VNET(VNET) - 2021 Q3 - Quarterly Report

Performance Highlights VNET reported robust Q3 2021 financial and operational results, exceeding guidance with significant revenue and adjusted EBITDA growth Third Quarter 2021 Financial Highlights VNET's Q3 2021 financial performance saw net revenues increase to RMB 1.56 billion, with strong growth in adjusted cash gross profit and adjusted EBITDA Q3 2021 Financial Highlights (vs. Q3 2020) | Metric | Q3 2021 | Q3 2020 | YoY Change | | :--- | :--- | :--- | :--- | | Net Revenues | RMB 1.56 billion | RMB 1.25 billion | +25.3% | | Adjusted Cash Gross Profit (non-GAAP) | RMB 674.5 million | RMB 526.2 million | +28.2% | | Adjusted Cash Gross Margin (non-GAAP) | 43.2% | 42.2% | +1.0 ppt | | Adjusted EBITDA (non-GAAP) | RMB 450.4 million | RMB 368.5 million | +22.2% | | Adjusted EBITDA Margin (non-GAAP) | 28.9% | 29.6% | -0.7 ppt | Third Quarter 2021 Operational Highlights VNET expanded its cabinet capacity to 65,264 in Q3 2021, with increased retail IDC MRR per cabinet and improved utilization rates for new IDCs Q3 2021 Operational Metrics | Metric | Q3 2021 | Q2 2021 | Q3 2020 | | :--- | :--- | :--- | :--- | | Total Cabinets Under Management | 65,264 | 62,876 | 51,476 | | Retail IDC MRR per Cabinet (RMB) | 9,296 | 9,015 | 9,074 | | Compound Utilization Rate | 59.8% | 59.9% | N/A | | Mature IDC Utilization Rate | 75.5% | 76.3% | N/A | | Ramp-up & Newly-built IDC Utilization Rate | 34.7% | 29.2% | N/A | Management Commentary Management attributed strong Q3 performance to the successful dual-core strategy and unique IDC solutions, exceeding guidance despite regulatory uncertainties - CEO Samuel Shen emphasized that the company's dual-core strategy in retail and wholesale IDC services is effectively meeting growing demand and strengthening its market leadership[4] - CFO Tim Chen noted that Q3 financial performance was a milestone, with top- and bottom-line growth exceeding the high end of guidance, driven by a unique mix of wholesale/retail solutions and digital transformation trends[6] Third Quarter 2021 Financial Results Q3 2021 net revenues grew 25.3% to RMB 1.56 billion, with gross profit increasing to RMB 375.2 million and net profit significantly impacted by fair value changes of convertible notes Q3 2021 Income Statement Highlights (YoY & QoQ) | Metric | Q3 2021 (RMB) | YoY Change | QoQ Change | | :--- | :--- | :--- | :--- | | Net Revenues | 1.56 billion | +25.3% | +4.2% | | Gross Profit | 375.2 million | +36.4% | +4.4% | | Gross Margin | 24.0% | +1.9 ppt | 0.0 ppt | | Operating Expenses | 261.3 million | +31.1% | -0.5% | | Net Profit (to shareholders) | 156.2 million | +60.8% | -65.7% | - The year-over-year increase in gross margin was primarily attributed to the Company's optimized operating efficiency[7] - Net profit for Q3 2021 included a gain of RMB 185.8 million from changes in the fair value of convertible promissory notes due to a decrease in the Company's stock price[13] - As of September 30, 2021, the company held RMB 3.94 billion in cash, cash equivalents, restricted cash, and short-term investments[14] Financial Outlook VNET projects Q4 2021 net revenues between RMB 1.75-1.77 billion and adjusted EBITDA between RMB 450-470 million, with strong full-year growth anticipated Q4 2021 and Full Year 2021 Guidance | Period | Metric | Guidance Range (RMB) | | :--- | :--- | :--- | | Q4 2021 | Net Revenues | 1.75 billion - 1.77 billion | | | Adjusted EBITDA | 450 million - 470 million | | Full Year 2021 | Net Revenues | 6.19 billion - 6.21 billion | | | Adjusted EBITDA | 1.74 billion - 1.76 billion | - The midpoints of the full-year 2021 guidance represent a 28.5% YoY increase in net revenues and a 32.2% YoY increase in adjusted EBITDA[15] Financial Statements VNET's consolidated financial statements show total assets of RMB 23.65 billion, with Q3 2021 net cash from operations at RMB 134.7 million and significant investing activities Consolidated Statements of Operations VNET reported Q3 2021 net revenues of RMB 1.56 billion, gross profit of RMB 375.2 million, and net profit of RMB 156.2 million, influenced by fair value changes Q3 2021 Statement of Operations (in thousands RMB) | Line Item | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | Net revenues | 1,560,460 | 1,245,794 | | Gross profit | 375,235 | 275,143 | | Operating profit | 113,902 | 75,870 | | Net profit attributable to VNET Group, Inc. | 156,183 | 97,144 | Q3 2021 Earnings Per Share (EPS) | Metric | Value (RMB) | Value (USD) | | :--- | :--- | :--- | | Basic EPS | 0.18 | 0.03 | | Diluted EPS | (0.03) | (0.00) | Consolidated Balance Sheets As of September 30, 2021, VNET's total assets reached RMB 23.65 billion, with liabilities increasing to RMB 16.22 billion, primarily from borrowings Balance Sheet Summary (in thousands RMB) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | 7,447,654 | 6,055,607 | | Total Non-current Assets | 16,202,865 | 13,318,148 | | Total Assets | 23,650,519 | 19,373,755 | | Total Current Liabilities | 6,794,908 | 6,121,960 | | Total Non-current Liabilities | 9,424,876 | 6,354,315 | | Total Liabilities | 16,219,784 | 12,476,275 | | Total Shareholders' Equity | 7,430,735 | 6,897,480 | Condensed Consolidated Statement of Cash Flows Q3 2021 net cash from operations was RMB 134.7 million, with RMB 1.49 billion used in investing activities and RMB 256.4 million generated from financing Q3 2021 Cash Flow Summary (in thousands RMB) | Cash Flow Activity | Q3 2021 | Q2 2021 | Q3 2020 | | :--- | :--- | :--- | :--- | | Net cash from Operating Activities | 134,672 | 314,806 | 209,971 | | Net cash used in Investing Activities | (1,492,614) | (522,340) | (914,471) | | Net cash from (used in) Financing Activities | 256,400 | (1,887,775) | 1,445,329 | | Cash at end of period | 3,931,488 | 5,021,490 | 5,454,311 | Reconciliation of GAAP and Non-GAAP Results This section reconciles Q3 2021 GAAP to non-GAAP results, detailing adjustments for adjusted EBITDA of RMB 450.4 million and adjusted cash gross profit of RMB 674.5 million Q3 2021 GAAP to Non-GAAP Reconciliation (in thousands RMB) | Metric | GAAP Value | Adjustments | Non-GAAP Value | | :--- | :--- | :--- | :--- | | Gross Profit | 375,235 | +297,046 (D&A)
+2,211 (SBC) | 674,492 (Adj. Cash Gross Profit) | | Operating Profit | 113,902 | +316,951 (D&A)
+4,608 (SBC)
+14,959 (Other) | 450,420 (Adj. EBITDA) | Supplementary Information This section provides supplementary details including conference call information, non-GAAP measure definitions, exchange rates, and forward-looking statements Conference Call Information A conference call to discuss Q3 financial results was scheduled for November 18, 2021, at 8 P.M. U.S. Eastern Time - A conference call to discuss the financial results was scheduled for November 18, 2021, at 8 P.M. U.S. Eastern Time[16] Non-GAAP Disclosure & Other Notes VNET clarifies its use of non-GAAP measures, specifies the RMB to USD exchange rate, and notes that financial information is unaudited and preliminary - The company uses non-GAAP measures like adjusted cash gross profit and adjusted EBITDA to supplement U.S. GAAP results and help investors assess business trends[17][18] - All RMB to USD translations are for convenience and based on the exchange rate of RMB 6.4434 to US$1.00 as of September 30, 2021[19] - The financial information presented is unaudited and preliminary, subject to potential adjustments upon completion of the year-end audit[20]