VNET(VNET) - 2022 Q1 - Quarterly Report

VNET First Quarter 2022 Financial Report Performance Highlights The company reported solid Q1 2022 growth in revenue and adjusted EBITDA alongside an expansion in cabinet capacity Q1 2022 Financial Highlights (YoY) | Metric | Q1 2022 | Q1 2021 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | RMB 1.65 billion | RMB 1.39 billion | +18.6% | | Adjusted Cash Gross Profit (non-GAAP) | RMB 684.8 million | RMB 605.3 million | +13.1% | | Adjusted EBITDA (non-GAAP) | RMB 506.2 million | RMB 415.1 million | +21.9% | | Adjusted EBITDA Margin (non-GAAP) | 30.8% | 29.9% | +0.9 p.p. | Q1 2022 Operational Highlights | Metric | As of Mar 31, 2022 | As of Mar 31, 2021 | Q1 2022 Change | | :--- | :--- | :--- | :--- | | Total Cabinets Under Management | 78,964 | 55,926 | +424 (QoQ) | | Utilized Cabinets | 43,032 | 33,582 | +1,329 (QoQ) | | Overall Utilization Rate | 54.5% | 60.0% | -5.5 p.p. (YoY) | | Retail IDC MRR per Cabinet | RMB 9,236 | RMB 9,144 | +1.0% (YoY) | Management Commentary Management attributed strong Q1 results to its dual-core strategy, despite adverse impacts from a COVID-19 resurgence - The CEO emphasized that the dual-core strategy (wholesale and retail IDC) drove solid operational and financial results, bolstered by the digital economy and favorable policies[4] - Key business achievements in Q1 include signing wholesale contracts for ~16MW of capacity and steady order growth in the retail business from new and existing customers[4] - The CFO noted that revenue and adjusted EBITDA growth were in line with expectations, despite seasonal factors and adverse effects from the COVID-19 resurgence in several tier-1 cities[4] Detailed Financial Results The company achieved a significant net profit turnaround driven by fair value gains, despite a slight decrease in gross margin Q1 2022 Profit & Loss Summary (YoY) | Metric | Q1 2022 | Q1 2021 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | RMB 1.65 billion | RMB 1.39 billion | +18.6% | | Gross Profit | RMB 355.5 million | RMB 323.3 million | +10.0% | | Gross Margin | 21.6% | 23.3% | -1.7 p.p. | | Net Profit/(Loss) Attributable to Shareholders | RMB 90.7 million | (RMB 84.7 million) | Turnaround to Profit | | Diluted Profit/(Loss) per ADS | RMB 0.18 | (RMB 0.60) | Turnaround to Profit | - The turnaround to net profit was mainly contributed by gains from fair value changes of convertible promissory notes and other operating income[9] - As of March 31, 2022, the company's cash, cash equivalents, restricted cash, and short-term investments totaled RMB 3.36 billion (US$530.8 million)[10] - Net cash generated from operating activities increased significantly to RMB 482.6 million from RMB 274.5 million in the same period of 2021[10] Business Outlook VNET reaffirmed its full-year 2022 guidance for net revenues and adjusted EBITDA, noting the forecast is preliminary Full Year 2022 Guidance | Metric | Guidance Range (RMB) | | :--- | :--- | | Net Revenues | 7,450 million - 7,750 million | | Adjusted EBITDA | 1,975 million - 2,125 million | - The provided outlook remains unchanged from previous estimates and does not account for potential future impacts from the ongoing COVID-19 pandemic[11][12] Financial Statements and Supplementary Information Consolidated Balance Sheets Total assets and liabilities grew, driven by increases in cash and cash equivalents and convertible promissory notes, respectively Key Balance Sheet Items (in thousands RMB) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | 3,042,359 | 1,372,481 | | Total Current Assets | 7,416,385 | 5,324,123 | | Total Assets | 25,515,209 | 23,095,039 | | Total Current Liabilities | 5,312,962 | 5,179,995 | | Total Liabilities | 17,817,780 | 15,494,038 | | Total Shareholders' Equity | 7,697,429 | 7,601,001 | Consolidated Statements of Operations The company reported net revenues of RMB 1.65 billion and achieved a net profit of RMB 90.7 million for the quarter Q1 2022 vs Q1 2021 Income Statement (in thousands RMB) | Account | Q1 2022 (Unaudited) | Q1 2021 (Unaudited) | | :--- | :--- | :--- | | Net revenues | 1,645,486 | 1,386,923 | | Gross profit | 355,521 | 323,312 | | Operating profit (loss) | 96,058 | 80,132 | | Net (loss) profit attributable to shareholders | 90,706 | (84,659) | Reconciliations of GAAP and Non-GAAP Results This section provides reconciliations from GAAP metrics to non-GAAP measures, detailing adjustments for items like depreciation and amortization Reconciliation to Adjusted Cash Gross Profit (Q1 2022, in thousands RMB) | Item | Amount | | :--- | :--- | | Gross profit (GAAP) | 355,521 | | Plus: depreciation and amortization | 327,393 | | Plus: share-based compensation expenses | 1,860 | | Adjusted cash gross profit (Non-GAAP) | 684,774 | Reconciliation to Adjusted EBITDA (Q1 2022, in thousands RMB) | Item | Amount | | :--- | :--- | | Operating profit (GAAP) | 96,058 | | Plus: depreciation and amortization | 349,609 | | Plus: share-based compensation expenses | 43,245 | | Plus: compensation for postcombination employment | 17,260 | | Adjusted EBITDA (Non-GAAP) | 506,172 | Condensed Consolidated Statement of Cash Flows Strong cash from operations and financing activities offset investing outflows, resulting in a net increase in cash of RMB 1.66 billion Cash Flow Summary (Q1 2022, in thousands RMB) | Activity | Amount | | :--- | :--- | | Net cash generated from operating activities | 482,599 | | Net cash used in investing activities | (1,032,758) | | Net cash generated from financing activities | 2,213,904 | | Net increase in cash and cash equivalents | 1,656,417 | Other Information Conference Call Details The company provided details for its Q1 2022 earnings conference call, including webcast and dial-in information - An earnings conference call was scheduled for May 24, 2022 (US) / May 25, 2022 (Beijing) to discuss the results[14] - Registration and dial-in information were provided for participants, and a live and archived webcast is available on the company's investor relations website[13][14] Notes and Disclaimers This section clarifies the use of non-GAAP measures, the RMB to USD exchange rate, and contains forward-looking statement disclaimers - The company uses non-GAAP measures like adjusted EBITDA and adjusted cash gross profit to supplement its U.S. GAAP results and help investors assess operating performance[15][16] - All translations from RMB to USD were made at a rate of RMB6.3393 to US$1.00, the rate in effect on March 31, 2022[17] - The financial information is unaudited and preliminary, subject to potential adjustments, and the report contains forward-looking statements[18][20]