VNET Group, Inc. Q1 FY2025 earnings call

• Operational side: Wholesale IDC business had strong performance with capacity and utilization growth. Retail business progressed smoothly with new orders. Won quality wholesale and retail orders in first quarter, including from intelligent driving, Internet, finance, etc. - Financial side: Total net revenues and adjusted EBITDA maintained solid growth. Strengthened financing capabilities with convertible notes, sustainability-linked loan, etc. - ESG: Issued fifth annual ESG report, made progress in green power, energy consumption, employee diversity, and ranked highly in ESG ratings.

Total net revenues increased by 18.3% year over year to RMB 2.25 billion for the first quarter. Wholesale revenues reached RMB 673 million, a year-over-year growth of 86.5%. Retail revenues increased by 4.8% to RMB 968.3 million. Adjusted EBITDA for the first quarter increased by 26.4% year over year to RMB 682 million, with an adjusted EBITDA margin of 30.4%. Wholesale capacity in service grew 18.1% quarter over quarter to 573 megawatts, utilization grew 23.9% quarter over quarter to 437 megawatts with a utilization rate of 76.2%. Retail capacity in service was 51,960 cabinets, with MRR per retail cabinet at RMB 8,898 this quarter.

• Total net revenues expected to be between RMB 9.1 billion to RMB 9.3 billion for 2025, representing year-over-year growth of 10% to 13%. - Adjusted EBITDA expected to be in the range of RMB 2.7 billion to RMB 2.76 billion, representing year-over-year growth of 15% to 18%. - Capital expenditure for 2025 expected to be in the range of RMB 10 billion to RMB 12 billion.

Q: Tom Tang from Morgan Stanley asked about customer demand and procurement processes after H20 chip ban.

A: Ju Ma responded that H20 chip embargo caused short-term impact on client demand but now everything is back on track, current order on hand is sufficient for this year and first half of next year, and expects sustained demand from hyperscalers.

Q: Edison Lee from Jefferies asked about retail demand and MRR drivers.

A: Ju Ma said retail orders are from AI-driven applications like fintech, local services, etc., and MRR increase is due to repurposing cabinets for high-voltage AI-driven needs charging higher prices.

Q: Daley Li from Bank of America Securities asked about gross profit margin improvement drivers and REITs progress.

A: Ju Ma said improved gross profit margin is due to increasing proportion of wholesale IDC (higher margin) and repurposing cabinets for higher MRR, and REITs project is progressing well with reasonable valuation.

Q: Louis Tung from Citi asked about H-share IPO plans and electricity tariff impact.

A: Qiyu Wang said potential H-share IPO is progressing but no specific timeline, and currently no declining trend in electricity bills.

Q: Sara Wang from UBS asked about wholesale business delivery plan and utilization visibility.

A: Ju Ma said clients have strong demand, and they are confident of pleasant move-in rhythm from clients for upcoming quarters and next year