VNET(VNET) - 2022 Q3 - Quarterly Report

VNET Third Quarter 2022 Earnings Release This report details VNET's Q3 2022 financial performance, operational metrics, and full-year outlook Management Commentary and Business Overview Management highlights steady growth from its dual-core strategy, securing key contracts despite macroeconomic challenges - The company is executing a 'dual-core' growth strategy, focusing on wholesale momentum and retail expansion[2] - VNET secured a new wholesale contract for approximately 15MW and extended another for approximately 33MW of new capacity[2] - Management remains confident in long-term growth driven by strong demand from digital transformation[2] Q3 2022 Financial & Operational Highlights The company shows solid revenue growth but faces margin pressure, alongside continued operational capacity expansion Financial Highlights Q3 2022 Key Financial Metrics (YoY) | Metric | Q3 2022 | Q3 2021 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | RMB 1.81 billion | RMB 1.56 billion | +16.3% | | Adjusted Cash Gross Profit (non-GAAP) | RMB 707.7 million | RMB 674.5 million | +4.9% | | Adjusted EBITDA (non-GAAP) | RMB 455.3 million | RMB 450.4 million | +1.1% | | Adjusted Cash Gross Margin (non-GAAP) | 39.0% | 43.2% | -4.2 p.p. | | Adjusted EBITDA Margin (non-GAAP) | 25.1% | 28.9% | -3.8 p.p. | Operational Highlights Q3 2022 Key Operational Metrics | Metric | As of Sep 30, 2022 | As of Jun 30, 2022 | As of Sep 30, 2021 | | :--- | :--- | :--- | :--- | | Total Cabinets Under Management | 82,660 | 80,831 | 65,264 | | Cabinets Utilized | 45,527 | 44,500 | 38,325 | | Overall Utilization Rate | 55.1% | 55.1% | 58.7% | | Retail IDC MRR per Cabinet | RMB 9,287 | RMB 9,186 | RMB 9,296 | Detailed Financial Performance Analysis Revenue grew 16.3% YoY, but profitability declined due to lower gross margin and a significant foreign exchange loss - Net revenues increased by 16.3% YoY to RMB 1.81 billion, driven by IDC, cloud, and VPN services[5] - Gross margin declined significantly to 17.5% from 24.0% YoY, with gross profit decreasing to RMB 316.6 million[7] - Total operating expenses rose to RMB 310.2 million, driven by higher sales and marketing expenses[7][8] - The company reported a net loss of RMB 425.2 million, a sharp reversal from a net profit of RMB 156.2 million YoY, impacted by a RMB 317.2 million foreign exchange loss[9] - Basic and diluted loss per ADS were both RMB 2.88 (US$0.42)[10] Financial Position and Cash Flow The company maintains a solid liquidity position and demonstrates strong growth in cash from operating activities - Cash, cash equivalents, and restricted cash totaled RMB 3.76 billion (US$528.0 million) as of September 30, 2022[10] - Net cash from operating activities increased substantially to RMB 607.4 million from RMB 134.7 million in Q3 2021[10] Business Outlook The company provides its full-year 2022 guidance for net revenues and adjusted EBITDA Full Year 2022 Guidance | Metric | Guidance Range (RMB) | | :--- | :--- | | Net Revenues | 7,250 million - 7,550 million | | Adjusted EBITDA | 1,800 million - 1,950 million | - The forecast is preliminary and subject to change, not including potential impacts from the COVID-19 pandemic[12] Consolidated Financial Statements Unaudited statements show asset and liability growth, a net loss, and strong operating cash flow funding investments Consolidated Balance Sheets Balance Sheet Summary (as of Sep 30, 2022 vs Dec 31, 2021) | Account | Sep 30, 2022 (RMB '000) | Dec 31, 2021 (RMB '000) | | :--- | :--- | :--- | | Total Assets | 27,639,949 | 23,095,039 | | Total Liabilities | 20,601,175 | 15,494,038 | | Total Shareholders' Equity | 7,038,774 | 7,601,001 | | Cash, cash equivalents and restricted cash | 3,756,073 | 1,708,473 | Consolidated Statements of Operations Q3 2022 Income Statement Highlights (Unaudited, RMB '000) | Line Item | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Net Revenues | 1,814,210 | 1,560,460 | | Gross Profit | 316,583 | 375,235 | | Operating Profit | 6,411 | 113,902 | | Net (Loss) Profit Attributable to Shareholders | (425,211) | 156,183 | Reconciliations of GAAP and Non-GAAP Results - Adjusted EBITDA for Q3 2022 was RMB 455.3 million, reconciled from operating profit by adding back items like depreciation and share-based compensation[27] - Adjusted cash gross profit for Q3 2022 was RMB 707.7 million, reconciled from GAAP gross profit by adding back non-cash items[27] Condensed Consolidated Statement of Cash Flows Q3 2022 Cash Flow Summary (Unaudited, RMB '000) | Cash Flow Activity | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Net Cash from Operating Activities | 607,417 | 134,672 | | Net Cash used in Investing Activities | (614,482) | (1,492,614) | | Net Cash from Financing Activities | 72,765 | 256,400 | Supplementary Information This section provides context on non-GAAP measures, currency translation, and forward-looking statements - The company uses non-GAAP measures like adjusted EBITDA to help investors assess operating performance[14][15] - Financial figures are translated from RMB to USD at a rate of RMB 7.1135 to US$1.00 for convenience[16] - The financial information presented is unaudited and preliminary, subject to year-end audit adjustments[17]