VNET Group, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Overview: Delivered strong Q3 results with net revenues up 12.4% YOY to RMB 2.12 billion and adjusted EBITDA up 20.2% YOY to RMB 595 million. Wholesale business drove growth with 86.4% YOY revenue increase.
• New Orders: Secured 6 new orders totaling 84 megawatts, including a 32-megawatt wholesale order for Huailai IDC Campus and a 14-megawatt wholesale order from another Internet customer.
• AI Demand: Expanded AI computing capabilities, with over 98% of wholesale capacity meeting HPC needs. Industries like Internet, cloud, short video, finance, and semiconductor drive AI demand.
• Green Energy: Ulanqab source-grid-load-storage integrated project approved, expected to come online H2 2025. Taicang pre-REIT project in progress, with underlying assets valued at RMB 5.74 billion.

Segment Performance

• Wholesale IDC: Net revenues increased 86.4% year-over-year to RMB 523 million. Capacity in service was 358 megawatts as of September, with a quarter-over-quarter increase of 26 megawatts. Utilization rate rose to 78%, with mature capacity utilization reaching 95.6%.
• Retail IDC: Capacity in service slightly increased to 52,250 cabinets. Utilization rate was 63.1% as of September, with MRR per retail cabinet at RMB 8,788.
• Non-IDC: VPN business acquired 2 new customers in industrial and manufacturing sectors, with over 220 POPs in over 100 cities worldwide.

Guidance

• Full Year 2024: Revised guidance for total net revenues to RMB 8 billion to RMB 8.1 billion (+7.9%-9.3% YOY) and adjusted EBITDA to RMB 2.28 billion to RMB 2.3 billion (+16.4%-17.4% YOY).
• Taicang Pre-REIT: Expect to sign definitive agreement with insurance company by end 2024 to co-establish pre-REITs fund, acquiring 100% stake in Taicang IDC campus phases 1 and 2.
• Ulanqab Project: Green energy project expected to come online H2 2025, increasing green energy usage proportion.

Risks

• Forward-Looking Statements: Subject to risks and uncertainties causing actual results to differ from expectations. Refer to SEC filings for detailed risks.
• REIT Execution: Uncertainties in executing pre-REIT and public REIT projects.
• Competition: Potential impact of competition on market share and pricing.

Question and Answer

Q: What is driving the demand for new orders?

A: Mostly AI computing demand, with inference-related requests growing. Industries like quantitative trading and autonomous driving also show stronger demand for integrated services.

Q: Details on Taicang IDC campus utilization rate?

A: Current utilization rate around 50%, expected to rise to 95% by end 2025 with EBITDA reaching ~RMB 570 million.

Q: Outlook for wholesale IDC capacity delivery?

A: Maintain current delivery plan, with planned deliveries in Q4 2024 and guidance for next year based on received orders and potential expansions.