VNET(US:VNET)2021-11-19 07:41Financial Data and Key Metrics Changes - The company achieved net revenues of RMB1.56 billion in Q3 2021, a 25.3% increase from RMB1.25 billion in Q3 2020, driven by increased customer demand for scalable IDC solutions [16][15] - Adjusted EBITDA rose by 22.2% to RMB450.4 million, with an adjusted EBITDA margin of 28.9%, compared to 29.6% in the same period of 2020 [18][15] - Gross profit increased by 36.4% to RMB375.2 million, with a gross margin of 24%, up from 22.1% year-over-year [16][15] Business Line Data and Key Metrics Changes - The wholesale business saw healthy momentum, with increased cabinet utilization from internet and cloud service customers [9] - The retail business expanded its client base, securing new relationships with companies like China Chengxin Credit Rating Group and Real AI, while also receiving add-on orders from existing customers [10] - The cloud business is generating additional interest, particularly from partnerships beyond Microsoft, indicating growth potential in this segment [11] Market Data and Key Metrics Changes - The company added 2,388 cabinets on a net basis during Q3 2021, with a utilization rate for newly-built cabinets increasing by 5.5 percentage points to 34.7% [8] - The compound utilization rate remained stable at around 60%, with expectations to achieve a full-year target of 25,000 standard cabinets [8] Company Strategy and Development Direction - The company is executing a dual-core growth engine strategy, focusing on both wholesale and retail IDC services to capitalize on digitalization trends [6][7] - Plans to deepen market penetration, diversify sector coverage, and broaden the customer base are in place to capture growth opportunities from digital transformation [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about demand in the coming quarters despite regulatory uncertainties, citing trends in data generation and cloud adoption [24][26] - The company is cautiously optimistic about the impact of potential regulatory changes and power tariffs, expecting limited effects on margins due to pass-through mechanisms in contracts [27][28] Other Important Information - The company received recognition for its ESG initiatives, with several data centers awarded for their environmental sustainability performance [12] - The company anticipates net revenues for Q4 2021 to be in the range of RMB1.75 billion to RMB1.77 billion, with full-year revenues expected between RMB6.19 billion and RMB6.21 billion [20] Q&A Session All Questions and Answers Question: Customer demand outlook and wholesale sales momentum - Management noted that datasets are doubling every 18 months and that COVID-19 has accelerated digital transformation, leading to bullish demand outlook [24] - Regarding margin risks from utility costs, management indicated that any potential tariff increases would have limited impact due to pass-through clauses in contracts [27][28] Question: CapEx guidance and retail MRR trends - Management explained the reduction in CapEx guidance from RMB5.5 billion to RMB1.8 billion due to fewer opportunities for securing future resources and lack of M&A activity [30][32] - Retail MRR growth is attributed to value-added services and hybrid multi-cloud offerings, with expectations for continued upward trends [34][36] Question: Cabinet addition guidance and margin outlook - Management confirmed the guidance of adding 25,000 cabinets annually, with 80% of resources secured for the next year [39] - The expected reduction in EBITDA margin for Q4 is due to increased costs associated with cabinet deliveries, which will stabilize over time [40] Question: Impact of power restrictions and green power utilization - Management stated that power control measures had limited impact on operations, with expectations for easing of restrictions [44] - The company is exploring partnerships to increase green power utilization, currently constrained by grid purchasing limitations [45][46] Question: Power quota challenges and future growth strategies - Management acknowledged challenges in obtaining power quotas but expressed confidence in securing necessary resources due to long-standing industry presence [69] - The company is prepared to adjust its CapEx strategy based on customer demand and market conditions [80]