BEIJING, Aug. 24, 2023 /PRNewswire/ — VNET Group, Inc. (Nasdaq: VNET) (“VNET” or the “Company”), a leading carrier- and cloud-neutral internet data center services provider in China, today announced its unaudited financial results for the second quarter ended June 30, 2023.
“During the second quarter of 2023, we delivered another solid set of results as we continued to execute our proven dual-core growth strategy, which reaffirms our ability to quickly capture incremental market demand amid the steady economic recovery,” said Jeff Dong, Chief Executive Officer of VNET. “We also saw some new AI application scenarios emerging across various industry verticals in China, starting to generate more demand for IDC services. With our high-performance data center design, extensive resources and strong execution capabilities, we remain poised to power the AI-driven demand for our wholesale and retail customers over the long term.
“Our wholesale and retail businesses continued to build strong sales momentum as digitalization gathers pace across industries. On the wholesale business front, we recently won an extended contract for 45MW of capacity from an existing internet giant customer. On the retail business front, in the second quarter we secured a contract for 7MW of additional capacity with an existing customer in the local service sector. Looking ahead, we believe our reliable and scalable IDC services, high power density deployment capabilities and loyal and expanding customer base position us well to seize rising opportunities and unleash further growth potential,” Jeff concluded.
Qiyu Wang, Chief Financial Officer of VNET, added, “In the second quarter of 2023, we remained focused on advancing high-quality revenue business to drive margin and profitability improvements. We are pleased to have achieved net revenues of RMB1.82 billion in the second quarter, representing an increase of 5.6% year over year. Thanks to our enhanced operating efficiency, adjusted EBITDA grew 9.9% year over year to RMB535.0 million, and adjusted EBITDA margin expanded to 29.4%. Moving forward, we will continue to explore new opportunities emerging from robust digital demand, especially AI-related demand, further strengthening our position as a leading IDC player and creating long-term, sustainable growth for our shareholders.”
Second Quarter 2023 Financial Highlights
Net revenues increased by 5.6% to RMB1.82 billion (US$251.2 million) from RMB1.72 billion in the same period of 2022. Adjusted cash gross profit (non-GAAP) increased by 4.1% to RMB742.9 million (US$102.5 million) from RMB713.7 million in the same period of 2022. Adjusted cash gross margin (non-GAAP) was 40.8%, compared to 41.4% in the same period of 2022. Adjusted EBITDA (non-GAAP) increased by 9.9% to RMB535.0 million (US$73.8 million) from RMB486.9 million in the same period of 2022. Adjusted EBITDA margin (non-GAAP) in the second quarter of 2023 was 29.4%, compared to 28.2% in the same period of 2022.
Second Quarter 2023 Operational Highlights
Total cabinets under management were 86,927 as of June 30, 2023, compared to 87,310 as of March 31, 2023 and 80,831 as of June 30, 2022. Cabinets utilized by customers increased by 2,000 in the second quarter of 2023 to reach 51,316 as of June 30, 2023, compared to 49,316 as of March 31, 2023 and 44,500 as of June 30, 2022. Overall utilization rate of cabinets[1] was 59.0% as of June 30, 2023, compared to 56.5% as of March 31, 2022 and 55.1% as of June 30, 2022. Retail IDC MRR[2] per cabinet increased to RMB9,530 in the second quarter of 2023, compared to RMB9,486 in the first quarter of 2023 and RMB9,186 in the second quarter of 2022.
[1] The overall utilization rate is calculated by dividing the number of customer-utilized cabinets by the total cabinets under management at the end of the period.
[2] Retail IDC MRR refers to Monthly Recurring Revenues for the retail IDC business.
Second Quarter 2023 Financial Results
NET REVENUES: Net revenues in the second quarter of 2023 were RMB1.82 billion (US$251.2 million), representing an increase of 5.6% from RMB1.72 billion in the same period of 2022. The year-over-year increase was mainly driven by the continued growth of our IDC business as well as our cloud and VPN services.
GROSS PROFIT: Gross profit in the second quarter of 2023 was RMB342.7 million (US$47.3 million), compared with RMB357.8 million in the same period of 2022. Gross margin in the second quarter of 2023 was 18.8%, compared to 20.7% in the same period of 2022.
ADJUSTED CASH GROSS PROFIT, which excludes depreciation, amortization, and share-based compensation expenses, was RMB742.9 million (US$102.5 million) in the second quarter of 2023, compared to RMB713.7 million in the same period of 2022. Adjusted cash gross margin in the second quarter of 2023 was 40.8%, compared to 41.4% in the same period of 2022.
OPERATING EXPENSES: Total operating expenses in the second quarter of 2023 were RMB249.5 million (US$34.4 million), compared to RMB321.7 million in the same period of 2022. As a percentage of net revenues, total operating expenses in the second quarter of 2023 were 13.7%, compared to 18.7% in the same period of 2022.
Sales and marketing expenses in the second quarter of 2023 were RMB63.1 million (US$8.7 million), compared to RMB80.4 million in the same period of 2022.
Research and development expenses in the second quarter of 2023 were RMB81.1 million (US$11.2 million), compared to RMB76.7 million in the same period of 2022.
General and administrative expenses in the second quarter of 2023 were RMB128.0 million (US$17.7 million), compared to RMB167.0 million in the same period of 2022.
ADJUSTED OPERATING EXPENSES, which exclude share-based compensation expenses and compensation for postcombination employment in an acquisition, were RMB241.5 million (US$33.3 million) in the second quarter of 2023, compared to RMB250.7 million in the same period of 2022. As a percentage of net revenues, adjusted operating expenses in the second quarter of 2023 were 13.3%, compared to 14.5% in the same period of 2022.
ADJUSTED EBITDA: Adjusted EBITDA in the second quarter of 2023 was RMB535.0 million (US$73.8 million), representing an increase of 9.9% from RMB486.9 million in the same period of 2022. Adjusted EBITDA in the second quarter of 2023 excluded share-based compensation expenses of RMB8.0 million (US$1.1 million). Adjusted EBITDA margin in the second quarter of 2023 was 29.4%, compared to 28.2% in the same period of 2022.
NET LOSS ATTRIBUTABLE TO VNET GROUP, INC.: Net loss attributable to VNET Group, Inc. in the second quarter of 2023 was RMB232.9 million (US$32.1 million), compared to a net loss attributable to VNET Group, Inc. of RMB377.2 million in the same period of 2022.
LOSS PER SHARE: Basic and diluted loss per share in the second quarter of 2023 were both RMB0.26 (US$0.04), which represented the equivalent of both RMB1.56 (US$0.24) per American depositary share (“ADS”). Each ADS represents six Class A ordinary shares. Diluted loss per share is calculated using adjusted net loss attributable to ordinary shareholders divided by the weighted average number of diluted shares outstanding.
As of June 30, 2023, the aggregate amount of the Company’s cash and cash equivalents, restricted cash and short-term investments was RMB2.76 billion (US$380.8 million).
Net cash generated from operating activities, in the second quarter of 2023, was RMB423.5 million (US$58.4 million), compared to RMB942.7 million in the same period of 2022.
Business Outlook
The Company expects net revenues for the full year of 2023 to be in the range of RMB7,600 million to RMB7,900 million, representing a year-over-year growth of 7.6% to 11.8%, and adjusted EBITDA to be in the range of RMB2,025 million to RMB2,125 million, representing a year-over-year growth of 8.1% to 13.5%. The above outlook remains unchanged from the previously provided estimates.
The forecast reflects the Company’s current and preliminary views on the market and its operational conditions, and is subject to change.
Conference Call
The Company’s management will host an earnings conference call at 9:00 PM U.S. Eastern Time on Wednesday, August 23, 2023, or 9:00 AM Beijing Time on Thursday, August 24, 2023.
For participants who wish to join the call, please access the link provided below to complete the online registration process and dial in 5 minutes prior to the scheduled call start time.
Event Title: VNET Second Quarter 2023 Earnings Conference Call
Registration Link: https://register.vevent.com/register/BId0a80aca23f747f89ed4d80958052f31
Upon registration, each participant will receive a set of dial-in numbers by location, a personal PIN and an email with further detailed instructions, which will be used to join the conference call.
A simultaneous audio webcast and replay of the conference call will be accessible on the Company’s investor relations website at http://ir.vnet.com.
Non-GAAP Disclosure
In evaluating its business, VNET considers and uses the following non-GAAP measures defined as non-GAAP financial measures by the U.S. Securities and Exchange Commission as a supplemental measure to review and assess its operating performance: adjusted cash gross profit, adjusted cash gross margin, adjusted operating expenses, adjusted EBITDA and adjusted EBITDA margin. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned “Reconciliations of GAAP and non-GAAP results” set forth at the end of this press release.
The non-GAAP financial measures are provided as additional information to help investors compare business trends among different reporting periods on a consistent basis and to enhance investors’ overall understanding of the Company’s current financial performance and prospects for the future. These non-GAAP financial measures should be considered in addition to results prepared in accordance with U.S. GAAP, but should not be considered a substitute for, or superior to, U.S. GAAP results. In addition, the Company’s calculation of the non-GAAP financial measures may be different from the calculation used by other companies, and therefore comparability may be limited.
Exchange Rate
This announcement contains translations of certain RMB amounts into U.S. dollars (“USD”) at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to USD were made at the rate of RMB7.2513 to US$1.00, the noon buying rate in effect on June 30, 2023, in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or USD amounts referred could be converted into USD or RMB, as the case may be, at any particular rate or at all. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this earnings release.
Statement Regarding Unaudited Condensed Financial Information
The unaudited financial information set forth above is preliminary and subject to potential adjustments. Adjustments to the consolidated financial statements may be identified when audit work has been performed for the Company’s year-end audit, which could result in significant differences from this preliminary unaudited condensed financial information.
About VNET
VNET Group, Inc. is a leading carrier- and cloud-neutral internet data center services provider in China. VNET provides hosting and related services, including IDC services, cloud services, and business VPN services to improve the reliability, security, and speed of its customers’ internet infrastructure. Customers may locate their servers and equipment in VNET’s data centers and connect to China’s internet backbone. VNET operates in more than 30 cities throughout China, servicing a diversified and loyal base of over 7,000 hosting and related enterprise customers that span numerous industries ranging from internet companies to government entities and blue-chip enterprises to small- to mid-sized enterprises.
Safe Harbor Statement
This announcement contains forward-looking statements. These forward-looking statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “target,” “believes,” “estimates” and similar statements. Among other things, quotations from management in this announcement as well as VNET’s strategic and operational plans contain forward-looking statements. VNET may also make written or oral forward-looking statements in its reports filed with, or furnished to, the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about VNET’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: VNET’s goals and strategies; VNET’s expansion plans; the expected growth of the data center services market; expectations regarding demand for, and market acceptance of, VNET’s services; VNET’s expectations regarding keeping and strengthening its relationships with customers; VNET’s plans to invest in research and development to enhance its solution and service offerings; and general economic and business conditions in the regions where VNET provides solutions and services. Further information regarding these and other risks is included in VNET’s reports filed with, or furnished to, the U.S. Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of this press release, and VNET undertakes no duty to update such information, except as required under applicable law.
Investor Relations Contact:
Xinyuan Liu
Tel: +86 10 8456 2121
Email: [email protected]
VNET GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))
As of
As of
December 31, 2022
June 30, 2023
RMB
RMB
US$
Assets
Current assets:
Cash and cash equivalents
2,661,321
2,362,999
325,872
Restricted cash
327,673
253,088
34,902
Accounts and notes receivable, net
1,763,693
2,020,880
278,692
Short-term Investments
–
144,516
19,930
Prepaid expenses and other current assets
2,147,500
2,542,062
350,569
Amounts due from related parties
152,089
232,518
32,066
Total current assets
7,052,276
7,556,063
1,042,031
Non-current assets:
Property and equipment, net
11,964,498
12,396,048
1,709,493
Intangible assets, net
1,497,131
1,436,523
198,106
Land use rights, net
576,020
610,195
84,150
Operating lease right-of-use assets, net
3,503,925
3,882,743
535,455
Goodwill
1,364,191
1,364,191
188,131
Restricted cash
500
882
122
Deferred tax assets, net
196,098
214,944
29,642
Long-term investments, net
242,194
755,625
104,205
Other non-current assets
551,572
598,865
82,587
Total non-current assets
19,896,129
21,260,016
2,931,891
Total assets
26,948,405
28,816,079
3,973,922
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts and notes payable
713,628
743,685
102,559
Accrued expenses and other payables
2,410,479
2,680,426
369,648
Advances from customers
1,157,963
1,448,931
199,817
Deferred revenue
95,078
83,474
11,512
Income taxes payable
42,017
37,897
5,226
Amounts due to related parties
6,928
356,358
49,144
Current portion of long-term borrowings
484,020
532,969
73,500
Current portion of finance lease liabilities
206,260
144,561
19,936
Current portion of deferred government grants
3,646
3,646
503
Current portion of operating lease liabilities
674,288
735,409
101,418
Convertible promissory notes
537,778
4,433,161
611,361
Total current liabilities
6,332,085
11,200,517
1,544,624
Non-current liabilities:
Long-term borrowings
3,049,856
3,667,562
505,780
Convertible promissory notes
5,859,259
1,805,589
249,002
Non-current portion of finance lease liabilities
1,047,640
1,181,477
162,933
Unrecognized tax benefits
87,174
87,174
12,022
Deferred tax liabilities
682,580
692,113
95,447
Deferred government grants
2,672
101,471
13,993
Non-current portion of operating lease liabilities
2,905,283
3,172,632
437,526
Total non-current liabilities
13,634,464
10,708,018
1,476,703
Shareholders’ equity
Ordinary shares
60
60
8
Additional paid-in capital
15,239,926
15,220,309
2,098,977
Accumulated other comprehensive income
11,022
3,800
524
Statutory reserves
77,996
77,996
10,756
Accumulated deficit
(8,369,868)
(8,520,454)
(1,175,024)
Treasury stock
(349,523)
(349,523)
(48,201)
Total VNET Group, Inc. shareholders’ equity
6,609,613
6,432,188
887,040
Noncontrolling interest
372,243
475,356
65,555
Total shareholders’ equity
6,981,856
6,907,544
952,595
Total liabilities and shareholders’ equity
26,948,405
28,816,079
3,973,922
VNET GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)
Three months ended
Six months ended
June 30, 2022
March 31, 2023
June 30, 2023
June 30, 2022
June 30, 2023
RMB
RMB
RMB
US$
RMB
RMB
US$
Net revenues
1,724,863
1,805,782
1,821,744
251,230
3,370,349
3,627,526
500,259
Cost of revenues
(1,367,086)
(1,453,402)
(1,478,995)
(203,963)
(2,657,051)
(2,932,397)
(404,396)
Gross profit
357,777
352,380
342,749
47,267
713,298
695,129
95,863
Operating income (expenses)
Other operating income
1,588
33,379
13,895
1,916
41,285
47,274
6,519
Sales and marketing expenses
(80,368)
(65,776)
(63,068)
(8,697)
(155,309)
(128,844)
(17,768)
Research and development expenses
(76,740)
(79,750)
(81,126)
(11,188)
(149,355)
(160,876)
(22,186)
General and administrative expenses
(167,044)
(127,447)
(128,017)
(17,654)
(321,281)
(255,464)
(35,230)
Reversal for doubtful debt
845
2,449
8,833
1,218
3,478
11,282
1,556
Total operating expenses
(321,719)
(237,145)
(249,483)
(34,405)
(581,182)
(486,628)
(67,109)
Operating profit
36,058
115,235
93,266
12,862
132,116
208,501
28,754
Interest income
8,814
5,681
10,038
1,384
13,363
15,719
2,168
Interest expense
(68,530)
(69,786)
(71,709)
(9,889)
(121,649)
(141,495)
(19,513)
Other income
2,896
1,164
14,192
1,957
8,287
15,356
2,118
Other expenses
(693)
(3,592)
(320)
(44)
(1,045)
(3,912)
(539)
Changes in the fair value of convertible promissory notes
(2,321)
21,298
154
21
57,957
21,452
2,958
Foreign exchange (loss) gain
(319,875)
78,633
(271,630)
(37,459)
(295,126)
(192,997)
(26,616)
(Loss) income before income taxes and gain (loss) from equity method investments
(343,651)
148,633
(226,009)
(31,168)
(206,097)
(77,376)
(10,670)
Income tax expenses
(30,946)
(44,886)
(12,545)
(1,730)
(77,646)
(57,431)
(7,920)
Gain (loss) from equity method investments
1,090
(174)
983
136
3,137
809
112
Net (loss) income
(373,507)
103,573
(237,571)
(32,762)
(280,606)
(133,998)
(18,478)
Net (profit) loss attributable to noncontrolling interest
(3,696)
(21,280)
4,692
647
(5,891)
(16,588)
(2,288)
Net (loss) income attributable to VNET Group, Inc.
(377,203)
82,293
(232,879)
(32,115)
(286,497)
(150,586)
(20,766)
(Loss) earnings per share
Basic
(0.43)
0.09
(0.26)
(0.04)
(0.32)
(0.17)
(0.02)
Diluted
(0.43)
0.07
(0.26)
(0.04)
(0.37)
(0.19)
(0.03)
Shares used in (loss) earnings per share computation
Basic*
886,204,618
888,383,240
888,705,981
888,705,981
885,915,878
888,555,145
888,555,145
Diluted*
886,204,618
1,056,829,494
888,705,981
888,705,981
919,915,879
905,386,636
905,386,636
(Loss) earnings per ADS (6 ordinary shares equal to 1 ADS)
Basic
(2.58)
0.54
(1.56)
(0.24)
(1.92)
(1.02)
(0.12)
Diluted
(2.58)
0.42
(1.56)
(0.24)
(2.22)
(1.14)
(0.18)
* Shares used in (loss) earnings per share/ADS computation were computed under weighted average method.
VNET GROUP, INC.
RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS
(Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))
Three months ended
Six months ended
June 30, 2022
March 31, 2023
June 30, 2023
June 30, 2022
June 30, 2023
RMB
RMB
RMB
US$
RMB
RMB
US$
Gross profit
357,777
352,380
342,749
47,267
713,298
695,129
95,863
Plus: depreciation and amortization*
362,003
401,877
400,173
55,186
689,396
802,050
110,608
Plus: share-based compensation expenses
(6,066)
–
–
–
(4,206)
–
–
Adjusted cash gross profit
713,714
754,257
742,922
102,453
1,398,488
1,497,179
206,471
Adjusted cash gross margin
41.4 %
41.8 %
40.8 %
40.8 %
41.5 %
41.3 %
41.3 %
Operating expenses
(321,719)
(237,145)
(249,483)
(34,405)
(581,182)
(486,628)
(67,109)
Plus: share-based compensation expenses
53,551
8,336
8,006
1,104
94,936
16,342
2,254
Plus: compensation for postcombination employment in an acquisition
17,453
–
–
–
34,713
–
–
Adjusted operating expenses
(250,715)
(228,809)
(241,477)
(33,301)
(451,533)
(470,286)
(64,855)
Operating profit
36,058
115,235
93,266
12,862
132,116
208,501
28,754
Plus: depreciation and amortization*
385,876
432,629
433,735
59,815
735,485
866,364
119,477
Plus: share-based compensation expenses
47,485
8,336
8,006
1,104
90,730
16,342
2,254
Plus: compensation for postcombination employment in an acquisition
17,453
–
–
–
34,713
–
–
Adjusted EBITDA
486,872
556,200
535,007
73,781
993,044
1,091,207
150,485
Adjusted EBITDA margin
28.2 %
30.8 %
29.4 %
29.4 %
29.5 %
30.1 %
30.1 %
* Before the deduction of government grants for three months ended March 31, 2023, three months ended June 30, 2023 and six months ended June 30, 2023.
VNET GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))
Three months ended
June 30, 2022
March 31, 2023
June 30, 2023
RMB
RMB
RMB
US$
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income
(373,507)
103,573
(237,571)
(32,762)
Adjustments to reconcile net (loss) income to net cash generated from operating activities:
Depreciation and amortization
385,876
431,654
433,015
59,715
Share-based compensation expenses
47,485
8,336
8,006
1,104
Others
447,480
62,631
357,787
49,341
Changes in operating assets and liabilities
Accounts and notes receivable
(137,720)
(254,293)
8,388
1,157
Prepaid expenses and other current assets
526,090
(378,933)
70,627
9,740
Accounts and notes payable
76,070
(3,377)
33,434
4,611
Accrued expenses and other payables
21,363
192,063
(5,950)
(820)
Deferred revenue
19,989
24,139
(35,743)
(4,929)
Advances from customers
70,884
405,945
(114,977)
(15,856)
Others
(141,299)
(136,727)
(93,540)
(12,902)
Net cash generated from operating activities
942,711
455,011
423,476
58,399
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment
(527,867)
(608,717)
(394,812)
(54,447)
Purchases of intangible assets
(12,690)
(2,312)
(10,178)
(1,404)
Payments for investments
(38,280)
–
(655,815)
(90,441)
Proceeds from (payments for) other investing activities
208
(90,489)
9,295
1,282
Net cash used in investing activities
(578,629)
(701,518)
(1,051,510)
(145,010)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank borrowings
18,860
279,916
169,204
23,334
Repayments of bank borrowings
(43,275)
(73,070)
(55,865)
(7,704)
Repayments of 2025 Convertible Notes
–
–
(380,333)
(52,450)
Payments for finance lease
(75,145)
(84,882)
(67,172)
(9,263)
(Payments for) proceeds from other financing activities
(62,119)
395,096
285,013
39,305
Net cash (used in) generated from financing activities
(161,679)
517,060
(49,153)
(6,778)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash
48,962
(17,205)
51,314
7,077
Net increase (decrease) in cash, cash equivalents and restricted cash
251,365
253,348
(625,873)
(86,312)
Cash, cash equivalents and restricted cash at beginning of period
3,364,890
2,989,494
3,242,842
447,208
Cash, cash equivalents and restricted cash at end of period
3,616,255
3,242,842
2,616,969
360,896