Q1 2023 VNET Group Inc Earnings Call
In listen only mode. After management's prepared remarks, there'll be question and answer session.
Put distance from all management include Mr. Jeff <unk>, Chief Executive Officer, Mr. <unk>, Chen Chief Financial Officer, and missing <unk> Investor Relations director of the company.
Please note that todays conference call is being recorded.
Speaker Change: I would now like to turn the call over to first speaker today mid single new.
Speaker Change: Go ahead.
Speaker Change: Thank you operator, Hello, everyone and welcome to our first quarter 2023 earnings Conference call.
Speaker Change: This release was distributed earlier today, I mean kind of find a copy of our avid side, that's what I was.
Our newswire services.
Speaker Change: 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 1995.
Speaker Change: Forward looking statements are subject to risks and uncertainties.
Speaker Change: May cause actual results to differ materially from our current expectations.
Speaker Change: For detailed discussions of these risks and uncertainties. Please refer to our latest annual report and other documents filed with the S. E C b.
Speaker Change: <unk> does not undertake any obligations to update any forward looking statements, except as required under applicable laws.
Speaker Change: Please also note that BNS earnings press release, and this conference call include the disclosure of unaudited GAAP financial matters as well as Oh did it non-GAAP financial matters.
Speaker Change: Venice earnings press release contains a reconciliation of the unaudited non-GAAP measures to the audited got matters.
Speaker Change: As a reminder, this conference is being recorded in addition, well that path of this conference call will also be available on our upside at October <unk> Dot com.
Speaker Change: Now I'll turn the call over to our CEO Jeff.
Jeff: Thank you again.
Jeff: Morning.
Jeff: Everyone. Thank you for joining our call today I will start with an overview of our first quarter results.
Yeah.
Jeff: I'll turn the call over to Tim our CFO, who will discuss our financial results and outlook in more detail.
We got off to a great start in 2023 with a solid first quarter performance. Thanks to our effective nucor growth strategy and competitive service offerings in.
Jeff: In the fourth quarter with Christianly ended one 300 utilized cabinets growing our overall utilization rate to 56, 5% from 55% last quarter total cabinets under management reached $87 310 by the end of the first quarter comparable.
Jeff: With approximately 78960.
One year ago, notably our retail MMR per cabinet reached a record high of RMB.
Jeff: 486 during this quarter up from RMB 371 in the first in the previous quarter.
Jeff: First quarter revenue of RMB 181 billion represented an increase of nine 7% year over year and adjusted EBITDA grow about 10% year over year to reach RMB $556 2 million, demonstrating our ability to drive stable growth amid China's steady.
Jeff: Post pandemic recovery.
Jeff: Before I talk more about our business results I want to share some color on the broader bankroll climate.
Jeff: The official statistics show Chinas GDP grew four 5% year over year for the first quarter exhibiting a good clear post pandemic recovery path.
Jeff: With the digital economy and post to become China's key growth driver in the coming years. China's government is diligently advances digital China vision.
Jeff: Is the strategic efforts, including taking forward looking steps in building digital infrastructure.
Jeff: Fostering more innovation and value creation, and a platform economy and accelerating digital transformation across a broader swath of economy and the general population. According to the NBRC Cumulus context advanced infrastructure facilities, such as <unk> connectivity.
Jeff: And data centers will serve as a strategic cornerstones for the development of the digital economy fulfilling growing demand from a broad spectrum of industries, including Internet players as well.
Jeff: Traditional industries as a leading player in China's IDC space, we are well positioned to provide ever improving services for customers and seize opportunities arising from the favorable policy landscape and digital economy boom.
Jeff: Now, let's take a closer look at our first quarter business update.
Execution of our dual core strategy continuing to prove strongly effective in both the wholesale and the retail IDC markets.
Jeff: Our wholesale source offerings continue to gain traction are more leading internet players during the quarter as we mentioned during our last earning call in the first quarter. We won the bid for a new customer one of China's Internet Giants to deploy ITC services to support business expansion through our.
Jeff: <unk> assets located in the <unk> Delta region. The overall project will total more than 100 megawatts and be delivered in multiple phases.
Jeff: The project is now progressing smoothly and the initial phase of the Companys will be delivered by the end of this year as scheduled.
Jeff: This project once again exemplifies our compelling value proposition and our service capabilities for our wholesale customers.
Jeff: Moving on to our retail business in today's business operating environments companies of all size and sectors are pursuing digital transformation with increasing urgency our high quality scalable retail IDC service offerings are attracting more and more enterprise demanding fast reliable and secure.
Jeff: To access to facilities or digital transformation agendas.
Jeff: In the first quarter growing demand from call services media and traditional sectors drove an expansion in our number of new customers as.
Jeff: In time, we continue to win extended orders from existing customers across a variety of industries, including local services IP services online gaming and financial services our.
Jeff: Our comprehensive service offerings on the customized solutions create an excellent service experience for customers.
Solidifying our customer loyalty and boosting our overall.
Jeff: Positive news.
Jeff: Next I want to share an update on the <unk> business.
Jeff: April Microsoft and our Blue call jointly launched Microsoft teams, one of Microsoft's 66365 core modules for the Chinese market together with office 365.
Jeff: Gross op team will be operated under Microsoft 365 by our Blue call in China, bringing more robust and efficient functionality supported by Blue calls secure and reliable cloud services.
As Chinas digital transformation accelerates will leverage brookhouse call operational expertise and decade long strategic partnership with Microsoft to further unlock is a unique value proposition.
Jeff: Last but not least I'd like to provide an update on our ESG performance, which is an important part of our growth and long term value creation philosophy.
Jeff: Last month, we released our third annual ESG report detailing our 2022 ESG initiatives and outcomes.
Jeff: Clothing third party verification of our carbon inventory results. We also highlight our achievements such as our average annual <unk> of.
Jeff: 137 are green power purchase agreement with a supply guarantee of Approx 500 million kilowatt hours over the next five years and an increasing our percentage of female employees in management positions to 29% going forward, we will continue to deepen our.
Jeff: ESG engagement and embraced our responsibility to deliver sustainable value to our shareholders.
Jeff: In summary, our solid first quarter performance underscores our core strengths and execution capabilities with Chinas post pandemic economic recovery well underway alongside Paul from policies.
Jeff: Polyface designed to both the digital economy.
Jeff: We are optimistic about the domestic IDC serves the industry's growth prospects for the rest of the year, we will remain committed to our effective Duke local strategy focusing on our core business by providing our retail and wholesale customers with reliable on the customizable services, while fulfilling Inc.
Jeff: <unk> digital demand to facilitate digital transformation across the verticals. Thank.
Speaker Change: Thank you everyone I will now turn the call to the team to discuss our financial performance for the quarter on our business outlook.
Speaker Change: Thank you very much Jeff good morning, and good evening everyone.
Speaker Change: Before we start the detailed discussions of our financials. Please note that we will present non-GAAP measures today.
Speaker Change: Our non-GAAP results exclude certain noncash expenses, which are not part of our core operations. The details of these expenses maybe found in the reconciliation tables included in our earnings press release.
Please also note that unless otherwise stated all the financials. We present today are for the first quarter of 2023 and in Renminbi terms.
Speaker Change: Now, let me walk you through the first quarter financial results.
Speaker Change: Otherwise specified the growth rates I'll be reviewing are all on a year over year basis.
Speaker Change: We delivered solid results in the first quarter amidst a steady.
Speaker Change: Pandemic recovery in China.
Speaker Change: In the first quarter, our net revenues increased by nine 7% to $1 eight 1 billion for the same period last year.
Speaker Change: Mainly driven by the continued growth of our IDC business as well as our cloud and VPN services.
Speaker Change: Gross profit was $352 4 million in the first quarter of 2023.
Speaker Change: Presenting a decrease of 0.9% from the same period of 2022.
Speaker Change: Gross margin was 19, 5% in the first quarter of 2023 compared to 21, 6% in the same period of 2022.
Adjusted cash gross profit, which excludes depreciation amortization and share based compensation expenses was.
Speaker Change: $754 3 million in the first quarter of 2023.
Speaker Change: An increase of 10, 1% from the same period of 2022.
Speaker Change: Adjusted cash gross margin in the first quarter of 2023 was 41, 8% compared to 41, 6% in the same period of 2022.
Speaker Change: Adjusted operating expenses, which exclude share based compensation expenses and compensation for post combination employment and an acquisition were $228 8 million in the first quarter of 2023.
Speaker Change: Two $208 million.
Speaker Change: In the same period of 2022.
Speaker Change: As a percentage of net revenues adjusted operating expenses in the first quarter of 2023 were 12, 7%.
Compared to 12, 2% in the same period of 2022.
Speaker Change: Adjusted EBITDA in the first quarter of 2023.
Speaker Change: With 556.2 million representing.
Speaker Change: Representing an increase of nine 9% from the same period of 2022.
Speaker Change: Adjusted EBITDA in the first quarter of 2023 excluded share based compensation expenses of $8.3 million.
Speaker Change: Adjusted EBITDA margin was 38%.
Speaker Change: In both the first quarter of 2023.
Speaker Change: And 2022.
Speaker Change: Our net income attributable to ordinary shareholders in the first quarter of 2023 was $82.3 million.
Speaker Change: Compared to a net income of $97 million in the same period of 2022.
Speaker Change: Basic and diluted earnings were 0.09.
Speaker Change: <unk> 0.07.
Speaker Change: For ordinary share respectively.
Speaker Change: And 0.54.
Speaker Change: 0.42.
Speaker Change: Per avs, respectively.
Speaker Change: Each eds represents six class a ordinary shares.
Speaker Change: Turning to our balance sheet.
Speaker Change: As of March 31st 2023.
The aggregate amount of the company's cash cash equivalents and restricted cash was $3 to $4 billion.
Speaker Change: Meanwhile, net cash generated from operating activities in the first quarter of 2023.
Speaker Change: It was $455 million.
Speaker Change: Compared to $482 6 million in the same period of 2022.
Speaker Change: Our capex in the first quarter of 2023.
Speaker Change: With $611 million.
Speaker Change: Next.
Speaker Change: Moving to our outlook.
Speaker Change: For the full year of 2023.
Speaker Change: Our outlook remains unchanged with.
Speaker Change: With net revenues expected to be in the range of 7000 600 million to 7000 $900 million.
Speaker Change: Representing a year over year increase of seven 6% to 11.8%.
Speaker Change: And adjusted EBITDA to be in the range of 2000 25 million to 2120 $5 million.
Representing a year over year increase of eight 1% to 13, 5%.
Speaker Change: Looking forward, we will continue to explore new opportunities arising from the robust digital demand and.
Speaker Change: To further strengthen our presence as a leading IDC player.
Speaker Change: As always we are dedicated to delivering sustainable value to all of our stakeholders in the long run.
Speaker Change: This concludes our prepared remarks for today.
Speaker Change: Operator, we're now ready to take questions.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: To ask a question. Please press star one one on your telephone.
Speaker Change: To withdraw your question. Please press star one one again.
Young No: Our first question comes from the line of young no from Morgan Stanley. Please ask your question Yeah.
Young No: Thanks for the opportunity.
Young No: I have three questions here. The first one is about the demand and are moving.
Young No: We see steady improvement of the utilization rate in the first quarter.
Young No: Management believes that.
Young No: Overall customer moving.
Young No: We'll continue to improve further in some quarter.
Young No: We have this question because of the overall macro.
Young No: Data.
Young No: <unk> done a little bit in April so that's why I think there was some concern on the overall demand side.
Young No: <unk> share with us the latest observation in the operation right.
Second question is that are we observed a few.
Young No: Public cloud vendors cutting their price or unit price recently in the market.
Good.
Young No: What is the management's view.
Young No: In terms of the.
Speaker Change: Got it.
Speaker Change: Is this kind of a price action transferring to data center.
Speaker Change: No matter from the volume demand perspective, or from the pricing pressure or whatever.
Speaker Change: Have a commercial negotiation perspective.
Speaker Change: That's the second question. So the question is.
Speaker Change: We are glad to see that as the company introduced Microsoft teams in China and.
Speaker Change: What makes.
Speaker Change: The market more excited is that.
Speaker Change: Microsoft.
Launch of office co pilot.
Speaker Change: Arena have any plan to introduce the new generation of AI product.
Speaker Change: Two China. Thank you.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Hi, Jeff.
Speaker Change: Yes, let me let me give you some colors on the.
Speaker Change: On the other answer the questions you just not the first one is a boy.
Speaker Change: All of those demands.
Speaker Change: We are glad as we.
Speaker Change: As we keep repeating.
Speaker Change: Actually from the macro sites.
Speaker Change: Such as China, reopening and favorable regulatory environments like supporting the development of <unk> platform economy on digital economy, we have seen kind of the channel is.
Speaker Change: Being recovered from the market.
Speaker Change: To be honest.
Given given the given the facts.
Speaker Change: So the real market, we need to be.
Speaker Change: More patients for the market to warm up.
Speaker Change: No.
Speaker Change: It will be to wait to be fully recovered from the from the market.
Speaker Change: And lastly, as we as we mentioned.
Speaker Change: We have already.
Speaker Change: A large <unk> large order actually from the marquee as well, which is a signal.
Speaker Change: We have the ability.
Speaker Change: The market has already recovered, especially from.
Speaker Change: So almost all of the customer and a lack of the short video players instead of the other call.
Speaker Change: Cloud service players.
Second question.
Speaker Change: Regarding the <unk>.
Speaker Change: <unk> service profile.
Players. So you just mentioned Prescott.
Speaker Change: The answer is some.
Speaker Change: Observations, we can share with you. The first I will see you don't know we don't have any direct competition with those.
Speaker Change: Those players are.
Speaker Change: Regarding our price cost as we have a different customer base.
Speaker Change: Secondly.
Speaker Change: The company is that we are in several sectors like financial services.
Speaker Change: You may be able to use IDC DSL or a public cloud to meet compliance requirements I'll take an example, we recently signed contracts with Morgan Stanley.
For example, the only can do with <unk>.
Speaker Change: IDC instead of a call.
Speaker Change: And in the past.
Speaker Change: In terms of pricing.
Speaker Change: All of the all the pricing we have assigned already been determined in the contract as well so.
Speaker Change: We don't see any.
Immediate or direct.
Speaker Change: Feedback actually from from there or Prescott.
Yes.
Speaker Change: Actually my question is it really.
Speaker Change: Is that true do you seeing because we are a price cut will generate more business volume to overall public call and then transfer to.
Do you see suppliers.
Speaker Change: Yes, yes, yes.
We think that that will be probably true when we agree with.
Thank you.
Speaker Change: Alright, thank you.
Speaker Change: Sorry, I hope by the third.
Speaker Change: Yes, yes, yes in terms of the Microsoft.
Speaker Change: I would see.
Yes.
The blue call on the Microsoft.
We we recently launched.
Speaker Change: India and China.
Speaker Change: Yes.
We would expect.
Speaker Change: So the enterprises, we will build on the integrated modern office management system.
Speaker Change: And.
Speaker Change: Intelligent scalable cloud collaboration platform to help us.
Speaker Change: Those customers operate operationally.
Speaker Change: What are we looking for in terms of the.
Speaker Change: Uh huh.
Speaker Change: Well we have.
Speaker Change: We will have.
Speaker Change: From from teams.
Speaker Change: We will see we will see see what we can do in terms of the income and also for the.
Speaker Change: The additional products.
From the from teams going forward.
Speaker Change: We will keep the keep the monitoring and see what we can after we launched.
Speaker Change: We will see.
Speaker Change: We can give them to the market immediately.
Speaker Change: Okay.
Thank you.
Speaker Change: Thank you.
Our next question comes from the line of Adam.
Sydney Lee from Jefferies. Please ask your question Edison.
Okay, Hi, Nolan.
Speaker Change: Management.
Three questions. The first one is in the.
Speaker Change: The first quarter at 1400 neutralized happiness.
Speaker Change: Can you share with us the split between retail and wholesale and what sort of demand you are seeing from retail versus wholesale so far.
Speaker Change: Number two is the.
Number two it's been borne RBC business can you ask can you share some color on this.
Speaker Change: Growth of the Microsoft with Us.
Speaker Change: The VPN business, so far and what is your outlook for the rest of the year.
Speaker Change: Number three is on your.
Speaker Change: Phoebe.
Speaker Change: That will be applicable next year.
Yes.
Speaker Change: Whether you have a plan or what are you thinking of in terms of the refinancing.
Speaker Change: The STB.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you Edison, Let me, let me take a crack at this and then I'll have Jeff add additional comments from his side as well in terms of the additional billable cabinets.
Speaker Change: I would say that the majority of those additional cabinets are coming from the wholesale business, but.
Speaker Change: But that is also not.
Speaker Change: A surprise given the fact that those customers do ramp up in larger volume.
Speaker Change: In terms of cabinets as compared to our smaller scaled enterprise customers.
Speaker Change: So again, it's driven largely by the wholesale customers adjust earlier on I.
Speaker Change: I talked about and we've mentioned for the last few quarters already.
A bifurcation in the wholesale customer as well between the cloud service provider customers versus the large internet companies and I think that again, you've seen I would say more.
Speaker Change: <unk> ramp up.
A faster ramp up with regards to their large internet companies.
Speaker Change: So that would be comprising the wholesale side does that split.
Speaker Change: For the non IDC business outlook.
Speaker Change: There is continued growth.
Speaker Change: In that business, obviously, you've seen that Microsoft has launched landed new products.
Speaker Change: And so we do expect that that will continue to grow.
Speaker Change: And as that business grows then obviously, our blue cloud related business will grow as well.
Speaker Change: And then in a similar fashion.
Speaker Change: Last but not least.
Speaker Change: Much aware of the market's questions around the upcoming STB.
For next year, the $600 million SCB, we have already received the requisite to N D. R C approvals.
Speaker Change: And we actually have a number of both onshore renminbi as well as offshore you stall or alternative solutions in progress.
Speaker Change: As soon as we have further details we will then announce them to the market Jeff I don't know if you wanted to add anything else so with regards to the.
Jeff: Retail wholesale growth or the non IDC business outlook.
Jeff: Yes.
Jeff: I think the team has already come.
Jeff: Covered most of the part I just add on that.
Jeff: In terms of new.
Jeff: Added billable companies.
Jeff: Continually mainly from from wholesale wholesale business as well in terms of the revenue percentage we cover.
Jeff: 30% from the from the hotel and 70 more from the retail in terms of the capacity on the <unk>.
Jeff: <unk> covenant.
Jeff: It's about 40% from the falling from the hotel and 60% from our retail.
Jeff: And for the Microsoft teams.
Jeff: Yes.
Jeff: I would say, it's a really very positive signals to us.
Jeff: And we will see.
Jeff: But we'll see.
Domestic.
Jeff: Which are required to product compute empower for training demand from those models will boost for data centers.
Jeff: In a low tier areas as the latency is not a major concern going forward. So I assume that's probably one of the positive things going forward and also the higher level of the intra data center communication, what we call It cross connection.
Jeff: So I mean as one of the unique advantages.
Jeff: Enterprises utilize the interconnect connections to reduce latency.
Jeff: So continuously trained on the new data SaaS for improved accuracy and the response with with all the information.
Jeff: We would think about this lease probably.
Jeff: Next direction for the data centers as well so that's some comments I can share with you on the Microsoft teams.
Speaker Change: Okay. Thank you Jeff is it possible to talk about the growth rate of the non RTC business in the first quarter.
Thanks.
Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Alright can you hear my question Tim.
Speaker Change: Sorry, you were saying the growth rate of the non <unk> businesses.
Speaker Change: Yes in the first quarter possible some color on.
I mean, we don't give the segment breakdown, but I would say that the growth rate probably would be somewhere in the high single digits.
Speaker Change: Okay.
Speaker Change: Expect that to be similar in the rest of the year.
Speaker Change: Difficult to say at this moment, because again, if youre looking at the non IDC business, you're looking at the VPN business, but also the Microsoft side.
Speaker Change: And I think that that is the Microsoft side, we do have less visibility I mean do you have visibility around.
Speaker Change: The growth of the underlying business, but only as it is shown to us. So so again, we don't have that and connection to the end customer rate in terms of Microsoft's final visits so.
Speaker Change: Hard to say at this moment, but I would say if you look at the overall trend first quarter. It's still early in trying to still coming out of Covid.
Speaker Change: I think after another quarter or so we probably will have a much better gauge. If this is going to accelerate or flatten at the same levels or decelerate in terms of the growth.
Speaker Change: So we'll have a better idea probably next quarter.
Speaker Change: Okay. Thank you.
Speaker Change: Yeah.
Speaker Change: Alright, thank you.
Speaker Change: Our next question comes from the line of Eden Zhang.
Eden Zhang: From Nomura. Please ask your question either.
Okay. Good morning management I have one question. So I know that your retail MA has been continuously.
Eden Zhang: Included.
Eden Zhang: Since second quarter of last year until we're there was around 5000 RMB. So just wonder what's the driver behind the <unk>.
Eden Zhang: Sequential improvement in our retail MLR.
Eden Zhang: And also could management give us more colors on.
Eden Zhang: Our wholesale <unk> and what's your expectation on what the future trend forward pricing. Thank you.
Speaker Change: Okay, let.
Speaker Change: Let me take the first one and then I'll see if Jeff has some color on the second in terms of retail MLR.
Speaker Change: I mean, I think we've always talked about the fact that we expected the MLR to be north of 9300, or so and I think if you look at historical data, it's been up and down at certain quarters I think in this quarter in particular, I would say there'll be two key factors.
Speaker Change: The first is that there are additional.
Speaker Change: Value added services.
Being added by.
Speaker Change: By existing customer cabinets.
Speaker Change: So as an example, you have increase in O&M services from customers so that.
It does not increase the total number of underlying cabinets, you're dividing by but rather increasing the top the revenue side. So obviously the MLR for the overall retail cabinets will go up.
Speaker Change: Secondly is that the new cabinets that we are adding.
Speaker Change: Our higher MLR cabinets that again, there is a demand.
Speaker Change: For the co location and value added services from our customers and so that is another trend I would say less than the first one. The first one is I would say a bigger driver for this quarter is really customers, adding two already.
Speaker Change: Our suite of services.
Speaker Change: That are being offered by <unk>.
Speaker Change: And therefore, I, increasing overall MLR for the segment as a whole.
Speaker Change: For I guess pricing on the on the wholesale side and kind of where we see it going maybe I'll pass that to Jeff.
Jeff: Some comments there.
Jeff: Yes in terms of the MLR on the wholesale side I would.
Jeff: I would answer pharma to two aspects one is from the.
Jeff: From the market as supply sites.
Jeff: A lot of the smaller players has been capital starved recently, especially since last year.
Jeff: Actually.
Jeff: How is the slowdown on the supply side as well.
Jeff: And the larger players like us.
Jeff: We saw some of our other peers. We have also scaled back for the market to make sure. We match the supply side, which is less of one was one thing we would see from a supply demand side.
Jeff: And also in terms of pricing.
Jeff: Alder on.
Jeff: We do see you know.
Jeff: I just wanted to be for the MLR on the wholesale side that is trend down.
Jeff: A little bit by the way.
Jeff: Especially from our <unk>.
Jeff: Our analysis, we can.
Jeff: We can see even though.
Jeff: We you know we see just finally seems to the starting from 2023, we see.
Jeff: Some of the recovery signal it's actually.
Jeff: It's come up from a low.
Already it was a year.
Jeff: No.
Jeff: There were a few smaller players in the market, especially I know.
Jeff: Some established players like us are being more cautious about the cash spending.
Jeff: That'd be aside we don't primarily to go after the cost deals.
Jeff: On the cost which is you know.
<unk>.
Jeff: To some extent.
Jeff: The pricing will be stable.
Jeff: Yes.
Jeff: Certain level.
Jeff: And going forward from our side the way you would do.
Jeff: To better cost control and also to improve our efficiency to compromise any any up and down from the marketing side.
Speaker Change: Thank you.
Speaker Change: Great. Thank you.
Our next question comes from the line of.
Speaker Change: Justin Huang from UBS. Please go ahead gentlemen.
Speaker Change: Alright.
Justin Huang: My question I've two questions.
Justin Huang: The first one on <unk>.
Justin Huang: So I'm wondering if you have any.
Justin Huang: Hum.
Justin Huang: The man.
Justin Huang: I saw rates moving.
Justin Huang: Yeah.
Justin Huang: All right.
Justin Huang: And my second question is on the margin.
Justin Huang: I noticed your Q1.
Justin Huang: So I'm wondering what's the reason behind.
Justin Huang: Maybe.
Speaker Change: Hello, Amit.
Speaker Change: All right. Thank you.
Speaker Change: Hello.
Speaker Change: Okay.
Speaker Change: Hi, gentlemen.
Speaker Change: Yes, sorry can you hear me, yes, yes, yes, yes.
Speaker Change: So to your question on the church BT is whether or not you've seen increase we've seen increased customer demand.
Okay.
Speaker Change: Yes, I would say, it's probably still early stage.
Speaker Change:
Speaker Change: And in terms of the direct impact.
Speaker Change: There are customers that have announced obviously to the market that they are developing.
Speaker Change: Our relevant products and services.
Speaker Change: A link to.
Speaker Change: M a C.
Speaker Change: Having said that I would say that it has not yet turned into a very tangible new tenders and so forth around that product. So I would still say its quite early stage.
Speaker Change:
Speaker Change: Secondly in terms of the EBITDA margins.
Speaker Change: For first quarter actually as we mentioned in our earnings release as well it did also exceed our own.
Speaker Change: Internal forecast and expectations and then there are a couple of our key drivers.
Speaker Change: One is.
Speaker Change: There are and this is there is a seasonality aspect as well in the first quarter are there are certain nonrecurring.
Speaker Change:
Speaker Change: Revenues.
Speaker Change: That come in or or benefits from that.
Speaker Change: That impact in a positive way the EBITA and therefore the margins.
Speaker Change: We also did see some costs.
Speaker Change: That were actually delayed from first quarter into.
Into second quarter, and so what you will probably see is us.
Speaker Change: Slightly higher than expected margin in the first quarter.
Speaker Change: As compared to if you look at your modeling.
Speaker Change: A little lower than what we expected for the second quarter and Thats purely just a timing.
Speaker Change: Issue.
Speaker Change: Which is relevant still is we've been going.
Speaker Change: Going through quite a challenging time in our industry and so we have very much focused on cost controls.
Speaker Change: So on our utility side.
Speaker Change: And cost management side.
Speaker Change: We have been.
Speaker Change: Newly rolling out a new <unk>.
And so that's a positive again to the margin.
Speaker Change: So yes, I'd say in terms of your overall question is in line with last year, but I think there are a number of factors.
Speaker Change: And then again higher than what we had expected does that help to answer your question Jonathan.
Speaker Change: Yes.
Speaker Change: Youre most welcome.
Speaker Change: Now let me let me let me give you some colors on AIA demand.
Speaker Change: Demand as you mentioned.
Speaker Change: We do see you know as a.
Speaker Change: Chan from base.
Speaker Change: Phase <unk>.
Speaker Change: Tomorrow as well mainly from our retail side.
Speaker Change: Let's take example, we recently, we we got some feedback from our from our Beijing government agencies, especially around the Bay area.
Speaker Change: <unk> customers, we saw AI related of computing needs. These are very strong.
Speaker Change: Finally from a retail side, we are we are.
Speaker Change: Keep in dialogue with some of the customers with AI.
Speaker Change: Basically in nature.
Speaker Change: But we havent see.
Speaker Change: Much demand is actually from the wholesale side.
Speaker Change: Okay.
Speaker Change: Alright, Thank you very much for your questions and with that ladies and gentlemen, we conclude our conference for today. Thank you.