VNET Group, Inc.

Good morning and good evening, ladies and gentlemen. Thank you and welcome to 21 via Net Group's first quarter 2021 earnings conference call. With us today are Mr. Samuel Shen, Chief Executive Officer and Executive Chairman of Retail IDC, Mr. Tim Chen, Chief Financial Officer, and Ms. Renee Jang, Investor Relations Director of the company. I'll now turn the call over to your first speaker today, Ms. Renee Zhang, IR Director of Gen1 Bionet. Please go ahead, ma'am.

Thank you, operator. Hello, everyone. Welcome to our first quarter 2021 earnings call. Before we start, please note that this call may contain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and observations that involve known and unknown risks, uncertainties, and other factors not under the company's control, which may cause actual results, performance, or achievements of the company to be materially different from the results, performance, or expectation implied by these forward-looking statements. All forward-looking statements are expressly qualified in their entirety by the cautionary statements risk factors, and details of the company's filing with the SEC, 21 Wayland undertakes no duty to revise or update any forward-looking statements for selected events or circumstances after the date of this conference call. I will now turn the call over to Mr. Samuel Shin, CEO of 21 Wayland.

Thank you, Renee. Good morning and good evening, everyone. Thank you for joining us on our earnings call today. During the first quarter of 2021, we grew our net revenue by 27.1% to RMB 1.39 billion from RMB 1.09 billion a year ago. Additionally, we grew our adjusted EBITDA to RMB 415.1 million from RMB 259.4 million, reaching the high end of our previous guidance. Our adjusted EBITDA margin increased to a new high of 29.9% from 23.8% in the prior year period. We attribute this quarter's financial achievements to our ability to capitalize on shifting market demand, our dual-core growth engine strategy, and our methodical execution of business expansion. As we transition into post-pandemic world, Leading to an age of digital transformation, we foresee both a multitude of headwinds and tailwinds in the IDC space. Central government's regulation on the supply side of the emission peak by 2030, carbon neutrality by 2060, will lead to near-term challenges. However, should result in long-term sustainable value for industry leaders, Recent intensified competition in certain geolocations could force companies to better compete over operational efficiency, business innovation, and customer satisfaction, all areas in which we excel. Lastly, new market entrance in the IDC space might cause near-term market fragmentation, yet will create ample M&A opportunities for us in the mid to long term. On the other hand, central government and financing institutions maintain favorable policies towards the new infrastructure space in support of the digitalizing trend. Data sovereignty, data privacy, and data security are ever increasing in importance, leading to a shift in customer demand towards major carrier-neutral and cloud-neutral IDC providers. Furthermore, the trend of remote working, increased regulatory compliance, data-driven decision-making, as well as mixed reality all lead to a sustained market demand for IDC. High-growth areas such as industrial 5G, blockchain, Internet of Things, and smart manufacturing are fueling a broader market demand for cloud computing. which will benefit leading IDC providers like VNet. As such, we have seen an expansion of potential customer base far beyond public cloud service providers and internet companies. With our dual core growth engine, we are well positioned to take advantage of these market trends and to transform headwinds into tailwinds in order to propel VNet into the next phase of our growth trajectory. Our unique and specialized dual-core growth engine combines hyperscale green IDC wholesale solutions with next-generation IDC retail solutions. This has enabled us to grow to what and who we are today. This year, VNet celebrated our 25th anniversary since inception and 10th anniversary since being listed on NASDAQ. In collaboration with China IDC Circle, which is an industry think tank, we hosted the 2021 China IDC Discovery Summit, which in itself is a strong endorsement to Binance's leadership position in the industry. Looking back at our 25-year history, we have ushered in the emergence of China's IDC sector, growing in harmony with the new digital era. and broadened the development horizon for the whole industry. Going forward, as we continue to boost our dual-core growth engine, expand our business, and nourish our industry ecosystem, we will contribute further towards a healthy, stable, and sustainable industry. In preparation for our next phase of growth, we formally launched a new subsidiary brand called Neolink. which integrates five product lines into our new retail business segment, alongside our VPN business. Neolink's mission is to proactively capitalize on the market opportunities emerging out of the central government's Digital China growth initiative. It's online in the 14th five-year plan. It is also a manifestation of our wholesale plus retail dual-core strategy. Neolink is committed to construct a new digital infrastructure in order to ease our clients' digital transformation while also become a trustworthy partner to our clients throughout their entire transformative life cycle. Leveraging our dual-core growth engine, we were able to execute our business expansion in a methodical manner to achieve meaningful results. As of March 31, 2021, our net total cabinets under management increased by 2,373 cabinets, sequentially to 55,926 cabinets, compared to 53,553 cabinets at the end of 2020. In the first quarter, our compound utilization rate increased to 61.7%, reflecting a healthy customer acquisition in both wholesale and retail IDCs. In particular, our utilization rate for mature cabinets was 73.9% and for ramp-up cabinets was 30.6%. Since the beginning of the year, we have moved capacity delivered in 2019 to mature group and capacity delivered in 2020 to ramp-up group. In addition to capacity expansion, we have also achieved encouraging sales progress. In the first quarter, we signed a contract with a leading e-commerce platform for services to provide 1,000 cabinets or roughly 6 megawatts in our Hebei O2 space to be delivered in Q2 of this year. This marked another successful conversion of a long-term retail customer to a wholesale customer. In Shanghai, we won a retail bet from a leading video community company geared towards the younger generation and also entered into an agreement with a fast-growing tech-based logistics company. Additionally, we have seen an incremental demand from the financial services industry, many from commercial banks, who have become the biggest gainers within our customer mix. While we work tirelessly to satisfy growing customer demands, we are also mindful of social responsibilities. During the first quarter, we reached an important milestone in our ESG initiatives. The combined low carbon emission rate of our Beijing data centers surpassed China's industry benchmark by 15%. Furthermore, three of our data centers have been shortlisted for the honor of national green data centers, while our Beijing 06 data center was one of the first to receive a prestigious honor in China. With the adoption of multiple energy saving and consumption reducing measures, we will continue to optimize our energy consumption structure as part of our commitment to build carbon neutral centers. With the establishment of a strategic advisory committee and a specialized ESG working group, we at VNet remain dedicated to further developing our ESG initiatives and meeting our goals. Finally, I would like to take the opportunity to formally introduce our new CFO, Mr. Tim Chen. Prior to assuming the CFO position, Tim was our chief strategy officer since August 2020 and has made significant contributions to our capital market operations. He was instrumental in our latest two rounds of capital raising, including the successful convertible bond issuance in January of this year. Tim has also made meaningful impact to optimize our shareholder structure, provide ample liquidity, for our future debt repayment and better position us for further capacity expansion. In addition to a strong track record in fundraising, Tim also possesses an innate ability to engage with investors. Even before Tim's appointment as CFO, he was already in frequent communications with our shareholders and investors, making his transition a natural extension from his previous post. So with that, I will now turn the call over to Tim, who will further discuss our financial results for the quarter, as well as his thoughts on our future growth. Tim?