VNET Group, Inc.

Good morning and good evening, ladies and gentlemen. Thank you and welcome to VNet Group Inc. 4th Quarter 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. We will be hosting a question and answer session after the management prepare remarks. With us today are Mr. Samuel Shen, Chief Executive Officer and Executive Chairman of Retail IDC. Mr. Tim Chen, Chief Financial Officer, and Ms. Xingyuan Liu, Investor Relations Director of the company. I will now turn the call over to the first speaker today, Ms. Liu, IR Director of Vinet Group Inc. Please go ahead, ma'am.

Hello, everyone. Welcome to our fourth quarter 2021 earnings conference call. Our earnings release was distributed earlier today, and you can find a copy on our IR website as well as on Newswire Services. Please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Report Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest annual report and other documents filed with the SEC. VNet does not undertake any obligations to update any forward-looking statements except as required under applicable laws. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will also be available on our IR website at ir.vnet.com. I will now turn the call over to our CEO, Samuel.

All right. Thank you, Xin Yuan. Good morning and good evening, everyone. Thank you for joining our fourth quarter 2021 earnings conference call. We concluded 2021 with strong operating and financial results. Operationally, we successfully achieved this year's delivery target by adding approximately 25,000 cabinets in the full year of 2021, including 13,276 cabinets that were delivered in the fourth quarter. Financially, for the full year of 2021, we grew our revenue by 28% and our adjusted EBITDA by 32%. We attribute our achievements to favorable government policies, robust market demand, persistent strategy execution, and methodical service expansion. First, we are pleased to see the favorable government policies continue to provide a strong tailwind to our industry development. Last month, The Eastern Data Western Computing Plan was joined and released by China's National Development and Reform Commission, together with three other central regulatory departments. Of the eight national computing hubs, we have already deployed our data centers in the Beijing-Tianjin-Hebei region, Yangtze River Delta, Greater Bay Area, Chengdu-Chongqing Economic Circle, and Inner Mongolia Autonomous Region. In addition, this January, the State Council of China unveiled the first five-year growth plan for the digital economy, highlighting the sector's role in reshaping global economic structure and rolling out developed targets through 2025. The plan laid out measures for upgrading national infrastructure, fostering the role of data as a production element, and promoting digital transformation. The plan also gives priority to the development of digital infrastructure, a pillar of achieving digital economic prosperity that will also spur investment and drive overall economic growth. During the fourth quarter, we received orders not only from bare weather technology companies in the internet sectors, but also traditional companies in brick and mortar industries that are transforming through digitalization. In addition, we're seeing growing demand in both the wholesale and retail segments. In order to seize this burgeoning market demand, we maintain a laser sharp focus on executing our dual core strategy to offer both wholesale and retail IDC services, enabling us to achieve solid operating results. On a cabinet delivery front, we added 13,276 cabinets on a net basis in the fourth quarter. to 78,540 cabinets as of December 31, 2021, despite a myriad of challenges, including equipment delivery delays caused by the COVID resurgence in certain regions of China, global chip shortages, and construction difficulties due to excessively cold weather. To meet our annual delivery targets against all odds is a strong testament to our solid execution capabilities. developed on the foundation of our extensive experience in the IDC sectors. This achievement demonstrates our superior capabilities in project management, logistics, as well as suppliers and government relations. In addition, successfully leverage our extensive technological expertise to explore extension resources. Turning to our monthly recurring revenue, our retail IDC MRR reached a new high of 9,301 in the fourth quarter, representing 2% year-over-year growth. Our continued growth in MRR is a manifestation of the increasing endorsement from our existing customers. As we continue to improve our service capabilities and enrich our one-stop solution offerings, our existing customers expanded their contract scope accordingly to include more varied added services, such as interconnectivity bare-matter services, hybrid cloud services, O&M, and more. We're also making good progress on our utilization rate. Our compound utilization rate increased to 61.6% in the fourth quarter compared to 59.8% in the previous one. This increase was mainly driven by consistently strong demand from the internet sectors and the digitalization trend in the traditional industries. such as financial services, automobile manufacturing, and local services. The utilization rate for mature cabinets, which consisted of cabinet deliveries prior to and during 2019, was 76.7%, compared to 75.5% in the previous quarter. The utilization rate for ramp-up and newly built cabinets, which consisted of cabinet deliveries in 2020 and 2021 was 39.6% compared to 34.7% in the previous quarter. That being said, we do expect to see some seasonal fluctuations in the utilization rates in the first quarter. This is because each year we reclassify mature, red pop, and newly built cabinets in the first quarter, and we delivered a large amount of newly built cabinets in the fourth quarter of last year. On the resource front, we have recently secured new resources exceeding 20 megawatts in capacity at a premium location in Beijing, and we expect to deliver the cabinets over the next two years in multiple phases. Additionally, we continue to secure more resources in other Tier 1 cities and surrounding areas. On the wholesale business side, while maintaining our ramp-up speed, we continue to secure more orders from existing and new customers. Our customers in the internet sectors and cloud computing industry maintain a healthy pace of development and ramp up fast to meet their increasing data processing needs. In the fourth quarter, we won a pre-committed order of approximately 7 megawatts in capacity from an existing internet customer. Recently, the same customer awarded us a further pre-committed order of approximately 11 megawatts in capacity. And we also secured three other orders, totaling approximately 5 megawatts in capacity. Two of them were multi-year contracts from our existing customers in the internet and technology sectors, respectively. While the third one was a multi-year contract with a state-owned cloud enterprise in the southern western region of China. We continue to see the increasing demands in our wholesale business and are confident about our future prospects in this segment. Turning to our retail business, the digital transformation trend further fueled our business growth across multiple verticals. We continue to see trans demand from several industries, including financial services, automobile manufacturing, local services, and IT services. In addition, we also saw increased demand from traditional industries such as logistics, manufacturing, and construction. For example, several globally renowned companies partnered with us to expand their business in China during the quarter, demonstrating our strong customer recognition, exceptional operating track record, and superior ITC technologies. These customers include a leading global investment bank, the world-leading credit rating service provider, and a global leader in the premium and luxury car industry. We have now reached over 1,400 IDC customers in total, and they operate in a wide variety of industries. This growth and diversification of our customer base will help us to mitigate any potential adverse regulatory changes and also serves as a secure foundation for the future development of our dual-core strategy. For our Blue Cloud business, we continue to grow the business by providing industry-specific solutions to help our customers improve their operational efficiency and reduce cost. Within seeing the unprecedented supply chain disruption caused by the COVID-19 pandemic, we decided to proactively develop a solution to help our clients resolve acute pains in their logistics management and shorten their product to market time. We recently initiated a logistics execution system, one of our key SaaS offerings to IDC customers in the automotive industry. This SaaS offering improves support for lean manufacturing with the aim of minimizing lead time and increasing customer satisfaction by fulfilling tailored requirements. The system also provides better warehouse management by synchronizing online and offline orders. Enabling direct ordering from manufacturers eliminates the need for intermediate distributors, allowing manufacturers to produce goods based on the actual needs of customers. During the quarter, Neutron, a new local EV manufacturer, began using our logistics execution system and provided excellent initial feedback. Utilizing our successful execution experience and product development capabilities, we expect to expand our product reach to serve more upstream and downstream industry participants in the automotive industry and expand into various other sectors going forward. Beyond the execution of our strategy, we further explore options. to diversify our financing solutions and enhancing the resilience of our business. In January, we reached an agreement with Blackstone, the world's largest alternative investment firm, pursuant to which Blackstone made an additional investment in VNet by purchasing US $250 million of our convertible notes. Last December, we signed a master joint venture investment agreement with a sovereign wealth fund Together, we will form joint ventures to pursue development and investment opportunities in multiple built-to-suit hyperscale data center projects in China. As the leading data center service providers in the industry, we have always considered sustainable development as a core part of our mission since inception, and ESG strategy is an integral part of our long-term business success. We aim to achieve both carbon neutrality and 100% renewable energy by 2030. And we have also committed to a number of ESG initiatives. First of all, we strive to contribute to a sustainable future. We became a signatory of the UN Global Compact in November 2021 and now pledge to consider all 17 UN Sustainable Development Goals in our comprehensive business development. In the pursuit of increasing renewable energy ratio in our energy consumption, we successfully signed strategic cooperation agreements with China Huadian Corporation, Shanghai Electric Wind Power Group, and China Southern Power Grid Energy Efficiency and Clean Energy Co. In addition, as a response to the international initiatives and domestic callings against climate change, we're now examining climate-related risks and opportunities concerning the industry, and have recently committed to supporting the Task Force on Climate-Related Financial Disclosures, aka TCFD. Last but not least, we continue striving to decrease the PUE of our data centers. The average PUE of our stabilized data center was 1.37 in 2021, notably lower than the industry average. Turning to our capital market initiatives, I would like to take the opportunity to share with you that we are planning a secondary listing on the Hong Kong Stock Exchange. We believe a secondary listing in Hong Kong will provide our shareholders with an additional trading value while offering them greater protection amid an evolving regulatory environment. The timing of our contemplated secondary listing is subject to market conditions and regulatory approvals, however. In summary, 2021 was a rewarding year. We maintained consistent execution of our dual core strategy to achieve sustained growth, and we also succeeded in meeting our annual target for 2021 by delivering approximately 25,000 cabinets. In consideration of the uncertainties in the macroeconomic environment, we would like to revise our annual cabinet delivery target from 25,000 cabinets to a range of 14,400 to 17,400 cabinets for the year of 2022. With that, I would now turn the call over to Tim. He will discuss our financial results for the quarter and his thoughts on our future growth. Hi, Tim.