Q3 2024 VNET Group Inc Earnings Call
Remarks, there will be a question and answer session.
Now the Chinese line is in listen only mode. If you wish to ask questions. Please dial in through the English line.
Participants from our management include Mr. Kevin Chen rotating president Mr XI Wang Chief Financial Officer.
Mr. Zhu MA Executive Vice President.
Mr XI Yang Senior Vice President.
Speaker Change: She one layer Investor relations director of the company.
Speaker Change: Please note that today's conference call is being recorded.
Speaker Change: I would now like to turn the call over to the first speaker today machine one layer. Please go ahead.
Speaker Change: Thank you operator, Hello, everyone and welcome to our third quarter 2024 earnings Conference call.
Speaker Change: Our earnings release was distributed earlier today and you can find a copy on our aero side as well as our newswire services.
Speaker Change: Today's call will contain forward looking statements made under the safe Harbor provisions 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.
For detailed discussions of these risks and uncertainties. Please refer to our latest annual report and other documents filed with the FCC.
Speaker Change: <unk> does not undertake any obligations to update any forward looking statements, except as required under applicable laws.
Speaker Change: Please also know that Vinasse earnings press release, and this conference call include the disclosure of unaudited GAAP and non-GAAP financial matters.
Speaker Change: <unk> earnings press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures.
Speaker Change: Summary presentation, which we will refer to during this conference call can be viewed and downloaded from our Arab site at IR there'll be no dotcom.
Speaker Change: Next I'd like to alert you that we will be utilizing text to speech technology powered by new linked the AI to deliver these quarters prepared remarks by commission.
Speaker Change: Rotating president and Shuang our CFO.
Gavin and she will join the Q&A session in person. Additionally, this conference is being recorded.
Speaker Change: Webcast of this conference call will also be available on our site at IR there'll be net dot com.
Speaker Change: Now, let's get started with today's presentation.
Speaker Change: Good morning, and good evening, everyone. Thank you for joining our call today.
Speaker Change: I'll start with an overview of our third quarter results, let's turn to slide four we delivered.
Speaker Change: A strong quarter led by a 12, 4% year over year increase in net revenues to RMB, two 1 billion, mainly driven by the rapid growth of our wholesale IDC business. Adjusted EBITDA also increased by 22% year over year to RMB $595 million.
Speaker Change: Thanks to our cost and resource allocation optimization efforts.
Speaker Change: Our wholesale business maintained its strong growth momentum with net revenues from this segment, increasing by a remarkable 86, 4% year over year to RMB $523 million as we capitalized on rising demand wholesale capacity in service reached 358 megawatts as of the end of September increasing by.
Speaker Change: 69 megawatts year over year, and 26 megawatts quarter over quarter.
Speaker Change: Wholesale capacity utilized reached 279 megawatts, increasing by 119 megawatts year over year, and 27 megawatts a quarter over quarter.
This reflects our ability to scale effectively and respond to the market expanding digital infrastructure needs.
Speaker Change: Utilization rate of our wholesale business rose by two one percentage points quarter over quarter to 78% a healthy pace in this high demand environment and the utilization rate of our mature wholesale business reached a new high of 95, 6%.
Speaker Change: Our retail IDC business continues to progress smoothly with capacity in service and utilization rate remaining stable as of the end of September.
Speaker Change: Furthermore, our ample cash position an unused credit line provided reliable support for the company's current business operations and future development.
Speaker Change: Together these results position us well for sustained growth and demonstrate our dedication to enhancing shareholder value.
Moving onto our new order wins during this quarter, we continued attracting high quality customers during the third quarter with six new order wins totaling 84 megawatts as you can see on slide five in addition to the two services orders totaling 35 megawatts for you we'll launch our vault campus that we met.
Speaker Change: <unk> on our last earnings call. We have secured another three orders for data centers in the greater Beijing area and one elsewhere.
Speaker Change: Specifically, we won a new wholesale order from an internet customer for 32 megawatts at our Wildlife IDC campus located in Hubei Province, one of our Green computing clusters, which I will review in more detail later.
Speaker Change: We also received a 14 megawatt wholesale order from another internet customer and a one two megawatt retail order from our semiconductor customers are data centers improving province as.
Speaker Change: As well as a one eight megawatt retail order from an information and communications technology services customer for our data center in the northern region the strong.
Speaker Change: Demand for our wholesale and retail data centers across key regions underscores the enduring customer appeal of our reliable and high quality IDC services.
Speaker Change: Now, let's turn to slide eight to look at the AI demand trends that shaped our development during the third quarter.
Speaker Change: We made significant strides harnessing the growing demand for high performance computing power.
Speaker Change: We continue to see an increasing number of industries adopting AI applications for enhanced operational efficiency.
Speaker Change: AI driven demand among our customers primarily stems from leading internet clients and industry leaders in the cloud computing services short video local services financial and semiconductor sectors.
Speaker Change: We have expanded our AI computing capabilities in response aligning our infrastructure with the market surging needs for AI model training and data processing.
Currently over 98% of our wholesale capacity and service is capable of meeting our high performance computing power requirements empowering us to quickly capture and accommodate customers AI driven demand we have witnessed the unprecedented surge of large language model development starting in 2023.
Speaker Change: During the past year, we have won around 300 megawatts of new orders approximately 90% of which are set to facilitate AI demands of our customers.
Speaker Change: Additionally, we have deepened our collaboration with clients to better understand their specific AI requirements, enabling us to tailor our services to our customers more effectively.
We're consistently advancing our research and development on power modules in refrigeration in heat dissipation solutions that can achieve air cooling of up to 30 kilowatts per cabinet and liquid cooling of up to 120 kilowatts per cabinet.
Speaker Change: We also continued to enhance our data centers with innovative designs high density cabinet appointments and cutting edge cooling technology.
Speaker Change: Moving to slide nine.
Speaker Change: I'd like to review, our wildlife ICC comfort versus <unk> cluster of the National East data West Computing project and serves as a demonstration project for the national collaborating innovation system for National integrated Big data centers.
Speaker Change: It is situated just approximately 60 kilometers from downtown Beijing close to customers, enabling us to efficiently meet their high demand for computing power, including the integration of training and inference for large language models as well as model fine tuning.
Speaker Change: Our wildlife IDC campus is a hyperscale green computing cluster with a total planned construction land area of around 326000 square meters quite light located in Hubei Province, Northwest of Beijing is home to our third computing power cluster, succeeding those in Wuhan Tomo and high at home.
Speaker Change: Why that offers multiple strategic and geographic advantages.
Speaker Change: Currently our wildlife IDC Cam business capacity stands at approximately 500 megawatts and we plan to build a campus into a gigawatt level capacity computing cluster in phases, owing to its exceptional service capabilities. Our wildlife IDC campus recently won a 32 megawatt order from an internet.
Speaker Change: Customer to meet its demand for AI computing power.
Speaker Change: On a related note.
Speaker Change: We continue to develop our Green data center business and recently received approval from the energy administration of inner Mongolia for our first source grid load storage integrated project, a 300000 kilowatt project known as the woodland Tahoe Green Energy project.
<unk> project encompasses 200000 kilowatts of wind power and 100000 kilowatts of photovoltaic power as well as 45000 kilowatts of coal located energy storage equivalent to 180000 kilowatt hours.
Speaker Change: It also includes the construction of the dedicated electricity transmission line from renewable energy sources, who our woodland taboo datacenter. Once stable operations are achieved the project is expected to generate approximately 700 million kilowatt hours of green energy annually, providing <unk> and tableau campus.
Speaker Change: With a steady long term supply of Green energy.
Speaker Change: We view the world and top of Green Energy project is another value creative for our business and are very excited about its approval.
Speaker Change: Is one of just a few source grid load storage integrated projects in the Chinese data center industry.
Speaker Change: With a dedicated electricity transmission line not only will this project supply renewable cost efficient green power to a rule and tableau campus, but it will also create more synergies for our strategic cooperation with Shandong High speed Holdings group limited to develop renewable energy projects in northern Chile.
Speaker Change: Anna.
Speaker Change: Furthermore, we will and toggled approval will elevate the proportion of green power used in our data centers propelling progress in carbon neutrality, one of our key ESG initiatives now moving onto our regional data update.
Speaker Change: As you can see on slide 10, we remain focused on the development of the young River Delta and the greater Beijing area with the latter regions under construction capacity proportion increasing during the third quarter, mainly driven by the construction of our highlight IDC campus now.
Speaker Change: Let's delve into our business updates starting with our wholesale business on slide 11.
Speaker Change: Wholesale business continues to drive our overall growth recording an 86, 4% year over year increase in revenues this quarter.
Our capacity in service increased by 26 megawatts quarter over quarter, reaching a total of 358 megawatts as of the end of September for an increase of 69 megawatts from the end of September of last year.
Speaker Change: The utilization rate increased to 78% compared with 75, 9% last quarter with a mature capacity utilization rate of 95, 6% and a ramp up capacity utilization rate of 46, 4%.
These utilization rate improvements reflect our ability to facilitate quick customer move ins and our timely responses to customer needs during the quarter.
Speaker Change: We have a clear growth path for our wholesale data center capacity.
Speaker Change: Let's move on to slide 12, which illustrates our progress in capacity development and utilization.
Speaker Change: Notably our utilized capacity continued increasing during the past quarters from 236 megawatts in the first quarter to 252 megawatts in the second quarter to 279 megawatts in the third quarter, primarily driven by strong customer demand from EGF, Kansas <unk>.
Speaker Change: <unk> and <unk>, we also further ramped up construction in the past quarters to capture future rising demand.
Speaker Change: Increasing capacity under construction from 139 megawatts in the first quarter to 279 megawatts in the second quarter to a total of 297 megawatts in the third quarter.
Speaker Change: This increase is mainly attributed to the new order for our <unk>, our campus zero, one and NH being campus <unk>, which will provide reliable high performance computing infrastructure to our client.
Speaker Change: By the end of September the pre commitment rate for capacity under construction had risen to 88, 4%. Additionally, the capacity held for short term future development increased by 72 megawatts to 192 megawatts, primarily due to an abundance of demand with high certainty.
Speaker Change: We are closely communicating with our potential customers on multiple orders, which are expected to enter the construction phase.
Speaker Change: Given our high pre commitment way and the continuous growth in market demand. We are planning to further expand the capacity of our wholesale data centers targeting a total capacity of approximately one gigawatt to solidify our leadership position in the data center services sector.
Speaker Change: Moving to our retail business on slide 13.
Speaker Change: Our retail IDC business continued to operate smoothly in the third quarter. The retail capacity in service has increased slightly to 52250 cabinets. The utilization rate was 63, 1% as of the end of September with mature capacity utilization rate holding steady at 69 five.
Speaker Change: 5%.
Speaker Change: Our MLR per retail cabinet has slightly increased to RMB 8788, this quarter from RMB 8753 last quarter.
Turning to our new capacity on slide 14, we see that the resource pipeline for our IDC business remains robust currently we have seven data centers under construction, we plan to deliver in capacity of approximately 297 megawatts over the next 12 months from the fourth quarter of 2024.
Speaker Change: To the third quarter of 2025.
Speaker Change: Our capacity in service for the wholesale business with 358 megawatts as of the end of the third quarter of 2024, meaning that our expected new capacity is equivalent to approximately 83% of our current capacity in service.
Speaker Change: Specifically, we anticipate delivering approximately 191 megawatts in total during the upcoming fourth quarter of 2024, and the first quarter of 2025 and approximately 105 megawatts in total during the second and third quarters of 2025.
For our non IDC business, our <unk> business continued to expand its customer base by acquiring two new customers in the industrial and manufacturing sectors.
Speaker Change: Offering its premium ICT consultation and SD Wan services to support customers digital upgrades and business operations.
Speaker Change: <unk> currently boasts more than 220 Pops and over 100 cities worldwide and will strategically expand its footprint to other countries and regions going forward.
Speaker Change: In conclusion, the strong execution of our effective strategy drove strong third quarter results.
Speaker Change: Looking ahead, we will continue to refine our core strengths to build high performance data centers and offer innovative ITC services.
Speaker Change: We are confident that our industry know, how and innovation capabilities will empower our success amid the AI boom. Additionally.
Speaker Change: Additionally building on our strategic cooperation with Shandong High speed Holdings group, we will continue to develop our green energy business and deepen our commitment to our ESG goals.
Speaker Change: Propelling BNET is high quality and sustainable development remains a priority as we strive to deliver value to all of our stakeholders.
Tim: Thank you everyone I will now turn the call over to Tim to discuss more about our operating and financial performance.
Tim: Good morning, and good evening everyone.
Tim: Before we start the detailed discussion of our third quarter performance. Please note that unless otherwise stated all the financials. We present today are for the third quarter of 2024 are in renminbi terms.
Tim: Are there more unless otherwise specified all of the growth rates I am reviewing are on a year over year basis.
Moving on to slide 16 in the third quarter, we remained focused on high quality revenue businesses with high margins and delivered strong financial and operational results.
Tim: For our total net revenues increased by 12, 4% to RMB 212 billion, our adjusted cash gross profit increased by 16, 6% to RMB $861 million.
Tim: While our adjusted EBITDA also grew year over year by 22% to RMB $595 million.
Tim: In addition, our efforts to improve operational efficiency paid off with sales and marketing research and development and general and administrative expenses decreasing by 12, 9% year over year to RMB 246 million for the third quarter going forward, we will continue to refine copper.
Tim: Cost control measures and optimize our working capital to maintain a robust financial position <unk>.
Tim: Additionally, the company has deepened its emphasis on profitability through high quality development controlling costs and increasing efficiencies.
Tim: While maintaining healthy cash flow, we also significantly improved our profitability this year delivering a net profit for the third quarter as well as accumulative net profit for the first nine months of 2024.
Tim: In the third quarter of 2024, the company recorded a net profit of RMB 332 million a significant improvement from the net loss of RMB 40 million in the same period of last year.
Tim: Sequentially, we recorded a substantial increase of 362% primarily due to the company's consistent operational improvements and a gain on debt extinguishment, let's look more closely at our top line as we have mentioned previously we have subdivided total net revenues from IDC business until <unk>.
Tim: Sale and retail IDC business based on the nature and scale of our data center projects with revenues from non IDC business remaining separate.
Tim: As you can see on slide 17, our wholesale revenues remained our key revenue growth driver with strong momentum increasing by 86% year over year to RMB 523 million, mainly driven by the E. J S campus zero to <unk> zero six data centers.
Tim: Our retail revenues continue to account for the largest part of net revenues.
Tim: Our retail revenues remained relatively stable increasing sequentially by one 1% to RMB 975 million are non IDC business continues to progress smoothly during the third quarter, we maintained solid margins. Thanks to our continuous efforts to enhance overall efficiency as we.
Tim: We have shown on slide 18, our adjusted cash gross margins and EBITDA margins remained quite stable.
Tim: Moving on to liquidity on slide 19, we maintained a strong cash flow during the quarter.
Tim: We recorded a net operating cash inflow of RMB 143 billion for the first nine months of 2024 slightly higher than that of the same period of last year, primarily due to steady payment collection from customers and effectively measured expenditures.
Tim: Our cash position remained healthy with the company's total cash equivalents restricted cash and short term investments, reaching RMB, two 1 billion stable compared to that as of the end of the second quarter.
Speaker Change: Next let's take a look at that on slide 20.
Speaker Change: We maintained our prudent approach to debt management with our net debt to the trailing 12 months adjusted EBITDA ratio of four nine and total debt to trailing 12 months adjusted EBITDA ratio of five six both remaining at a healthy level, we prioritize long term debt maturity planning and our debt and.
Speaker Change: Management to ensure the security of debt repayment, notably the Companys short and medium term debt maturing in 2024 to 2026 comprises only 32% of our total debt.
Speaker Change: Turning now to Capex spending, which we view as a critical investment in our future growth and industry presence.
Speaker Change: As you can see on slide 21, our Capex has remained relatively stable over the past three years of between RMB 3 billion and $4 billion in the first nine months of 2024, our Capex was RMB 335 billion of which RMB. Two 3 billion was used for wholesale business expansion.
Speaker Change: We expect our Capex for the full year 2024 will likely reached the high end of our guidance around RMB five 5 billion supported by our healthy balance sheet solid cash flow and the steady progress, we're making and selling mature assets, we have sufficient capital to support our capex plan for the near future.
Speaker Change: <unk>, while maintaining a reasonable leverage position.
Speaker Change: Now moving to our full year guidance for 2024 on slide 22, we have decided to increase our full year guidance for total net revenues and adjusted EBITDA, primarily because faster than expected move ins from our core customers wholesale projects are accelerating the growth of our wholesale.
Speaker Change: IDC business, along with our retail business is steady progress.
Speaker Change: Specifically, we expect total net revenues to be in the range of RMB 8 billion to RMB eight 1 billion a year over year increase of seven 9% to nine 3% and adjusted EBITDA to be on the range of RMB 228 billion to RMB, two 3 billion.
Renting a year over year increase of 16, 4% to 17, 4%.
Speaker Change: Next I want to share some details on her pre rights project.
Speaker Change: As previously mentioned, we are proactively advancing the capitalization of our wholesale data centers and have made significant progress recently currently we are in the final stages of entering into a definitive agreement with one of China's leading insurance companies and expect to sign this agreement by the end of 2024.
Speaker Change: <unk> establish a pre reeds fund through which the fund will acquire a 100% stake in the first and second phases of art, Tom IDC campus.
<unk> will retain a 51% equity interest in the underlying assets through the fund.
Speaker Change: And we will continue to consolidate the projects financial results and the company's financial statements and manage the daily operations of the assets to provide a seamless customer experience.
Speaker Change: Underlying assets have a total capacity of approximately 210 megawatts and our valued at RMB 574 billion. The net will receive approximately RMB 115 billion as the consideration of equity interest held by the insurance company.
Speaker Change: This transaction marks the first direct investment by a major Chinese insurance company immature data center assets in China.
Speaker Change: It highlights, we nets prowess and effectively managing capital cycle, bolstering and diversifying the company's capital sources with long term investors, while further enhancing the companys balance sheet efficiency if.
Speaker Change: If this project progresses as planned it will further strengthen our cash reserves and reduce our debt ratio. The company will continue to pursue exits for our existing premium data centers through multi tier REIT structures, including public reads. This will create a steady source of incremental cash flow and build a healthy so.
Speaker Change: Stable capital structure and asset operating cycle supporting our high quality long term development.
As Gavin mentioned earlier, our source grid load storage integrated project and launch Aldo facilitated in collaboration with Shandong Highspeed Holdings Group Limited recently obtained the local governmental approval. This project is expected to come into service during the second half of next.
Speaker Change: At year end, we will further increase the proportion of <unk> Green energy usage.
Speaker Change: Going forward, we will further deepen our commitment to our ESG initiatives to sum up we were pleased to deliver another better than expected quarter led by robust growth in our wholesale business continued revenue growth and significantly enhanced profitability. Thanks to the strong execution of our refresh.
Speaker Change: <unk> dual core strategy supported by a robust business fundamentals and healthy cash position.
Speaker Change: We will continue to invest in business development, especially AI driven opportunities to propel our high quality sustainable growth.
Speaker Change: This concludes our prepared remarks for today, we are now ready to take questions.
Speaker Change: Thank you.
Speaker Change: We will now begin the question and answer session.
Speaker Change: If you wish to ask a question. Please press star one on your telephone and wait for your name to be announced.
Speaker Change: If you wish to cancel your request please press star two.
You're on a speakerphone, please pick up the handset to ask a question.
Speaker Change: For the benefit of all participants on today's call. Please ask your question to management in English and then repeat in Chinese.
Speaker Change: Your first question comes from Sara Wang with UBS. Please go ahead.
Thank you Kieran.
Speaker Change: Thank you for the uptake.
I have two questions.
Speaker Change: First is that it's actually encouraging to see that.
Speaker Change: Mark about here or there it's fine.
Speaker Change: Why.
Speaker Change: We wanted to have a scale customer.
Speaker Change: What is driving that and NPA at scale.
Shifting to an in house and pricing are retiring on a meter all of this we see this year.
Speaker Change: Maybe I missed it.
Speaker Change: On the pricing.
Speaker Change: And my follow up here.
So raising capex, how shall we think about competition.
Speaker Change: Going forward.
Speaker Change: Well the <unk> issue.
Speaker Change: We shall now knocking on that.
Speaker Change: You bet.
Speaker Change: Bank nationalization multichannel channel shifts our assumption I don't actually.
Speaker Change: Sure balance sheet on April nine we might shake out I mean that was that right.
Speaker Change: I think I've got that right.
Speaker Change: On an ATM.
Speaker Change: Yes, I'm sorry.
Speaker Change: Can you tell us about neutral now.
Speaker Change: Sure.
Speaker Change: Sure.
Speaker Change: My second question is on the Green Energy project.
Apple.
Speaker Change: I believe its definitely helping ensure we wanted to optimize our downtown Atlanta.
Speaker Change: How shall we think about pipeline margin off the phone.
Speaker Change: I'll have a integrated solution.
Speaker Change: Great.
Speaker Change: So how can we think about the price.
Speaker Change: And I'd just add that.
Speaker Change: And our clients.
Speaker Change: So let me provide you will at <unk>.
Speaker Change: More on that.
Mr. Gao: Thank you Mr. Gao.
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Mr. Gao: Good afternoon guys.
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Mr. Gao: Suddenly it all should be done.
Mr. Gao: Okay.
Mr. Gao: Uh huh.
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Speaker Change: Hi, Jacob.
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Speaker Change: Sheila Street Youll reach without somebody you guys.
Speaker Change: No doubt.
Speaker Change: And I'm talking about momentum.
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Speaker Change: Creating the future.
Speaker Change: I'm Sean.
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Speaker Change: Thank you Nigel.
Speaker Change: Highlights for the commission.
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Speaker Change: Thank you Tricia.
Speaker Change: Sure Linda.
Speaker Change: Well then.
Speaker Change: And Joe should clearly each okay.
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Speaker Change: Sure Sheila.
Speaker Change: John Hi, John So again yet.
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Speaker Change: Sure Glenn.
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Sure.
Speaker Change: Thank you.
Mike: This is Mike <unk> Executive Vice President I will take your first question.
Mike: As you rightly pointed out to that we did have a lot of new orders from Q3 and.
To be specific we signed six new orders totaling 84 megawatts and most of them are AI workload related to request.
Mike: <unk>.
Mike: So with that being said.
Mike: Our total new orders received for the past year totaled 300 megawatt and amount of them, 90% of them are AI workload related.
Speaker Change: So of course, you are right. So that the growth is mainly driven by the <unk>.
Speaker Change: Market demand from AI related workload and looking forward that we do notice that in the market that there is.
Speaker Change: Strong given the stronger demand for infrared.
Speaker Change: As more applications are being rolled out because of the AI to them and we're seeing a faster growth of and trends related to request in the market. So our reading is that.
Speaker Change: And friends, who will become stronger.
Speaker Change: Demand going into next year. However.
Speaker Change: Proportionate increase among the new orders so to respond to market needs. Like this we are planning ahead.
Speaker Change: One of the moves.
Speaker Change: <unk> that we did is planning further.
Speaker Change: Plan for our wildlife.
The center campus.
Speaker Change: Given its geographic proximity to Beijing, and we are actually launching integrated training and inference to services to cater to users' needs.
Speaker Change: And then just a quick add to that we have started to to serve our clients.
Speaker Change: Our inferencing knees, starting from Q3 in our retail campus.
Speaker Change: So thats an answer for your question on the new orders.
Speaker Change: Although what exactly does that mean that they are the ones.
Speaker Change: Shannon will then change.
Speaker Change: Jeff you mentioned a higher wage.
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Sean.
Speaker Change: Well Youll see.
Speaker Change: Hey, Jeremy.
Speaker Change: Chico.
Speaker Change: On your second question. This is Kevin rotating president.
Speaker Change: For the pricing of our newly secured orders it remained consistent with our previous orders.
Speaker Change: As we are seeing a more balanced supply and demand we are anticipating the price will come gradually stable in the second half of the year and even starting to pick up.
Speaker Change: And for our retail or wholesale.
Speaker Change: Campus.
Speaker Change: We are seeing more.
Speaker Change: Economies in fact of the economies of scale our construction costs.
Speaker Change: Is gradually coming down also we are having a better credit worthiness. So that brings the total cost for these operational costs for these centers are coming down and as a result, we are seeing increased ROI.
Speaker Change: Similar with Eisai.
Speaker Change: Capital H Schottenstein Keno Hill.
Speaker Change: Sure.
Speaker Change: So to achieve that.
Speaker Change: Sure one moment, let me do it.
Speaker Change: Hey, Joe.
Speaker Change: Well no. So that's all good.
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Speaker Change: So as Michelle Hello, Peter O'neill local GE centralized chiller.
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Speaker Change: This is Jay I'll take your third question on the well and capital a Green project.
Speaker Change: Recently, we have.
Received the approval from related to energy all authorities and our Mongolia Autonomous region I think of the approval will significantly increase the synergies between us and the Shandong high speed.
Speaker Change: With related to the construction work is going to be carried out by the.
Speaker Change: Our subsidiaries, our device and a high speed.
Speaker Change: New energy construction company.
Speaker Change: We'll be doing the construction work for that so.
Speaker Change: So we have received a total granted a capacity of 300000 kilowatt for this project. So once this project is.
Speaker Change: Into operation It is expected to generate a total of 700 million worth of kilowatt hours of Green electricity.
Speaker Change: This award to provide long term green energy supply to our lunch Apple campus.
Speaker Change: We are expecting that in the second half of the year.
Speaker Change: The electricity will be integrated into the grid.
Speaker Change: And then start to supply the power. So once that's done it's going to stick in April can only increase the proportion of green energy used by lunch Apple campus next year.
Speaker Change: And with regard to the margin with all of that being said I think at the margin will improve.
Speaker Change: Next question please.
Speaker Change: Thank you. Your next question comes from shoe young she with CIC. Please go ahead.
Speaker Change: Congratulations on the strong results and thank you for the opportunity to ask question. My first question is on the freight rates and Chi Tung.
Speaker Change: If project you have made the progress manual module counts session is the current utilization rate revenue and EBIT margin and we as a company ouch, Hey, megaprojects in future, but at the moment.
Speaker Change: I'm glad you did that kind of comes down there right now.
Speaker Change: And what you're planning to come back to <unk> got secondary Shlomo.
Speaker Change: Mckenna from diluted showroom EBITDA leadership team thinks you're closer to the National Highway shortly.
Speaker Change: And my second question is about <unk> 297 megawatts in the wholesale business in the next 12 months could management share with us the outlook on the Capex next year with a gag Lindsay issue concerning that PTC will come down a bit on it.
Charlene: My name is Charlene.
Speaker Change: So if you take a mechanical thing and again that's in our country.
Is that accurate.
Speaker Change: Yes.
Speaker Change: Paul.
Speaker Change: Ill follow up with either not linear.
Speaker Change: Sure absolutely.
Speaker Change: Hi, Sean.
Speaker Change: Paul.
Speaker Change: Uh huh.
Speaker Change: So Joe I'll take a shot.
Speaker Change: Yes.
Speaker Change: Got you.
Speaker Change: If you move onto another often.
Speaker Change: Yes, Sean.
Speaker Change: Sure <unk>.
Speaker Change: I apology youre designing.
Speaker Change: Yeah.
Yes.
Speaker Change: I'll pass and retooled the Shanghai.
Speaker Change: I don't want to hang out or your host Jonathan the EBIT.
Speaker Change: Yes.
Speaker Change: No.
Speaker Change: I'll take the first question.
Speaker Change: Actually the Titan project has been in the making for a while and I am very pleased to be able to share more details at this earnings call for the first phase and the second phase of our Thaicom campus right now that utilization rate is around 50, plus give or take.
Speaker Change: And given that it's still ramping up ramping up stage, we expected that the utilization rate will rise to 95% by the end of next year and by that time, we would have a EBITDA at around 517 million RMB.
Speaker Change:
Speaker Change: Hi, Sean.
Speaker Change: Sure.
Speaker Change: Passing the buttons Hugo de emphasized on Wall Street.
Speaker Change: We'll go to the technical trial.
I think anytime we're going to have a home for the team yet.
Speaker Change: Yes.
Speaker Change: Uh huh.
I'll talk to in the language.
So Josh I know on the patent hopping Julien.
Speaker Change: Hopefully it will.
Speaker Change: Rely on digital.
Speaker Change: Jonathan.
So the path ensemble.
Speaker Change: Well the Shanghai.
Speaker Change: Sure.
Speaker Change: So I may not have the challenge all of US you are going with.
Speaker Change: She has a very strong value either through.
Speaker Change: Please proceed hi, Jacob permits in northeast PA.
Speaker Change: Yes.
Speaker Change: Could you send the rule Porsche Dino posture.
Speaker Change: Pat on the Army all Oems.
Speaker Change: And yes, we will be asked about travel which is almost as yet.
Speaker Change: The Titan project marks the very first day example, where China's.
Speaker Change: Large scale insurance company directly purchased the equity stake off.
Speaker Change: Domestic IDC and we have gained a lot of experiences through reduced project.
In the process, we have engaged four to five large insurance companies.
Speaker Change: <unk> had engaged at them extensively and this laid a very good solid foundation for our future cooperation so going forward would advance similar projects.
Speaker Change: So at the moment.
Speaker Change: At this rate for our title and Capex is around 50.
Speaker Change: Percent, so thats, so we would likely too.
Speaker Change: Advances such a project win.
Speaker Change: Utilization rate.
As lower than this because of this it would allow us to generate some net to cash flow so for the <unk>.
Speaker Change: Title pre rates project, we are able to maintain the.
Speaker Change: So we're going to have the cash inflow once that is projected to deliver a consult.
Speaker Change: It's done.
Speaker Change: Meanwhile, we will still consolidated financial statements statements.
Speaker Change: Into our group level statements.
Speaker Change: And our goal for 2025 is too.
Carryout to the pre rates projected for our first phase will add capital.
Speaker Change: <unk>.
Speaker Change: All right.
Speaker Change: So John well.
For TV.
And then some dollar friedhelm chunky.
Speaker Change: Cheyenne.
Speaker Change: Saturday Halloween TD.
Speaker Change: The fleet down you will talk to you Sean.
Speaker Change: Thank you.
Johnny: Thank you Johnny.
Johnny: The appointment of Macquarie.
Johnny: Yes.
Johnny: Okay.
Johnny: Al.
Johnny: <unk> had some reliability angle.
Johnny: Watson.
Johnny: Awesome.
Next on Capex, we're seeing.
Johnny: Robust demand for our.
Johnny: Our wholesale services and that would translate into increased <unk>.
Johnny: Capex for 2025, our strategy is to.
Johnny: Work closely with our strategic suppliers and to maximize the synergies in order to make sure that our capex grow at a steady pace.
Speaker Change: Next question please.
Speaker Change: Thank you. Your next question comes from Daily Li with Bank of America Securities. Please go ahead.
Speaker Change: Hi management, Thanks for taking my questions and congrats on the strong results I have two questions first one is.
Speaker Change: Guarding the demand outlook by region, we have for Johnny you might go to a branch hobbled, but also what I call. The province, So how do we see the demand in the two regions and.
Speaker Change: The next two to three years, and which region, we may spend more cap out in the future.
Speaker Change: <unk>.
Speaker Change: Oh, sorry.
Speaker Change: So I'll make sure to ensure you gentlemen that caught some ranch hobbled, Ohio, Pedro Fireeye Calvert lineup hanging out with my technology that shoot you will end up being correct.
Speaker Change: Well I, just caught up which will be in HOKA.
My second question is.
Speaker Change: Of all the.
Speaker Change: Gross profit margin will see the Q3 gross margins to be in a good trend.
Speaker Change: And what are the key drivers for the better gross profit margin, how do we see the future gross margin trends.
Speaker Change: Or do you have with your <unk>.
Already that you can do you can argue usher it could hardly get your shot and you.
Got out tissue I'm wondering George.
We don't use with Shanghai related volume due to choose a woman who question Akshay I think.
Speaker Change: Well, let me touch on the Eagle and <unk>.
Speaker Change: Nikon to shoot a womans own <unk>.
<unk> patents.
Speaker Change: Nikon woman challenge, which I'll touch on growth Foundation that <unk>.
Speaker Change: I can answer that one.
Great.
And George Hitachi that Yugo.
Kind of adequately.
Hello, gentlemen.
Speaker Change: Paul will then tabular minting Wheeler. So you got this quarter that you guys do you show the demolition this union Judy Hamel Memorial and then you've got kind of automobile Jonathan.
Speaker Change: <unk>.
Speaker Change: So lesson on how you create oncology.
Speaker Change: <unk>, if you talk to the junior and wages.
Speaker Change: And then Dave will on top of that the way.
Well, then Danielle and a woman.
Speaker Change: During the quarter not cope with it in time.
Speaker Change: John I highlight Judy.
Speaker Change: And our geology that you.
We will be able to draw that youll get higher wages.
Speaker Change: Sure well.
Speaker Change: We will now lead.
Speaker Change: We will now baked into it.
Speaker Change: Sure the TD John.
Bush and to AEP.
Speaker Change: Alcohol <unk>.
<unk>.
Speaker Change: Shelby more the senior in Tokyo.
So im sure Youll you'd had a 40 leases.
Speaker Change: Somewhat higher Johnson, J, youll know each quarter each year.
Speaker Change: Cohort as we deal with you guys.
Speaker Change: And that Judy.
Speaker Change: People, who don't mean tightened on us.
Speaker Change: Women.
Speaker Change: To go jump through the Python CD.
Speaker Change: So she had a father.
Speaker Change: So the total enrollment so between cohort to yield that you guys don't get in Nigeria.
Speaker Change: So Sheila.
Speaker Change: Type of optical CD.
Speaker Change: All of you how youre essentially that's helpful.
Speaker Change: So that will immediately di Reso chewy nitrogen Jennifer treat Doug I've asked.
Speaker Change: In the Asia.
Speaker Change: So yes.
Speaker Change: Thank you.
Speaker Change: I'll take your first question.
Speaker Change: Right now for the group's development strategy, we would strategically focus on three campuses were three regions, while exploring the possibilities and opportunities at other regions. So the.
First a strategic focus area is equal on capital campus. So we positioned this as a green scalable large language model.
Speaker Change: Okay.
Speaker Change: Reenter the campus.
Speaker Change: Our goal is to build it into a peak quarter.
Speaker Change: Our scale campus, a majority of the request or tasks that were handling for it at this campus is in training.
Speaker Change: Training.
Speaker Change: Related.
Speaker Change: So thats the majority of the request or the AI workloads that we're handling at this campus and then the second is strategic focus region is our I'll highlight campus at Hebei Province.
Speaker Change: We have started to receive new orders for this campus that we are very pleased to see that and our goal is also to scale. This into a gigawatt hour a gigawatt campus.
Speaker Change: Given its geographic proximity to Beijing it could.
Speaker Change: Enjoy the spillover benefits.
Speaker Change: So we're going to use this campus to accommodate and friends as well as this on a small scale training related workloads.
Speaker Change: And other than that where we can use this campus to accommodate some other requests by our existing.
Speaker Change: Clients.
Speaker Change: From Beijing, and the next strategic calculus for US is the title campus located in Johnson Province, where it going to be using this this is a core node to suppress our clients in the region, we're planning to carry out to the construction for the third phase.
Speaker Change: Meanwhile, we'll explore other opportunities in Suzhou and within Joseph Province to expand our wholesale business in that region.
Speaker Change: Graham I'll leave you to Sean.
Speaker Change: Nice job.
Speaker Change: Oh man.
Speaker Change: Sure.
Speaker Change: Tissue your woman.
Speaker Change: All forward.
Speaker Change: Right.
Speaker Change: The Zip Huey Thank you Sean.
Speaker Change: You are familiar and you should all solutions.
Total with Jacobs.
Speaker Change: Jackie.
Speaker Change: No.
Speaker Change: Sure.
Speaker Change: Finishing the Hollywood.
Speaker Change: Sanjay.
Speaker Change: Thanks, Jason.
It.
Speaker Change: It sounds like Youll recall this year.
During the course of senior housing.
Speaker Change: Goldman kidney.
Speaker Change: So.
Speaker Change: So as you will see them shut down.
Speaker Change: On your question on gross profit margin there are three reasons that could explain the increase.
Speaker Change: Gross profit margin, what we are constantly cost optimizing our.
Speaker Change: IDC centers that increase the optimization for the personnel.
Speaker Change: As well as the P E and the second reason is the rising share of wholesale business.
Speaker Change: On our revenue because it has.
Speaker Change: <unk> has a higher gross profit margin than retail business as well as non IDC business and a third reason is that last year, we made adjustment to our discount to term. So that we have a lower discount rate. All of these are three reasons explained in the write off our gross profit margin.
Speaker Change: Yes.
Speaker Change: Depreciate.
Speaker Change: The last reason third reason, we adjust the term for our depreciation.
Speaker Change: So hence it's more it's reflecting the actual situation on the ground. So we did thesis III conditions.
Speaker Change: The reasons, we're having a better gross profit margin.
Speaker Change: Next question please.
Thank you.
Next question comes from Tom <unk> with Morgan Stanley. Please go ahead.
Speaker Change: Oh, Vince mentioned for the option to ask questions and congratulations on the very strong result.
Speaker Change: I only have one question, which is on the <unk>.
Speaker Change: Fourth quarter outlook can we have some more detail.
Speaker Change: How are you thinking about the demand in the fourth quarter, especially for the hotel business.
Speaker Change: If I can just see any.
Speaker Change: New orders coming in London.
Speaker Change: Expanding or tried.
Speaker Change: <unk> tried to show demand.
Speaker Change: Quite a thing.
Speaker Change: See excellent liquidity.
Speaker Change: <unk>.
Speaker Change: And to the extent of accounting the whole will eventually go into differently.
Speaker Change: Good Chad.
Speaker Change: Sure.
Speaker Change: GDP is what's really going.
Speaker Change: One by one less shipping and what's kind of been wanting to be bouncing back.
So of course, you get similar shoot.
Thank you.
Speaker Change: One I believe.
Speaker Change: We changed Orland.
Sure.
Speaker Change: So the mutual icon women.
Speaker Change: Pieces you too.
Yes.
Speaker Change: John This is Joe boxer Golladay your potential element.
Speaker Change: Would you be launching.
Speaker Change: I'd say to you.
Speaker Change: It's a little Hood.
Speaker Change: Zero, some jumbo the genes of yellow Joan wages for women.
Speaker Change: It's all sort of the outlook there you go.
Speaker Change: Pleasure.
Speaker Change: Tom.
Speaker Change: We'll then decide to like kind of a woman Kenya Johnson will be obviously the thoughts of again since you've been telling women you apologize.
Speaker Change: We'll then.
Speaker Change: June and July.
Speaker Change: Luncheon.
Speaker Change: And <unk>.
Speaker Change: Let me take your question.
Speaker Change: Sure.
Speaker Change: If you look at our guidance.
Speaker Change: Expect to that to our wholesale business to grow at a faster pace in Q4.
Speaker Change: And in terms of the revenue and gross profit for our retail presents and none IDC business that would be consistent with the guidance.
That we give so it's going to be relatively consistent or flat.
Speaker Change: If you look at our deliveries in Q3.
Speaker Change: And based on that.
Speaker Change: Our confidence that we are able to fulfill the annual delivery target set.
Speaker Change: So with that being said we are confident that we can fulfill our operational flat.
Speaker Change: Given the forward.
Speaker Change: Next question please.
Speaker Change: Thank you. Your next question comes from Edison Lee with Jefferies. Please go ahead.
Speaker Change: Okay.
Right.
Speaker Change: No.
Speaker Change: Okay.
Speaker Change: Thanks Christine.
Speaker Change: Thanks.
Speaker Change: Okay.
Speaker Change: In terms of Capex in terms of maybe requirement.
For China.
Speaker Change: China versus inference and Kim Ann that's question number one.
Speaker Change: Question number two is.
Speaker Change: And maybe just for <unk>.
Okay.
Speaker Change: And then question number three.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Your amount of powerhouse for short term development actually went up from 120 megawatt to 192 megawatt. So can you explain to us what what's driving that growth.
Well.
Speaker Change: Hey, Ross tissue appreciate it Hey, Joe.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thank you Ashish.
Speaker Change: Okay.
Speaker Change: First of all fund Jewish whole canola share it to the types of all such a huge hole.
Speaker Change: Okay understood.
Speaker Change: Choice will forget one casual shoes and human genome.
Oh gosh.
But for your actual issue kifah, knowing what she chooses to go hydrogen, but tivo <unk> available content intangible PBT shoot you an adventure.
What are you about backlog will come about.
Teva Anda.
Okay.
Speaker Change: <unk> got diphosphate fishbowl.
Speaker Change: Todays shalwar.
Speaker Change: About E E.
Speaker Change: The keys to Jay Ashish.
Okay.
Speaker Change: [noise].
Can you please repeat your third question.
Yes.
Speaker Change: Okay.
Speaker Change: Hello Edison number one question on them look great question.
Speaker Change: Number three thank.
Thank you.
Speaker Change: Oh, yes.
Speaker Change: On your page Paul.
Speaker Change: Okay.
Further development of short term.
Speaker Change: Well.
Speaker Change: Hello.
Speaker Change: Okay.
Speaker Change: Alright.
Speaker Change: It's not that simple.
Speaker Change: Great.
Speaker Change: Okay.
Yeah.
Speaker Change: Okay.
Speaker Change: I'll now turn the call back to Larry just.
Larry: Talk about the first two questions.
Larry: Okay.
Larry: Yes.
Larry: Okay.
Larry: Okay.
Larry: Sure.
Larry: Sure.
Larry: This year, when we got into the Eagle Ford.
Larry: Yes.
Larry: 10 minutes.
Larry: Jonathan its Josh.
Larry: Well the <unk>.
Larry: Yes.
Larry: Sure sure sure.
Larry: Tom.
Larry: Nathan I should add that.
I'll take the structural measures.
Speaker Change: How much of the attrition that we bought shlomi.
Speaker Change: Sure enough.
Speaker Change: While IGD.
Speaker Change: Thank you.
Speaker Change: Could you do a tweak.
Sure.
Speaker Change: John.
Speaker Change: Okay.
Speaker Change: <unk> will not sure yet.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: You can see.
Speaker Change: Sure.
Speaker Change: No.
Speaker Change: Thanks Marcia.
Speaker Change: Chile and Russia.
The future for sure.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Therefore, you should have.
Speaker Change: <unk> shown that Tony and yet you guys have chosen.
Great I appreciate that.
Speaker Change: Please.
Speaker Change: Entergy fully Chilean.
Speaker Change: Well, let me thank.
Speaker Change: Thank you.
Speaker Change: I'll take your first question.
Speaker Change: Given the current landscape.
Supply and demand for the.
AI in China.
Speaker Change: We expect to see demand for training related workloads will continue.
Speaker Change: To perform very strongly and that's going to last into next year.
Speaker Change: However, we didn't notice that there are some industries like a quantitative.
Speaker Change: Trading firms as well as autonomous driving firms they are having stronger demand for integrate for inference and training are integrated.
Speaker Change: Services as well as <unk>.
Pure <unk>.
Speaker Change: Inferencing related to their request.
Speaker Change: Why we are actually expanding our services add to highlight in our retail service campuses to accommodate such demand.
Speaker Change: So we.
Speaker Change: We expect that such a trend to continue well into next year, and then with a stronger quicker growth for some time.
Speaker Change: Q4 next year.
Speaker Change: I will not say that yard when she was on your capex.
Speaker Change: For TV.
Speaker Change: If I can.
Speaker Change: Perhaps.
<unk> should easily on the Capex.
Speaker Change: Uh huh.
Speaker Change: Hi, all should easily pass it you don't want your bar.
Speaker Change: She only organ function, which was your question.
Speaker Change: Who are you sure.
Speaker Change: Hi, all environmental ammonia should in cohort I will show a couple of weeks, you're going to hear GPU slightly therefore, holman sugar reduction.
Speaker Change: Can you go into a cohort.
Tycho: Sure Tycho.
Tycho: Yes.
Tycho: I will talk about the Capex.
Other than the investment in our wholesale business.
Tycho: And our round so with regard to the $1 billion.
Tycho: Over half of that is spent on our retail.
Speaker Change: The centers that as she used to for the maintenance repairs and Repurposing of these retail centers data centers.
Speaker Change: And we used the other half of the $1 billion to purchase a GPU related hardware to meet users' demand. So that will be delivered a coupled with the other.
Speaker Change: Related request.
Speaker Change: Next question please.
Speaker Change: Thank you. Your next question comes from Timothy Zhao with Goldman Sachs. Please go ahead.
Timothy Zhao: Great. Thank you management for taking my question I have two questions here. One is that I think on your wholesale <unk> and it's based on market condition.
Timothy Zhao: I think in terms of the monthly recurring revenue monthly services revenue. It seems that there was a Q on Q increase to a bigger extent could extend the reason or the drivers behind and secondly, I think for your in service capacity for the wholesale how do you see bad news just wondering if management can give us any outlook for the fourth quarter. This year.
Speaker Change: Next year please.
Speaker Change: Thank you Chuck I said why it's unusual with you I know, what you mean with that tailwind.
Speaker Change: <unk> shook when you women to wholesale.
Wholesale how do you see the chuckles into your order book would you want to get you to the <unk> show in October which by itself. Besides how in particular they hold are you again.
Speaker Change: Youll to shield from a.
Speaker Change: Ian.
Go into tissue Guangzhou women that we could service capacity that you go.
Speaker Change: Previous Shibuya junior industry, you do home unions that wholesale how do you see Japan cohort.
Speaker Change: It's quite helpful.
Okay.
Speaker Change: I don't want to chip in FEMSA Venezuela.
Speaker Change: Yeah, Hi, this is <unk>.
Speaker Change: He will then.
Food.
Speaker Change: Sure Jonathan.
Q1.
Speaker Change: Well no.
Speaker Change: Wholesale <unk>.
Speaker Change: MRV will fund diesel refinery Cheetah, just intermediate dirty in contango with John.
I'm kind of with that one can only get with John industrial enzymes.
Speaker Change: Squamous hostile to shop.
So the pull them into loans.
Sure Jonathan So you can change what I want.
Speaker Change: Yes.
Speaker Change: Well 90, Cheol cohort this year.
Speaker Change: Jason will tender.
Speaker Change: Which I know you've had some costs.
Speaker Change: Let me take your first question.
Speaker Change: I think that that's a.
Speaker Change: Mainly because for our wholesale business.
Speaker Change: The declines are moving faster than we expected so that's why.
Speaker Change: We are seeing we're seeing the monthly recurring revenue increasing quarter over quarter.
Speaker Change: And other than that thanks to the effective scale of economies. The decrease in construction cost as well as the funding costs. Our profitability is also improving and that's better than our expectation for these two reasons I explained.
Speaker Change: <unk> <unk>.
Speaker Change #100: Well, thank you everyone.
Speaker Change #100: Okay, well. Thank you everyone hears a woman's certainty that you're going to gel for Q1.
Well.
Speaker Change #100: Equally englishwoman gel four so a couple of different potential with high yield.
Speaker Change #100: No it was on <unk>.
Women's homogeneous with us Assortments homogeneous.
We'll mention yet.
Speaker Change #100: <unk>.
<unk> will be end up well millennial to the well known which annually <unk>.
<unk>.
Speaker Change #100: Portland jumped would you have today.
Speaker Change #100: Q1 to end up.
Speaker Change #100: China and kinds of those.
Speaker Change #100: So now what many.
Speaker Change #100: Here is what I want and I would ask you that you do whether you go to Jeff with your heart unless such as.
Speaker Change #101: As Johan.
Speaker Change #102: Is that one that.
Speaker Change #101: Sure.
Speaker Change #101: In <unk> cohort.
Speaker Change #101: You'll have to Florida.
Speaker Change #101: Thank you Bob.
Speaker Change #101: Okay.
Speaker Change #101: On the delivery outlook.
Speaker Change #101: We.
Speaker Change #101: We maintain our current delivery plan are unchanged, we are going to deliver the rest of the plan that deliveries in Q4. So thats on the planned delivery for this year are looking ahead to the next two year given the orders that we have received as well as the potential <unk>.
Speaker Change #101: <unk> with our existing clients.
Speaker Change #101: We have already also given our guidance on.
Speaker Change #101: Our capacity to be delivered next year.
Speaker Change #101: Yes.
Speaker Change #101: Okay.
Ladies and gentlemen that concludes our conference for today.
Speaker Change #101: Thank you for participating you may now disconnect your lines.