Q3 2022 VNET Group Inc Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial style.
Speaker 1: The conference will begin shortly. To raise your hand during Q&A, you can dial star 1.
Okay.
Hello, Ladies and gentlemen, thank you for standing by for the third quarter 2022 earnings Conference call for Venus Group, Inc. At this time, all participants are in a listen only mode.
Speaker 2: Hello, ladies and gentlemen. Thank you for standing by for the third quarter 2022 earnings conference call for VNet Group, Inc. At this time, all participants are in a listen-only mode. After the management's prepared remarks, there will be a question-and-answer session. Participants from our management include Mr. Jeff Dong, Chief Executive Officer, Mr. Tim Chen, Chief Financial Officer, and Xin Yang Liu, Investor Relations Director of the company. Please note that today's conference call is being recorded. I will now turn the call over to the first speaker today, Ms. Xin Yang Liu. Please go ahead.
After the managements prepared remarks, there will be a question and answer session participants from our management include Mr. Jeff Dong, Chief Executive Officer, Mr. Tim Chiang Chief Financial Officer, and she Yang Liu Investor Relations director of the company. Please.
Please note that today's conference call is being recorded.
Now I'll turn the call over to the first speaker today see Yang Liu Please go ahead.
Thank you operator, Hello, everyone and welcome to our call charge under your tenure two earnings conference call.
Speaker 3: Thank you operator. Hello everyone, and welcome to our third quarter 2022 earnings conference call. Our earnings release was distributed earlier today, and you can find a copy on our website, as well as our news wire services.
Our earnings release was distributed earlier today and you can find a copy.
Right.
Our newswire services.
Please note that the discussion today will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 90 95.
Speaker 3: Please note that the discussion today will contain forward-looking statements made under the SIF HAPRA provision of the U.S. Private Securities Litigation Reform Act of 1995.
Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.
Speaker 3: Overlooking statements are subject to risks and uncertainties that may cause actual results to differ from our current expectations.
A detailed discussion of these risks and uncertainties.
To our latest annual reports and other documents filed with the SEC.
Speaker 3: For detailed discussions of these risks and uncertainties, please refer to our latest annual report and other documents filed with the ITC. VNet does not undertake any obligation to update any forward-looking statements except as required under applicable laws. Please also note that VNet's earnings press release and this conference call include the disclosure of audited GAAP financial matters.
<unk> does not undertake any obligation to update any forward looking statements, except as required under applicable law.
Also note that we now are.
Earnings Press release, and this conference call include the disclosure.
GAAP financial measures as well as our audited non-GAAP financial measures.
We announced earnings press release contains a reconciliation of the audited non-GAAP measures to the audited.
Speaker 3: as well as audited net GAAP financial measures. VNet's earnings press release contains a reconciliation of the audited net GAAP measures to the audited GAAP measures . As a reminder, this conference is being recorded. In addition, a webcast of this conference call will also be available on our website at ir.vnet.com. I will now turn the call over to our CEO Jeff.
As a reminder, this conference is being recorded.
In addition, a webcast of this conference call will also be available.
At IHOP there'll be net dot com I will now.
I will turn the call over to obviously yogesh.
Thank you Regina good morning, and good evening, everyone. This is Jeff it's a great pleasure to meet and speak with all of you today I'm deeply honored to take on the role of CEO and excited to explore the great opportunities on the prospects ahead for arena.
Speaker 4: Thank you, Kingyuan. Good morning and good evening everyone. This is Jeff. It's a great pleasure to meet and speak with all of you today. I'm deeply honored to take on the role of CEO and excited to explore the great opportunities and prospects ahead for VNet. I look forward to leveraging my cross-industry expertise and working closely with our talented team.
I look forward to leveraging my call.
Industry expertise and working closely with our talented team will drive the company is still core growth strategy.
Our commitment to delivering sustainable long term value to our shareholders.
Speaker 4: to drive the company's dual core growth strategy and cement our commitment to delivering sustainable, long-term value to our shareholders.
Like to start with an overview of our third quarter performance.
But all of the mounting macroeconomic headwinds.
Speaker 4: I'd like to start with an overview of our third quarter performance against the backdrop of the mounting macroeconomic headwinds. We remain focused on fulfilling market demand for high quality and reliable ITC services. By the end of the third quarter, we had grown total cabinets under management to 82,660 from a proxy 65,301 years ago.
<unk> focus on fulfilling market demand for high quality and reliable service.
Great.
At the end of the third quarter, we had a golden total cabinets under management to $82 60.
<unk> from our proxy $65 301 year ago and Thailand.
By customers increased sequentially by $1 27 to approximately 45530 compared to our proxy.
Speaker 4: And same time, tepidase utilized by customers increased sequentially by 1,027 to approximately 45,530 compared to approximately 38,301 years ago. As a result, overall utilization rate remained flat at 55.1% as compared with the end of June .
Mm 301 year ago as a result, all utilization rate remained flat.
55, 1% compared with.
In addition, our repo book.
Company ramp up to 9287, RMB in the third quarter compared with $9 186 in the previous quarter.
Speaker 4: In addition, our retail MRR for company ramped up to 9,287 RMB in the third quarter, compared with 9,186 RMB in the previous quarter.
Our third quarter financial results reflect healthy progress in our wholesale and the retail business as well as our effective.
Speaker 4: Our third quarter financial results reflect healthy progress in our hotel and retail business, as well as our effective execution of our dual-core strategy. Our net revenues for the third quarter increased by 16.3% year-over-year to 1.814 billion MB, and adjusted EBITDA reached 455 million MB.
Our core strategy, our net revenues for the quarter increased by 16, 3%.
Over a year to 1.814 billion RMB unadjusted EBITDA reached 455 million.
Today's world is preparing for digital as a new norm for business at all times.
Thrive in this new era.
Speaker 4: Today's work is preparing for digital as a new norm for businesses to attempt and thrive in this new era of digital transformation experiments. As we witnessed at the 20th National Congress of the CPC, the central government supports this transformation as part of China's high-quality growth trajectory. And guidelines filling technological innovation and digital development across the world.
Transformation is paramount.
We witnessed a turnkey.
And there's no Congress and also the PPP the central government to support this transformation as part of China's high quality goes trajectory policy guidelines sealing technology cool innovation and digital development across a wide spectrum of industries are in place.
Slightly to pay the duty.
Infrastructure sector at the forefront of this.
Utilization outward and believe that it will fulfill market demand for data Center services.
A leading player in the IBD space.
Daily position to capture the worsening demand only new growth potential going forward.
Yes.
Speaker 4: Fortunately demand an unleashed new growth potential going forward.
I know volatile near term macro environment, we see long term demand remains strong with fundamental surrounding call on digital transformation in pets.
Speaker 4: Despite a challenging and volatile near-term macro environment, we see long-term demand remains strong with fundamental surrounding cloud and digital transformation still intact.
In response to the short term headwinds we plan to adopt a more prudent approach to our capital delivery for the fourth quarter. Therefore, we are revising our 2022 full year company and delivery plan.
Speaker 4: In response to the short-term headwinds, we plan to adopt a more prudent approach to our cabinet delivery for the fourth quarter. Therefore, we are further revising our 2022 full-year cabinet delivery plan to the range of 8,000 to 9,000 from the previous range of 9,400 to 5,400.
Joe its audience when I saw it.
From a previous range of.
102004.
Although the macro.
Microsoft needs lower moving on the Covid related restrictions now, let's take a closer look at our progress across our business a lot during the third quarter.
Speaker 4: The current outlook has structured in micro softness, lower moving and COVID related restrictions.
Speaker 4: Now let's take a closer look at our progress across our business lives during the third quarter.
On the wholesale business a phone with continued to gain sales momentum in the third quarter, we signed a new contract of approximately 15 megawatts with a leading cloud service providers in China to build is a network of infrastructure in the Yangtze River Delta region more recently once again extending our hotel.
Speaker 4: On the wholesale basis front, we continue to gain sales momentum. In the third quarter, we send a new contract of approximately 15 megawatts with a leading cloud service provider in China to build its network infrastructure in the Yangtze River Delta region. Moreover, we recently once again extended our wholesale data center services contract with one of our largest existing customers.
Data Center services contract with one of our largest existing customers a leading social platform in China.
This new owner will generally the capacity.
33 megawatts since the launch of our wholesale business in 2019.
Speaker 4: a leading social platform in China.
Speaker 4: This new order will generate a capacity of a POC 33 MIGUA. Since the launch of our hotel business in 2019, we have established a strong presence in this market segment, accumulating total contracted capacity in the service or under the value of 283 MIGUA by the end of the third quarter.
Our strong presence in this market segment accumulating total contracted capacity in the service.
<unk> 283 megawatt by the end of the third quarter.
Our in depth industry know hall, methodical result measurement of sophisticated engineering capabilities are key to our success in this sector.
Speaker 4: Our in-depth industry know-how, methodical resource management, and sophisticated engineering capabilities are key to our success in this sector.
On a regional business front, we are pleased to have delivered a growth.
A challenging macro environment highlighted by our expanding customer base.
Speaker 4: On the retail business front, we are pleased to have delivered a growth made challenging macro environment highlighted by an expanding customer base.
Oh glass and value added service offerings in the third quarter press release, all the existing customers and the automobile financial services online gaming local services and many others.
Speaker 4: and exciting progress in value-added service offerings. In the third quarter, a series of existing customers in the automobile, financial services, online gaming, local services, and many other sectors expanded their orders with us. At the same time, we also attracted more new customers among financial institutions.
Their orders with us.
Sometimes we also attracted more new customers among financial aid.
The health care service providers on a local service platform.
Furthermore, our value added services continue to attract new prospects to our retail business in the third quarter. We won several prestigious customers for all of our Interconnectivity.
Speaker 4: the healthcare service providers and local service platforms. Furthermore, our value added services continue to attract new prospects to our retail business.
Including a world, leading consumer electronics brands, a leading insurer in China, and a well known restaurant chain operator in China in particular.
Speaker 4: In the third quarter, we want several prestigious customers for our interconnectivity services, including a leading consumer electronics tech brand, a leading insurer in China, and a well-known restaurant chain operator in China.
Operator, we began to offer our in house developed Interconnectivity solutions.
Speaker 4: In particular, for this restaurant chain operator, we began to offer our in-house developed interconnectivity solutions built on our innovative SD1 technology. Upon implementation, this solution will successfully provide deployment of secure, flexible, and reliable connectivity across a customer's national network with more than 2,000 stores.
Our innovative <unk>.
Economically.
In my presentation. This exclusive real successful April by deployment of secure flexible and reliable connectivity across our customers' national network with more than 2000 stores. We view this project as the milestone in the go to market of our sale.
Our SD Wan technology as well as a good starting point for rollout.
Speaker 4: We view this project as a milestone in the gold market of our state-of-the-art SD1 technology, as well as a good starting point to roll out the solution into different verticals.
Different verticals turning into our call.
<unk> business, we have continued to make progress on our cloud London in kind of the business.
Speaker 4: Turning to our full cloud business, we have continued to make progress on our cloud landing in China business.
Third quarter, we have a leading international Iot automation company.
The management is cloud based product offerings, that's volatile customers in China.
Speaker 4: In this quarter, we have a leading international IoT automation company who manages its cloud-based products, offering access to customers in China, and providing operations and maintenance services accordingly. This project illustrates our remarkable value proposition in helping international technology companies find a more efficient and effective way to manage their products.
Operation and maintenance service accordingly.
<unk> illustrates our remarkable value proposition, helping international technology companies.
More efficient and effective way to enter and expand into.
And for the China market.
Additionally, this quarter, we extended our club.
Speaker 4: to enter and expand into the China market. In addition, this quarter we extended a cloud solution to emerging Chinese smart EV enterprise by developing an integrated and efficient supply chain management system.
Hallucinatory merchant Chinese smart EV enterprise by developing an integrated supply.
Supply chain management system.
The pillar to the customers that <unk> brokerage.
Procurement process on a deeply integrated with other module based solution.
Speaker 4: which is seamlessly tailored to the customer's auto parts.
Speaker 4: procurement process and deeply integrated with other module-based solutions in its digital infrastructure.
Digital infrastructure.
Going forward, we aim to address our presence in the automotive ecosystem.
For a more industry, especially cloud business opportunities across a wide variety of verticals by leveraging our unique surface.
Speaker 4: Going forward, we aim to stress our presence in automotive ecosystems.
Speaker 4: and explore more industry-specific cloud business opportunities across a wide variety of verticals by leveraging our unique stresses in IDC technology and cloud services.
<unk> technology on the call services.
Before I wrap up my remarks today I'd like to take a moment to celebrate our vertical partnership with Changzhou.
Speaker 4: Before I wrap up my remarks today, I'd like to take a moment to celebrate our valuable partnership with Changzhou High-Tech Jilong Holding Group, a subsidiary of the CEO Changzhou High-Tech Group, to form a joint venture with a total investment of 2 billion on B. The capital contribution from arena will be up to 700 million on B.
Holding group.
A subsidiary of the steel Changzhou attacked group to form a joint venture with total investment.
<unk> be the type of contribution from arena will be up to several hundred million RMB joining on both companies the resources and expertise with new joint venture will pursue new opportunities.
Speaker 4: drawing on both companies' resources and expertise. This new joint venture will pursue new opportunities.
<unk> developed and operate I do see projects across the nation. The JV unique pipeline of potential acquisition targets and closed a number of high quality data center assets located in multiple Mega city clusters in China.
Speaker 4: to acquire, develop, and operate IDC projects across the nation. The GVC initial pipeline of the potential acquisition targets includes a number of high-quality data center assets located in multiple megacity clusters in China, such as the Greater Beijing Area and the Greater Bay Area. This partnership represents an important step towards…
The greater Bay area on the grid.
This partnership represents an important step toward extending our business the horizon on the strengthening our presence in a particular infrastructure sector.
Speaker 4: extending our business horizon and strengthening our presence in the digital infrastructure sector.
In summary, we see strong long term demand on a bright future.
Services in China.
Speaker 4: In summary, we see strong long-term demand and bright future for IDC services in China, despite short-term macro turbulence.
Short term macro turbulence.
With governance caused our effective unplugged quality core growth strategy uncompetitive the service offering.
Speaker 4: With government support, our effective and flexible dual core growth strategy and competitive service offerings, we are well equipped to navigate near-term challenges and capitalize on future demand prospects.
Ill equipped to navigate near term challenges and capitalize on future demand prospects, we will continue to kill that prudently, yes, absolutely.
The positioning of the company.
Speaker 4: We will continue to execute the provenly yet. Decisively. It is a good day position in the company.
To capture rising opportunities at more industry Fortinet.
Their digital transformation, creating long term value for our shareholders along the way.
Speaker 4: to capture rising opportunities as more industries forge ahead with their digital transformation, creating long-term value for our shareholders along the way.
Thank you everyone with that I will now turn the call over to our CFO team to discuss our financial performance for the quarter on our business outlook.
Speaker 4: Thank you everyone. With that, I will now turn the call over to our CFO team to discuss our financial performance for the quarter and our business outlook.
You very much Jeff good morning, and gaining everyone.
Before we start the detailed discussion of our financials. Please note that we will present non-GAAP measures today.
Speaker 5: Thank you very much, Jeff. Good morning and good evening, everyone.
Speaker 5: Before we start the detailed discussion of our financials, please note that we will present non-GAAP measures today. Our non-GAAP results exclude certain non-cash expenses, which are not part of our core operations.
non-GAAP results exclude certain noncash expenses, which are not part of our core operations.
Sales of these expenses maybe found in the reconciliation tables, including our earnings press release.
Speaker 5: The details of these expenses may be found in the reconciliation tables, including in our earnings press release.
Please also note that unless otherwise stated all the financials. We present today are for the third quarter of 2022 in renminbi terms.
Speaker 5: Please also note that, unless otherwise stated, all the financials we present today are for the third quarter of 2022 in renminbi terms.
We're pleased to report another quarter of results, which reflects the effectiveness and agility of our two core growth strategy.
Speaker 5: We're pleased to report another quarter of results which reflect the effectiveness and agility of our dual core growth strategy.
In a challenging macro environment.
We remain confident in our <unk>.
Distinctive growth strategy.
Speaker 5: in a challenging macro environment.
Outstanding value proposition.
Speaker 5: We remain confident in our distinctive growth strategy.
And a powerful suite of service offerings.
Empower us to capitalize on long term prospects of the data center industry in China.
Speaker 5: outstanding value proposition, and a powerful suite of service offerings, which empower us to capitalize on long-term prospects of the data center industry in China.
Next let me walk you through our third quarter financial results.
Unless otherwise specified the growth rates I will be reviewing are all on a year over year basis.
Speaker 5: Next, let me walk you through our third quarter financial results.
Speaker 5: Unless otherwise specified, the growth rates I will be reviewing are all on a year-over-year basis.
In the third quarter, our net revenue increased by 16, 3% to 1.81 billion from the same period last year.
Speaker 5: In the third quarter, our net revenue increased by 16.3% to $1.81 billion from the same period last year.
Mainly due to increased customer demand for our highly scalable carrier and cloud neutral ITC solutions from both wholesale and retail OTC businesses.
Speaker 5: mainly due to increased customer demand for our highly scalable carrier and cloud-neutral IDC solutions from both wholesale and retail IDC businesses, as well as the continued growth of our cloud business and VPN business.
Well, that's the continued growth of our cloud business and VPN business.
Gross profit was $316 6 million in the third quarter of 2022.
Speaker 5: Gross profit was $316.6 million in the third quarter of 2022.
Representing a decrease of 15, 6%.
For the same period of 2021.
Speaker 5: representing a decrease of 15.6%.
Gross margin was 17, 5% in the third quarter of 2022 compared to 24% in the same period of 2021.
Speaker 5: from the same period of 2021.
Speaker 5: Gross margin was 17.5% in the third quarter of 2022 compared to 24% in the same period of 2021.
Adjusted cash gross profit, which excludes depreciation amortization and share based compensation expenses was $707 7 million in the third quarter of 2022, an increase of four 9% from the same period of 2021.
Speaker 5: Adjusted cash gross profit, which excludes depreciation, amortization, and share-based composition expenses, was $707.7 million in the third quarter of 2022, an increase of 4.9% from the same period of 2021.
Adjusted cash gross margin in the third quarter of 2022 was 39.0% compared to 43, 2% in the same period of 2021.
Speaker 5: Adjusted cash gross margin in the third quarter of 2022 was 39.0% compared to 43.2% in the same period of 2021.
Adjusted operating expenses, which exclude share based compensation expenses and compensation for post combination employment in an acquisition or $275 1 million in the third quarter of 2022 compared to 244.01 million in the same period of 2012.
Speaker 5: Adjusted operating expenses, which exclude share-based compensation expenses and compensation for post-combination employment in an acquisition, were $275.1 million in the third quarter of 2022 compared to $244.0 million in the same period of 2021.
One.
As a percentage of net revenues.
Adjusted operating expenses in the third quarter of 2022.
Speaker 5: As a percentage of net revenues, adjusted operating expenses in the third quarter of 2022 were 15.2% compared to 15.6% in the same period of 2021.
Or 15, 2%.
Care to 15, 6% in the same period of 2021.
Adjusted EBITDA in the third quarter of 2022 was $455 3 billion.
Speaker 5: Ajasipita in the third quarter of 2022 was 455.3 million, representing an increase of 1.1% from the same period of 2021.
Representing an increase of one 1% from the same period of 2021.
Adjusted EBITDA in the third quarter of 2022 excluded share based compensation expenses of $35 2 million.
Speaker 5: Adjusted EBITDA in the third quarter of 2022 excluded share-based composition expenses of $35.2 million.
Adjusted EBITDA margin in the third quarter of 2022 was 25, 1% as compared to 28.9% in the same period of 2021.
Speaker 5: Adjusted EBITDA margin in the third quarter of 2022 was 25.1% as compared to 28.9% in the same period of 2021.
Our net loss attributable to ordinary shareholders.
The third quarter of 2022.
Speaker 5: Are net loss attributable to ordinary shareholders?
$425 2 million.
Speaker 5: in the third quarter of 2022 was 425.2 million.
Compared to a net profit of $156 2 million in the same period of 2021.
Basic and diluted loss were both 0.48.
Speaker 5: compared to a net profit of $156.2 million in the same period of 2021.
Per ordinary share.
Speaker 5: Basic and diluted loss were both
And both of $2 88 per eds.
Speaker 5: 0.48
Each represents six class a ordinary shares.
Speaker 5: per ordinary share.
Speaker 5: and both 2.88 for ADS.
Turning to our balance sheet as.
Speaker 5: Each ADS represents six Class A Ordinary Shares.
As of September 30th 2022.
The aggregate amount of the company's cash.
Speaker 5: Turning to our balance sheet.
Speaker 5: as of September 30, 2022.
Cash equivalents and restricted cash was $3 76 billion.
Speaker 5: The aggregate amount of the company's cash
Speaker 5: cash equivalents
Meanwhile.
Speaker 5: restricted cash was 3.76 billion.
Net cash generated from operating activities in the third quarter of 2022 was $607 4 million.
Speaker 5: Meanwhile...
Speaker 5: Net cash generated from operating activities in the third quarter of 2022 was $607.4 million.
Compared to $134 7 million in the same period of 2021.
Speaker 5: compared to 134.7 million in the same period of 2021.
Our capex in the third quarter of 2022 was $585 million.
Speaker 5: Our capex in the third quarter of 2022 was 580.5 million.
Moving to our financial outlook.
We are maintaining our outlook for the full year of 2022.
Speaker 5: Moving to our financial outlook, we are maintaining our outlook for the full year of 2022 with net revenues expected to be in the range of $7,250 million to $7,550 million.
Net revenues expected to be in the range of 7000 $250 million to 7000 $550 million.
And adjusted EBITDA.
Expect it to be in the range of 1000 $800 million to 1900 $50 million.
Speaker 5: An adjusted EBITDA expected to be in the range of 1,800 million to 1,950 million.
This concludes our prepared remarks for today operator, we're now ready to take questions. Thank you.
Speaker 5: This concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you.
Yes.
We will now begin the question answer session.
Speaker 6: Thank you.
A question. Please press star one one on your telephone.
Speaker 2: We will now begin the question and answer session. To ask a question, please press star 1 1 on your telephone.
Once again Thats star one one.
Please standby.
Speaker 2: Once again that's star 11.
Speaker 2: Please stand by.
First question.
Our first question comes from the line Yang Liu from Morgan Stanley . Your line is open.
Speaker 7: First question.
Speaker 2: Our first question will come from Yang Liu from Morgan Stanley . Your line is open.
Yang Your line is open.
Hello can you hear me.
Speaker 2: Yang, your line is open.
So I have one question regarding the future.
Speaker 8: Can you hear me?
Future Capex plan.
Given the company has already.
Speaker 8: I have one question regarding the future capex plan. Given the company has already decided to set up a JV with partner, how should we think about the future capex split or the stakes in the JV for the future expansion?
Do you guys have set up a JV.
With partner, how should we think about the future capex split or the stake in the JV.
For the future.
Expansion.
Yes, Hi, Jessica.
First question. Thank you.
Sure.
Okay in terms of the Capex plans, so I'll leave the question to the team.
Speaker 8: I just have this question. Thank you.
Speaker 6: Thank you.
To address.
Speaker 4: Okay, in terms of the CAFEX plans, I'll leave the question to the team. To address the cooperation with Changzhou, I would highlight my discussion on the winner will take 35% of the equity interest in the GV structure with Changzhou.
The cooperation with Changzhou highlight.
Highlight this.
For my comments.
Mike.
The discussion on the.
We will take that.
Certainly a 35% of the equity interest in the JV structure, we saw Changzhou, which is.
Should we choose.
We saw it kind of the strategic partnership.
Between the between the arena.
Speaker 4: which is kind of the strategic partnership between the VNet and the Changzhou High-Tech Genome Holding Group, a subsidiaries of a state-owned group to form a joint venture with us as of the 2 billion RMB. I mean, to give and say that and join on both companies' resource.
Youll GMO holding group a subsidiary of cellphone stay on growth.
Pro forma joint venture.
We saw it.
Two 2 billion RMB.
So given that given the let's say the join.
Joining me on the boat company has the resources and expertise.
Joint venture we will pursue.
Pursue new opportunities.
In the future, we'll acquire develop and operate.
Certain projects across the nation.
I mean.
<unk> initial pipeline.
A number of the high quality assets located in.
During the meeting area in the Greater Bay area, which is especially for the Bay area, which is.
Speaker 4: in the greater Beijing area and the greater Bay Area, which is, especially for the Bay Area, which is, I mean, kind of the strategic exposure to us since we have less exposure now. And this partnership also represents an important breakthrough in expanding our business horizon. For example, our future fund management.
Kind of the strategic exposure to us since we have less exposure to that.
This partnership also represents an important breakthrough in expanding our business horizon.
For example over future fund management and also strengthening our presence in this.
Digital infrastructure sectors.
Speaker 4: and also strengthening our presence in this digital infrastructure sectors.
Can you hear me.
Yes, I can get yes, okay.
So basically for the second part of the question I think youre asking a little bit in terms of the capex and impact of sort of Capex split.
Speaker 5: And can you hear me?
Speaker 5: Yes, I can. Basically, for the second part of the question, I think you were asking a little bit in terms of the capex and impact to sort of capex split. I think the company is looking at its overall capex spend. Obviously, the markets are challenging at the moment on the offshore side.
I think the company is looking at its overall capex spend obviously the markets are challenging at the moment on the offshore side, but I would stress that overall.
<unk> continues to enjoy very very strong support from the local onshore renminbi banks.
Speaker 5: I would stress that VNet continues to enjoy very strong support from the local onshore Roman B. Banks.
In terms of the project financing and other forms of financing available to us, but we are looking at the overall capex and.
Speaker 5: in terms of project financing and other forms of financing available to us, but we are looking at the overall capex and cooperations or joint ventures like the one that Jeff just mentioned I think are an important way for us to continue to be able to secure the resources necessary for our customers while at the same time perhaps moderating.
Cooperations are joint ventures like the one that Jeff just mentioned I think are an important way for us to continue to be able to secure the resources necessary for our customers.
While at the same time, perhaps moderating.
The cash spent on our site. So it really is an attempt to find ultimately.
Speaker 5: the cash spent on our site. So it really is an attempt to find ultimately.
The split between kind of these types of ventures and when it will depend on the target projects. So jeff's talked about some of the areas that are focused with changzhou.
Speaker 5: the split between these types of ventures and VNet will depend on the target projects. Jeff's talked about some of the areas that are focused with Tung-jo. For those types of projects, obviously then we would have a smaller share or smaller split. But the overall scale itself is also capped.
And so for those types of projects, obviously than we would have a smaller share us about the split.
But the overall scale itself is also capped so I'd say.
Keep watch over the space, but at the moment it is a way for us to diversify our funding sources.
Speaker 5: keep watch over this space, but at the moment it is a way for us to diversify our funding sources of it. Thank you.
Yes.
Reported follow up that's the.
The company will not put all the new pipeline that JV.
Speaker 8: May I follow up that the company will not put all the new pipeline in the JV, right? It is just a selective project to JV.
Yes.
Select him.
Project.
Jim.
That's correct that's correct there are targeted projects.
That will be put in so not the entire pipeline.
Speaker 5: That's correct. That's correct. There are targeted projects that will be put in, so not the entire pipeline, no.
Is there any.
Our overall strategy on room.
Speaker 8: Are there any...
What is the thought that what type of projects will be putting the.
Speaker 8: overall strategy or rule, what is the thought of what type of project will be put in the JV and what will be done by VNet itself or partner with other
JV will be done by yourself or partner with other.
Potential founding partner or yeah.
Yes.
Thank you.
Speaker 8: potential funding partner or other players. Thank you.
I'll I'll tackle this as well so Jeff just now mentioned.
Sort of greater Beijing area Greater Bay area.
Speaker 5: I'll tackle this as well. So Jeff just now mentioned sort of Greater Beijing area, Greater Bay Area. So those are two areas that we're looking at specific projects with Hangzhou on the JV.
So those are two areas that we're looking at specific projects, which have Joe on the JV.
Obviously that could expand but there is a limited pool of capital there as well. So that's the initial focus and there are already targeted projects that we're looking at with them.
Speaker 5: Obviously, that could expand, but there is a limited pool of capital there as well. So that's the initial focus. And there are already targeted projects that we're looking at with LiftUp.
So when did we have more details will be disclosed to the market.
Speaker 5: So when we have more details, we'll be short-disclosed to the market.
Thank you Moshe.
Most welcome.
Thank you one moment for our next question.
Speaker 9: Thank you. You're welcome. Thank you.
Speaker 2: Thank you. One moment for our next question.
Our next question comes from the line of Edison Lee from Jefferies. Your line is open.
Speaker 6: Thank you.
Speaker 2: Our next question comes from Edison Lee from Jeffries. Your line is open.
Edison lease from Jefferies. Your line is open.
Speaker 2: That is the name from Jeffries. Your line is open.
Hi.
Thank you very much for taking my question.
My first question would be very much targeting Jeff and I want to congratulate Jeff on that.
Speaker 8: Hi, thank you very much for taking my question. My first question would be very much targeting Jeff, and I want to congratulate Jeff on the question.
The covenant as CEO , but Jessica can you share with us.
Your.
Speaker 8: becoming the CEO . But Jeff, can you share with us?
Near term objectives and disposition.
And maybe also your longer term vision for the company.
Speaker 10: your
Speaker 8: near-term objectives in this position, and maybe also your longer-term vision for the company.
And.
I think some cornerstone investors can also find out.
What youll API.
Speaker 8: I think it's important for investors to also find out what your KPIs are and because there's a privatization deal going on right now, so I think investors definitely would like to find out in fact where the company is headed right under your leadership. So that's question number one. Question number two is about the Changzhou JV. I understand that JV is going to manage all the projects.
And because they're so prioritization deal coming on right now so I think investors definitely we would like to find out where the company is headed.
Leadership.
That's question number one question number two is about the travel journal JV.
I understand that.
To manage on a project that will be acquired by just chatter China JV. So I want to know operationally what are those dcs that will be applied by the changzhou JV will actually be.
Speaker 8: that will be acquired by this Changzhou JV. So I want to know operationally, what are those IDCs that will be acquired by the Changzhou JV will actually be integrated with VNet, and how does that work?
Speaker 8: So I want to know operationally what are those IDCs that will be acquired by the Changzhou JV will actually be integrated with VNet and how does that work. Thank you.
Integrated with <unk> and how does that work.
Thank you.
Okay. Thank you.
Speaker 4: Okay, thank you. First question, I would like to see my goal actually for the short term and try to, I mean, there's a couple of things. The first thing is in terms of the strategy, I will continue to strengthen our wholesale and retail dual core growth strategy.
First question I would like to see my my my goal actually.
For the short term any title.
Title.
A couple of things in the first half in terms of the strategy.
To strengthen our wholesale and the retail dual core growth strategy.
Second of all is tied to it.
Our operation optimize the overall operations and diversify our customer base.
Speaker 4: And second of all, it's try to improve our operation, optimize the overall operations and diversify our customer base. We will have some new customers such as the financial institutions and some new economy like the EV sectors, et cetera. And another thing is try to reach, we've done some restructure.
But we will have some new customers such as our financial.
Gotcha.
Economic.
Sectors.
Uh huh.
Another thing I tried to read when we've done some restructuring.
Our middle office.
To improve.
Improve our efficiency as well for the long term, we will do some.
Cost control.
And of course I'm quantity.
EBITDA increased.
As you mentioned on the further to address the first question.
Regarding <unk>.
Second question.
For the former Changzhou.
I think most of the people often.
Speaker 4: Your second question for Changzhou, I think most of the people are interested in this part. And I would say Changzhou cooperation is more like we team up together to identify some certain assets, and which is kind of the debt restructure on the target. So going forward we'll...
Interestingly as part.
I would say.
Cooperation a small like the we team up together to identify some certain ISS.
And the weakness kind of that restructure.
Targeted so so going forward, we will we will try to leverage.
Tangible platform on until we spend an hour an hour.
Speaker 4: we will try to leverage the Changzhou platform and to expand our EOM and our exposures going forward, which is the key to strategically position ourselves on this prospect. So that's my question.
Sure.
Speaker 4: and to expand our U.N. and our exposures going forward, which is a key to strategically position ourselves on this prospect. So that's my question. That's us.
Our exposure going.
Going forward.
Which which is a key to strategically position ourselves.
This prospect so so that's my question.
Thanks Ross.
Thank you Kevin for kind of a follow up.
Another question, which is well.
Speaker 8: Thank you, Jeff. Can I follow up with another question, which is, can you please answer the question?
Vienna is sound in your existing assets into this joint venture.
Okay.
Speaker 8: Will Veena be selling your existing assets into this drone venture?
Edison.
So Lisa.
Yes. These are new projects Edison. So we would not this is not a instrument where we would be.
Speaker 11: I don't think so.
Speaker 5: Yeah, these are new projects Edison, so we would not, this is not an instrument where we would be selling our existing pipeline into this entity. So there are new projects being identified and targeted. Jeff talked about sort of, you know, debt restrictions. These are also projects where perhaps there is an opportunity given the current owners of some of these projects.
Selling our existing pipeline into the side entity. So there are new projects being.
<unk> identified.
Targeted.
Jeff talked about sort of that research and these are also projects, where perhaps there is a an opportunity given.
Given the current owners of some of these projects.
And so we're teaming up with someone with the financial firepower to be able to take advantage of these opportunities.
Speaker 5: and so we're teaming up with someone with the financial firepower to be able to take advantage of these opportunities.
Okay. So let me clarify that so it seems that the capital comes back so much focus on brownfield projects.
Speaker 8: I see. So let me clarify that. So it seems that the Time Travel Convention will focus on brownfield projects, and so that's why V-Net will continue to focus on greenfield projects. So would that be an accurate thinking?
And so thats why we think we'll continue to focus on greenfield projects, so would that be an accurate.
Correct.
Okay.
The current targets, yes would be potentially a brownfield or otherwise, yes, so less greenfield.
Speaker 5: The current targets, yes, would be potentially a brownfield or otherwise, yes. So less greenfield projects.
Thanks.
Okay. Thank you, yes, what we won't be sounds like that pipeline into that entity itself.
Speaker 5: Okay, thank you. We won't be selling our pipeline into that entity itself.
Okay.
Yes. Thank you that's it for me thanks.
Thanks Allison.
Speaker 12: Okay.
One moment for next question.
Speaker 12: Thank you, that's it from me.
Next question comes from the line of.
Speaker 9: Thanks, Austin.
From UBS.
Speaker 2: One moment for next question.
Yes.
Speaker 2: Our next question is from Linus from UBS.
Hi, Thank you for the opportunity to ask the question. So I have one question. So I noticed that we have the lifestyle.
Speaker 3: Hi, thank you for the opportunity to ask a question. I have one question. I noticed that we have revised down the cabinet delivery plan. What's our latest cabinet budget for this year and next year? And also, as Justice mentioned, cost control is one of the long-term targets. Wondering if there's any
Kevin and deliberate plan.
What's our latest Capex budget for this year and next year and also.
Justice mentioned Qualcomm so it's one of the long term target. So I'm just wondering if there's any kind of target for being that to achieve positive free cash flow or yourself that Nancy.
<unk>.
Speaker 3: timeline target for VNet to achieve positive free cash flow or self-financing. Thank you.
Hi, sorry can you hear me.
Yes, okay. Okay I'll I'll take this range. So your first question was on cabinet delivery.
Speaker 13: Hi, can you hear me?
Speaker 5: Yes, we can. Yes, I can. Okay, good. I'll take this question. So your first question was on cabinet delivery. And for that, we are, as we mentioned, revising our cabinet delivery into the range of 8,000 to 9,000. And basically, the outlook for the rest of this year into next year, we've already factored in the overall macro softness that we've seen.
And for that we are as we mentioned.
Rising our cabinet jewelry into the range of eight to 9000.
And basically the outlook for the rest of this year into next year, we've already factored in the overall macro softness that we've seen.
And also the slower moving.
And then there are some construction delays related to COVID-19 related restrictions, but those are I would say less of a factor, but still a factor in terms of shifting perhaps this year into next.
Speaker 5: Also, the slower move in. And then there are some construction delays related to COVID related restrictions. But those are, I would say, less of a factor, but still a factor in terms of shifting perhaps this year into next.
In terms of our outlook.
Outlook in terms of 2023.
Give some more color in fourth quarter, but we're expecting the next year's delivery will be similar to this year, perhaps a little bit better.
Speaker 5: in terms of our outlook in terms of 2023. We'll give some more color in fourth quarter, but we're expecting that next year's delivery will be similar to this year, perhaps a little bit better.
What's your second question sure.
And so as the cost control is one of the long term target.
Speaker 9: What was your second question, Sarah?
Speaker 3: So as cost control is one of the long-term targets, so just wondering if there's any timeline target for VNet to achieve self-financing?
So just wondering if there's any timeline target for being that achieve self financing.
Okay like positive free cash flow yes.
So I think overall, if you look at our our financing plans right now there is a couple of things that we're focused on one is on the capex side, and obviously sort of cash out.
Speaker 14: or like positive potential.
Speaker 5: So I think overall if you look at our financing plans right now, there's a couple of things that we're focused on. One is on the CapEx side and obviously cash out. I would say that we're increasingly selective on our CapEx and sort of prudent CapEx spend.
I would say that were increasingly selective on our capex.
Put in Capex spend.
We do also still have very strong support from the domestic banks onshore financing.
Speaker 5: We do also still have very strong support from the domestic banks onshore financing and then alternative financing in terms of the Changzhou Corporation as well as exploring onshore reach structures. And then last but not least, when you're looking at our overall ramp up, you continue to see the billable cabinets increasing.
And then alternative financing.
Changzhou Corporation as well as exploring onshore REIT structures.
And then last but not least you know when you.
Looking at our overall ramp up.
We continue to see the billable cabinets increasing.
I would say that just given all these things put together probably targeting 2024, I think next year still will be quite challenging just given the fact that we were still targeting something in the range of three.
Speaker 5: I would say that given all these things put together, probably targeting 2024, next year still will be quite challenging given the fact that we were still targeting something in the range of $3.5-4Bn of CapEx. Some of it we can moderate with these corporations.
Three and half to $4 billion of Capex, but again some of it we can moderate with these corporations.
Got it thank you.
Speaker 14: Got it. Thank you. Welcome.
One moment for next question.
Our next question comes from the line of Ethan Zhang from Nomura. Your line is open.
Speaker 2: One moment for our next question.
Speaker 2: Our next question comes to the line of Ethan Zhang from Nomura. Your line is open.
Ethan Zhang from Nomura Your line is open.
Oh, sorry.
Thanks. My question is I looked at our first quarter EBITDA margin was down.
Speaker 2: Your line is open.
Speaker 8: Oh, sorry. Thanks. My question is, I note that our first quarter EBITDA margin was down like three percentage points compared to QQ or Q3 of last year. Just wonder, could management give us some breakdown or quantitative impact of different negative factors that affect our EBITDA margin and what is the impact?
<unk> points compared to a <unk> or search of last year's just wonder can management give us some breakdown or quantitative.
Impacts of different negative factors.
Affect our EBITDA margin and what is the.
Outlook for the EBITDA margin for next year. Thank you.
Speaker 8: outlook for the EBITDA margin for next year. Thank you.
Hi, Ethan.
I am here in terms of overall EBITDA margin actually we've.
Speaker 5: Hi Ethan, it's Tim here. In terms of overall EBITDA margin, actually the company has been working quite hard on cost controls because we have seen during the course of this year obviously costs like utilities and so forth going up but we've managed to moderate that with some cost controls and also deferral of costs.
The company has been working quite hard on cost controls because we have seen during the course of this year, obviously costs like utilities, and so forth going up.
But man.
Managed to moderate that.
With some cost controls and also deferral of causes.
For third quarter.
Terms of the next year and expectations I think that we expect that the margin compression.
Speaker 5: for third quarter. In terms of the next year and expectations, I think that we expect that the margin compression will also then flatten out, but it will depend on the overall continued ramp up of the business and that there will be no further changes to our underlying cost of sales.
We'll also then.
Now but.
But it will depend on the overall continued ramp up of the business.
And that there will be no further changes to our underlying cost of sales.
Well, we'll have some more details on fourth quarter in terms of our views as we end this year.
Thank you got it.
Speaker 5: We'll have some more details in fourth quarter in terms of our views as we end this year.
Speaker 5: We'll have some more details in fourth quarter in terms of our views as we end this year. Thank you.
Got it got it thank you.
Thank you one moment for our next question.
Speaker 2: Thank you. One moment for next question.
Our next question comes from the line of Alex Wang from Daiwa. Your line is open.
Speaker 2: Our next question comes from Alex Wang from Daiwa. Your line is open.
Alright.
Yes, very clear.
Speaker 15: Yeah, sorry, can you hear me?
Okay.
We will have from daiwa.
Speaker 14: Yep, very clear.
For the first two questions so far.
Speaker 15: Okay, yeah, it's Rohan from Dava. So, first two questions. So first is, we've got more about estimated capex for all our existing unfinished projects within our pipeline. And second question is, could you share more color on that repayment issue and the pressure from potential lingering debt? Thanks.
Thanks, guys.
More about the estimated capex for all of our own finished approach activating our pipeline.
Second question.
Could you share more color on that repayment to Asia, and a cracker from Bob Potter Cozy and growing that.
Sure. Let me take your second question first in terms of repayments, we have a small.
Outstanding convertible note that's coming up.
Our next year.
First half.
Around $70 million.
U S dollars and then our next.
Maturity bump will be or $600 million CB.
That's something that we have already started planning for.
Speaker 5: our 600 million CB. So that's something that we have already started planning for and will be tackling during the course of 2023.
And we'll be tackling during the course of 2023.
In terms of your second question.
Youre talking about Capex on our outstanding.
Speaker 5: In terms of your second question, you're talking about CapEx on our outstanding MOU.
Outstanding Mou.
Projects or what what do you mean by <unk>.
Have capex spend this year, obviously for projects that we are delivering in 2023.
Speaker 5: projects or what do you mean by we have CapEx spend this year obviously for projects that we're delivering in 2023. But we also then have
But we also then have.
The continued development of new projects as well so just wanted to clarify your question.
Speaker 5: the continued development of new projects as well. So, just wanted to clarify your question.
Yes, that's excluding the partnership with the Changzhou, Yeah. So whats the estimated capex for our existing I'll finish the projects that we're doing our own peptide in the next three years.
Speaker 15: Yeah, just excluding the partnership with Chengzhou. So what's the estimated capex for our existing unfinished projects within our own peptide in the next three years?
Hum.
Probably won't be to give you in the next three year guidance.
Guidance here, we have actually more than one of these tongue Joe types of.
Speaker 5: I probably won't be able to give you the next three year guidance here. We have actually more than one of these Tangzhou types of projects under discussion. What I can tell you is that what we're looking at for next year is probably a similar CAPEX level as this year and it includes the remaining deliveries for this year.
Projects under discussion so what.
What I can tell you is that.
What we're looking at for <unk>.
Next year is probably a similar capex level as this year and that includes the remaining <unk>.
<unk> for this year.
For deliveries in 'twenty, three and obviously preparations next year for deliveries in 'twenty four in terms of the powering structure and so forth.
Speaker 5: for deliveries in 23 and obviously preparations next year for deliveries in 24 in terms of the power infrastructure and so forth. We'll probably come to you offline and have some discussion on the general parameters for the coming three years. But obviously, as we continue to get new MOUs each quarter, that number will change and shift. So we'll have to rerun those numbers as well because we've just had a couple of new MOUs.
Probably.
Come to you offline and have some discussion on the general parameters for the coming three years, but obviously as we continue to get new mou's each quarter that number will change and shift.
So we will have to rerun those numbers as well because we've just had a couple of new Mou.
Thank you.
Okay. Thank you.
Speaker 5: Thank you.
Thank you.
Speaker 6: Thank you. Okay, thank you. Okay, thank you.
That's all the time, we have for Q&A today, ladies and gentlemen that concludes our conference for today. Thank you for participating you may now disconnect everyone have a great day.
Speaker 2: Thank you. That's all the time we have for Q&A today, ladies and gentlemen. That concludes our conference for today. Thank you for participating. You may now disconnect. Everyone have a great day.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
Speaker 1: The conference will begin shortly. To raise your hand during Q&A, you can dial star 11.
[music].
Okay.
[music].