition and so I think Samuel gave you some of the color in terms of.
What we offer to our customers and look we've seen a lot of live examples.
Of cases, where.
This does not actually come down to an IRR question, but rather actually having the right resources in the REIT places with the right solutions.
And we are on both sides of the ledger here there are cases, where unfortunately, we're not able to meet the very very precise requirements of the customer.
And so we're not running but similarly, we're in cases, where we meet all of the customers requirement.
Sure.
And therefore, there actually isn't a lot of sort of price competition here, but rather making sure that we have the right resources and REIT places. So I think that's a very very big focus SEC.
With regards to your question on EBITDA.
I would say that you know you would see in terms of cabinet delivery and ramp ups cabinet delivery is very very.
Requirement.
Heavy in the second quarter compared to first quarter and the same thing will be in terms of fourth quarter compared to the third quarter and second half. So you remember it was roughly a 10015 thousand split between first half and second half so that is the driver.
For the a lower expected.
EBITDA margins in the second half.
And then for the full year numbers that you're calculating out so hope that helps to answer your question to them.
Yeah. Thank you so much can I just have a follow up question. So in the presentation management mentioned that this year the target on overall utilization rate is 60%.
Yeah.
The target for next year.
Target for next year.
We will give some more details I think at this moment it really well.
Rolling out 25000 a year.
And so depending on the customer.
We have obviously, our wholesale customers that ramp up a little bit faster than our retail.
And so we'll have to look at that but we would be targeting around a similar range for next year as well.
So despite the fast rollout I think we're still targeting to get to around 60%.
Great. Thanks.
Thank you.
Our next question comes from the line of Ethan.
Yeah.
Your question.
Oh good morning, Thanks for letting me ask the question. So I have just one question on Capex.
During the first half I know that the company owns.
All right.
Co pack, which currently represents about 10%.
Capex guidance all five.
One 5 billion.
So just wondering.
Whether the companies you are maintaining your capex guidance.
So oh does indicate we might do more like M&A projects during the second half of this year.
Okay.
Delivery of capacity, well calibrated and also the cardiac.
Yeah.
Our current M&A strategy.
Okay. Thank you Ethan let let me take the SEC and I'll see if Simon wants to add anything to this in terms of Capex, you're correct. The capex that we've spent in the first half of the year a husband Uh huh.
But again this is related to our second half ramp up and acceleration. So we certainly do expect.
This will ramp up quite significantly in the second half.
And will be you know within the the the five to 6 billion that we've guided.
Secondly in terms of.
Lee and M&A strategy.
I think this is.
The strategy is to identify.
Opportunistic transactions, which suit our requirements in the obviously the requirements of our customers.
But as you can well appreciate you know M&A deals are not the easiest to forecast.
M&A because you can be talking to many and only have a few ultimately come through so we are in a number of discussions.
As we had indicated we've also acquired.
Some additional land and power in a quota on assets in the northern part of China.
And so we'll continue to do that and.
See some of those coming through again in the next two quarters I hope that helps.
That's very helpful.
Yeah.
Ladies and gentlemen, this does conclude our conference for today. Thank you for participating you may now disconnect.
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