VNET Reports Unaudited Second Quarter 2023 Financial Results

Rhea-AI Summary

VNET Group, Inc. announces Q2 2023 financial results with net revenues increasing by 5.6% to RMB1.82 billion. Adjusted EBITDA grows 9.9% to RMB535.0 million. Overall utilization rate of cabinets increases to 59.0%. Business outlook remains unchanged with expected year-over-year growth of 7.6% to 11.8% in net revenues and 8.1% to 13.5% in adjusted EBITDA.

Positive

• Net revenues increase by 5.6% to RMB1.82 billion
• Adjusted EBITDA grows 9.9% to RMB535.0 million
• Overall utilization rate of cabinets increases to 59.0%

Negative

• None.

BEIJING, Aug. 23, 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: ir@vnet.com

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

 

 

View original content:https://www.prnewswire.com/news-releases/vnet-reports-unaudited-second-quarter-2023-financial-results-301907901.html

SOURCE VNET Group, Inc.