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spk11: Hello, ladies and gentlemen. Thank you for standing by for the fourth quarter and full year 2022 earnings conference call for Vimprove Inc. At this time, all participants are in listen-only mode. After the management's prepared remarks, there will be a question and answer session. Participants from our management include Mr. Jeff Dong, Chief Executive Officer, Mr. Tim Chen, Chief Financial Officer, and Ms. Xinyuan Liu, Investor Relations Director of the company. Please note that today's conference is being recorded. I will now turn the call over to your first speaker today, Ms.
spk16: Xinyuan Liu. Please go ahead.
spk13: Thank you, operator.
spk09: Hello, everyone, and welcome to our fourth quarter and full year 2022 earnings conference call. Our earnings release was distributed earlier today, and you can find a copy on our IR website as well as our 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 Reform Act of 1995. Overlooking statements are subject to risks and uncertainties that may cause actual results to differ maturely 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. VNAT does not undertake any obligations to update any forward-looking statements except as required under applicable laws. Please also note that VNAT's earnings press release and this conference call include the disclosure of unaudited GAAP financial matters as well as unaudited non-GAAP financial matters. VNAT's earnings press release contains a reconciliation of the Unaudited Net Gap Matters to the Unaudited Gap Matters. 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, Jeff.
spk27: Thank you, Qingyuan. Good morning and good evening, everyone. Thank you for joining our fourth quarter and full year 2022 earnings conference call. Leading with macroeconomic headwinds and COVID-related disruptions, 2022 was an extraordinary year. Amid this challenging environment, we delivered solid financial and operational results through excellent execution of our dual core strategy. We achieved our 2022 delivery target by ending approximately 8,400 self-built cabinets. By the end of the fourth quarter, Our total cabinets under management has grown to approximately 87,320 from 78,540 a year ago. Meanwhile, cabinets utilized by customers increased exclusively by approximately 2,500 to approximately 48,000 compared to approximately 41,701 a year ago. Our overall utilizing rate was 55%. In addition, our retail MRR per company increased to RMB 9,371 in the fourth quarter, up from RMB 9,287 in the third quarter. We concluded 2022 with resilient fourth quarter revenue of RMB 1,881 million, an increase of 7.7% year-over-year, and adjusted EBITDA of RMB 424 million. For the full year, our revenue grew 14.1% to RMB 7,065 million, and just EBITDA increased 6.8% to RMB 1,873 million. Before we get deeper into our business details for the fourth quarter, I'd like to touch on the broader microclimate in China for some context. According to the 2023 Government Work Report issued earlier this month, the central government set the GDP growth target of around 5% for this year, up from last year's 3%. In addition, the government will continue to accelerate the digital transformation of traditional industries and small and medium-sized enterprises. We are also supporting the development of the platform economy. Last month, the central government rolled out a plan to build Digital China by 2025. which highlights the country's focus on expanding data resources and improving digital infrastructure. Encouraged by these supportive measures and positive signals, we expect industry's vitality to gradually recover and business confidence to rebound. In particular, we believe that internet giants will play to their strengths in technology to empower development of the digital economy. and unleashing greater demand across the markets. As China's leading IDC service provider, we are well positioned to capture new growth opportunities ahead. Now let's take a closer look at our Q4 business updates. Execution of our dual core strategy continues to prove strongly effective both in the wholesale and retail IDC markets. Our wholesale fronts. We continue to gain robust sales momentum with two major orders, despite the macro challenges. In the fourth quarter, we extended our wholesale data center services contract with one of our largest existing customers, a leading social platform in China. This extended order will generate capacity of approximately 33 megawatts. More encouragingly, we recently won the bid to deploy IDC services in multiple phases, to support the business expansion for a new customer, one of China's internet giants. During the first phase, we expect to provide customers with capacity of over 100 megawatt through our IDC assets located in the Yangtze River Delta region. This collaboration represents a significant development opportunity for us, ending to our proven track record of providing IDC services to powerhouse companies across China's internet industry. Moving on to our retail business, we continue to make meaningful progress on our customer-based expansion in the fourth quarter. Supported by our premium co-location and interconnectivity offerings, as well as our value-added services, we continue to extend our services to existing customers and attract new customers, meeting increasing demands from a wide spectrum of industries including financial services, local services, mobility, online gaming, and some traditional industries. In particular, our connectivity services have tapped into a variety of sectors, including public transportation, public cloud, and healthcare, an advertisement to our industry-leading service capabilities. Next, I would like to highlight our progress on hybrid cloud offerings. In the fourth quarter, we successfully facilitated digital transformation for the mainland China, operations of Watsons, a leading Asian health and beauty retailer. We provided the customer with a one-stop infrastructure as a service, OS solution, as well as complete operations and maintenance services for both software and hardware to optimize customer's IT architecture, enhance its business reliability, and improve operational efficiency. Looking ahead, we will continue to empower our customers' transitions into the evolving digital era by leveraging our IDC asset, network, and service capabilities. Turning to our ESG initiatives, we have always held our long-term commitments and responsibilities to our industry, environment, and society as the foundation of our ongoing success. Our dedication and hard work are paying off. Earning the company brought recognition from global renowned ESG rating agencies. We made great progress in our ESG ratings in 2022. Thanks to our continuous efforts in improving our ESG performance, MSCI upgraded us to an A rating in December 2022, which represents the highest ranking to date in China's internet service and infrastructure industry. In addition, our ESG score measured by the S&P corporate sustainability assessment reached 57, ranking in the top 10% among all companies in IT services industry globally. We also submitted CDP's climate change questionnaire in 2022 and achieved a B-grade, which exceeded that of 96% of participating companies in China. These accomplishments and accolades clearly demonstrate the effectiveness of our ESG strategy while strongly affirming our long-term investment value and development prospects. Moving into 2023, while economic recovery is still underway and may need time to realize a full rebound, we remain confident in the long-term growth potential of China's market as well as the IDC service industry as a whole. As a result, we set our 2023 delivery plan in the range of 8,000 to 9,000 cabinets. We believe supportive government policies will accelerate China's digitalization across multiple industries, and our proven dual-core growth strategy and industry-leading service capabilities will keep us at the helm of the market recovery. We will remain agile as we navigate shifting market dynamics and capitalize our future growth opportunities. creating sustainable and long-term value for our shareholders. Thank you, everyone. I will now turn the call to our CFO team to discuss our financial performance for the quarter and our business outlook.
spk06: Thank you, Jeff. Good morning and good evening, everyone. Before we start the detailed discussions of our financials, please note that we will present non-GAAP measures today. Our non-GAAP results exclude certain non-cash expenses which are not part of our core operations. The details of these expenses may be found in the reconciliation tables included in our earnings press release. Please also note that, unless otherwise stated, all the financials we present today are for the fourth quarter of 2022 and in MMB terms. As Jeff just mentioned, we concluded 2022 with resilient operating and financial performance amidst a myriad of external challenges. which speaks to our outstanding execution. Next, let me walk you through our fourth quarter financial results. Unless otherwise specified, the growth rates I will be reviewing are all on a year-over-year basis. In the fourth quarter, our net revenue increased by 7.7% to 1.88 billion from the same period last year, mainly due to increased customer demand for our highly scalable carrier and cloud-neutral IDC solutions from both wholesale and retail IDC businesses, as well as the continued growth of our cloud and VPN services. Gross profit was $328.4 million in the fourth quarter of 2022, representing a decrease of 13.6% from the same period of 2021. Gross margin was 17.5% in the fourth quarter of 2022, compared to 21.8% in the same period of 2021. Adjusted cash gross profit, which excludes depreciation, amortization, and share-based compensation expenses, was $740.1 million in the fourth quarter of 2022, an increase of 3.7% from the same period of 2021. Adjusted cash gross margin in the fourth quarter of 2022 was 39.4% compared to 40.9% in the same period of 2021. Adjusted operating expenses, which exclude share-based compensation expenses, compensation for post-compensation employment and acquisition, impairment of loan receivable to potential investee, and impairment of long-lived assets were $355.4 million in the fourth quarter of 2022 compared to $273.7 million in the same period of 2021. As a percentage of net revenues, adjusted operating expenses in the fourth quarter of 2022 were 18.9% compared to 15.7% in the same period of 2021. Adjusted EBITDA in the fourth quarter of 2022 was $424.3 million, representing a decrease of 8.3% from the same period of 2021. Adjusted EBITDA in the fourth quarter of 2022 excluded a reversal of share-based compensation expense of $7.8 million. Adjusted EBITDA margin in the fourth quarter of 2022 was 22.6% compared to 26.5% in the same period of 2021. Our net loss attributable to ordinary shareholders in the fourth quarter of 2022 was $64.2 million compared to a net loss of $27.3 million in the same period of 2021. Basic and diluted loss were both 0.07 per ordinary share and both 0.42 per ADS. Each ADS represents six Class A ordinary shares. Now turning to our balance sheet, as of December 31st, 2022, the aggregate amount of the company's cash, cash equivalents, and restricted cash was 2.99 billion. Meanwhile, Net cash generated from operating activities in the fourth quarter of 2022 was $569.6 million compared to $664 million in the same period of 2021. Our capex in the fourth quarter of 2022 was $1.21 billion, and the total capex for the full year 2022 was $3.35 billion. Now moving to our outlook, we expect net revenues for the full year of 2023 to be in the range of $7,600 million to $7,900 million, representing a year-over-year increase of 7.6% to 11.8%, and adjusted EBITDA to be in the range of $2,025 million to $2,125 million, representing a year-over-year increase of 8.1% to 13.5%. Looking forward, we will continue to execute on our dual core growth strategy and remain focused on our core business as well as higher quality revenues. In addition, we will continue to explore more capital resources to further strengthen our financial position. This concludes our prepared remarks for today. Operator, we're now ready to take questions. Thank you.
spk11: Thank you. At this time, we will conduct the question and answer session. As a reminder to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
spk16: Please stand by while we compile the Q&A roster. Our first question comes from the line of Yang Liu of Morgan Stanley. Please proceed with your question.
spk22: Good morning. Thanks for the opportunity to ask questions.
spk20: Two questions from my side. The first one is about moving. Could management share the color here today? What does moving look like from your retail and wholesale customer? And what should be the utilization rate by the end of this year if we add another 8,000 to 9,000 cabinets? Yeah, that's the first question. And the second question is we're glad to see that company onboard a new wholesale customer with pretty big order size. When should we expect the financial contribution will be visible in future? Thank you.
spk14: Hi, Yang. Can you hear me?
spk20: Yes, I can.
spk06: Okay. Let me take the second question, and then I'll pass back to Jeff and the team on the first question on the ramp-ups. For the new customer that we've announced just now, we're expecting the financial contribution to take place basically end of this year, early next year. So, obviously, it's going to take us time to deliver the cabinets. So by the time meaningful financial contribution takes place, I think it will be 2024. I hope that's helpful. Let me pass the ramp up in terms of what we've been seeing in fourth quarter and the first few months of the first quarter to Jeff and team.
spk27: Hi, it's Jeff. We wrap up, regarding the wrap up, at the end of 2022, it will be 55% utilization rates We expect more for this year. And let me give you some colors on the new customers just Tim mentioned. Essentially, it's actually the large majority of the available cabinets in Code4. So we can see, as you mentioned, the moving from internet players is very good and faster than what we expect from the cloud service providers. Given the contribution to our financials, I would say in terms of this contract, we will see by the end of this year, it's about over 70 megawatts will be next year. We see substantially uneligible financial contributions will come up by the end of this year, early next year.
spk21: Thank you.
spk16: One moment for our next question.
spk11: Our next question comes from the line of Sarah Wang of UBS. Please proceed with your question.
spk10: Hi, thank you for the opportunity to ask a question. So I have one question. So would management please walk us through the financing plan and also the major cash inflows and outflows for this year, especially given one of the comfortable bonds might be put full early next year?
spk15: Thank you.
spk06: Thanks, Sarah, for the question. It's Tim here. With regards to the overall financing plan, we've obviously started already at the end of last year going through the alternatives available to the company. We see with quite positive news that the public markets are gradually opening up. As to the major inflows and outflows, obviously the business continues to generate very healthy operating cash flow. would be mainly the CapEx. And at this moment, we're expecting CapEx to be quite similar to what it was in 2022, which is between 3 to 3.5 billion RMB. However, I would then point out next is that this CapEx is not all committed or contracted. So we do have the ability to ratchet back during the course of the year. and we'll do so really for two areas. One is as we see the customer demand and also the customer requirements in terms of delivery dates. If they shift, you've seen us also in 2022 adjust during the course of the year as required. And then secondly, obviously, is we are planning our overall cash flow for the potential customers refinancing of the convertible bond that would be in first quarter of 2024. So that's something that we're keeping a very close eye on and obviously looking to the various alternatives. Obviously, given where share prices are for us and our peers, we will be looking mainly at debt and convertible as the main instruments. Also, something that we've already mentioned last year and we continue to work on would be onshore RMB financings, both in the form of private and public REITs. I hope that answers your question, Sarah.
spk10: Thank you. And just a quick follow-up. On the operating cash flow for 2022, it seems it was 2.6 billion RMB. So how shall we think about the operating cash flow level for 2023? Thank you.
spk06: Yeah, I would say that, look, the working capital points will not move very, very much. So you're looking at underlying EBITDA as a good proxy. So obviously, we've given some guidance on EBITDA.
spk07: I think you'd use that as a proxy on where directionally we expect operating capital to go as well.
spk15: Got it. That's clear. Thank you.
spk07: Thank you, Sarah.
spk11: As a reminder, to ask a question, please press 911 on your telephone. Please stand by.
spk16: One moment, please.
spk11: Our next question comes from the line of Edison Lee of Jefferies. Please proceed with your question.
spk08: Okay. Hi, thank you. Hi, Tim and Jeff. Thank you for the presentation. I have two questions. Number one is on this new customer that you have signed up for over 100 for over 100 megawatts. So based on your comment a little bit earlier, I assume that the 3,000 cabinets that you are including in your 2023 guidance is not related to this customer. I just want to confirm that. And also, could you give us some color on the pricing and also on the potential for 401 orders for this particular customer in the same region or in the same data center campus? And my number two question is, is it possible for you guys to give us an update on your joint venture IDC fund with the Chengzhou government? And in fact, is that being factored into your 2023 guidance or how much of that is being factored into that? Yeah, that would be great. Thank you.
spk27: Editing, let me answer your question. The first one, in terms of new customers, yes, it is. We included 3,000 companies this year, which is from the first phase of the new customer.
spk08: Sorry, Jeff. Can I confirm that this 3,000 companies will be delivered toward the end of the year, so that's why the financial contribution
spk06: Yeah, that's correct. It's Tim here. That's correct. We're expecting that these will be delivered at the very tail end of the year, and so I don't expect, at least from my side, any meaningful financial contribution, probably a little bit at the very beginning of it, but really the meaningful contribution will be in 2024, first quarter.
spk08: Sorry, can I also follow up with just one related question? Will this 100 megawatts be fully delivered within 2024 or it's going to go into 2025?
spk27: It's going to be divided into different phases. The first phase will be this year and early next year we will deliver two thirds and the remaining will be delivered next year.
spk18: or it will be completely delivered in 2024? No, no, no.
spk03: No, no, sorry.
spk06: The first phase, the first part is going to be mainly in the 2023 into the early part of 2024. But the balance, we will need to see whether the customer will give us the heads up. So it depends on their move-in rate. If the move-in rate is very, very strong, they may give us an earlier go-ahead, in which case, yes, it would be in 2024. But if not, it could actually drag into the outer years.
spk17: I'm sorry. I want to further clarify, because I think that's an important point.
spk08: So this 100 megawatt contract, you already signed the MOU with the customer. However, the timing of delivery is actually not specified in the MOU. Is this understanding correct?
spk03: Only part of it is specified, and the balance is not. Based on the indication that they've given us? Yes, correct.
spk27: Tim, let me put it this way. Edison, we will be fully delivered within the three years per the MOU with the customer.
spk08: Okay, and in the same location, right? All these capacities are the same location?
spk24: Yes, same location, yes.
spk08: Okay, thank you.
spk26: Yeah, in terms of the second question. Sorry, Jeff, please go ahead.
spk27: Okay, let me answer your questions in terms of the JV with Changzhou. We recently signed an SPA in Langfang area with one project, which is the largest one from the identified portfolio. The JV has already committed over 500 million RMB and as a proportion, we also committed the capital. And this long-form project will achieve IT scale of about 140 megawatt and also will be delivered cabinets, more than 17,000 cabinets. in total. So that's what we have done so far. And some other projects we are also closely in discussion with Changzhou and will be ramped up soon, probably by the end of this year, including Shenzhen, Dongguan, and also in central Beijing areas.
spk08: Thank you. Just a follow-up. So will this long-term project be contributing profitability to VNet this year?
spk27: I wouldn't say it contributes to VNet financials, but it's also divided into different phases. Phase 1 and Phase 2 already has customers. And we are sending the SPA on Phase 3 and Phase 4, which is a Greenfield project with a full regulatory license. Hopefully, it will be delivered by the end of this year and ramping maybe next year.
spk28: Okay. Thank you very much.
spk11: Ladies and gentlemen, that concludes our conference today. Thank you for participating. You may now disconnect. you Thank you. you Hello ladies and gentlemen, thank you for standing by for the fourth quarter and full year 2022 earnings conference call for Veeam Group Inc. At this time all participants are in listen only mode. After the management's prepared remarks there will be a question and answer session. Participants from our management include Mr Jeff Dong, Chief Executive Officer, Mr. Tim Chen, Chief Financial Officer, and Ms. Xinyuan Liu, Investor Relations Director of the company. Please note that today's conference is being recorded. I will now turn the call over to your first speaker today, Ms. Xinyuan Liu. Please go ahead.
spk13: Thank you, operator. Hello, everyone, and welcome to our fourth quarter and full year 2022 earnings conference call.
spk09: 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 Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ maturely 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. BNAT does not undertake any obligations to update any forward-looking statements except as required under applicable laws. Please also note that BNAT's earnings press release and this conference call include the disclosure of unaudited GAAP financial matters. as well as unaudited non-GAAP financial matters. VNet's earnings press release contains a reconciliation of the unaudited non-GAAP matters to the unaudited GAAP matters. 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, Jeff.
spk27: Thank you. Good morning and good evening, everyone. Thank you for joining our fourth quarter and full year 2022 earnings conference call. Laden with macroeconomic headwinds and COVID-related disruptions, 2022 was an extraordinary year. Amid this challenging environment, we delivered solid financial and operational results through excellent execution of our dual core strategy. We achieved our 2022 delivery target by ending approximately 8,400 self-built cabinets. By the end of the fourth quarter, our total cabinets under management had grown to approximately 87,320 from 78,540 a year ago. Meanwhile, cabinets utilized by customers increased significantly by approximately 2,500 to approximately compared to approximately 41,700 one year ago. Our overall utilization rate was 55%. In addition, our retail MRR per company increased to RMB 9,371 in the fourth quarter, up from RMB 9,287 in the third quarter. We concluded 2022 with resilient fourth quarter revenue of RMB 1,881 million, an increase of 7.7% year-over-year, and adjusted EBITDA of RMB 424 million. For the full year, our revenue grew 14.1% to RMB 7,065 million, and adjusted EBITDA increased 6.8% to RMB 1,873 million. Before we get deeper into our business details for the fourth quarter, I'd like to touch on the broader microclimate in China for some context. According to the 2023 Government Work Report issued earlier this month, the central government set the GDP growth target of around 5% for this year, up from last year's 3%. In addition, the government will continue to accelerate the digital transformation of traditional industries and small and medium-sized enterprises. We are also supporting the development of the platform economy. Last month, the central government rolled out a plan to build Digital China by 2025, which highlights the country's focus on expanding data resources and improving digital infrastructure. Encouraged by these supportive measures and positive signals, we expect industries vitality to gradually recover and business confidence to rebound. In particular, we believe that internet giants will play to their strengths in technology to empower development of the digital economy and unleashing greater demand across markets. As China's leading IDC service provider, we are well positioned to capture new growth opportunities ahead. Now, let's take a closer look at our Q4 business updates. Execution of our dual core strategy continues to prove strongly effective both in the wholesale and retail IDC markets. On wholesale fronts, we continue to gain robust sales momentum with two major orders despite the macro challenges. In the fourth quarter, we extended our wholesale data center services contract with one of our largest existing customers. a leading social platform in China. This extended order will generate capacity of approximately 33 megawatt. More encouragingly, we recently won the bid to deploy IDC services in multiple phases to support the business expansion for a new customer, one of China's internet giants. During the first phase, we expect to provide customers with capacity of over 100 megawatt through our IDC assets located in the Yangtze River Delta region. This collaboration represents a significant development opportunity for us, ending to our proven track record of providing IDC services to powerhouse companies across China's internet industry. Moving on to our retail business, we continue to make meaningful progress on our customer-based expansion in the fourth quarter, supported by our premium co-location and interconnectivity offerings, as well as our value-added services. We continue to extend our services to existing customers and attract new customers, meeting increasing demands from a wide spectrum of industries including financial services, local services, mobility, online gaming, and some traditional industries. In particular, our connectivity services have tapped into a variety of sectors. including public transportation, public cloud, and healthcare, another testament to our industry-leading service capabilities. Next, I would like to highlight our progress on hybrid cloud offerings. In the fourth quarter, we successfully facilitated digital transformation for the mainland China operations of Watsons, a leading Asian health and beauty retailer. We provided the customer with a one-stop infrastructure as a service. our IaaS solution, as well as complete operations and maintenance services for both software and hardware to optimize customers' IT architecture, enhance its business reliability, and improve operational efficiency. Looking ahead, we will continue to empower our customers' transitions into the evolving digital era by leveraging our IDCS network and service capabilities. Turning to our ESG initiatives, we have always held our long-term commitments and responsibilities to our industry, environment, and society as the foundation of our ongoing success. Our dedication and hard work are paying off. Earning the company brought recognition from global renowned ESG rating agencies. We made great progress in our ESG ratings in 2022. Thanks to our continuous efforts in improving our ESG performance, MSCI upgraded us to an A rating in December 2022, which represents the highest ranking today in China's internet service and infrastructure industry. In addition, our ESG score measured by the S&P Corporate Sustainability Assessment reached 57, ranking in the top 10% among all companies in IT services industry globally. We also submitted CDP's climate change questionnaire in 2022 and achieved a big rate which exceeded that of 96% of participating companies in China. These accomplishments and accolades clearly demonstrate the effectiveness of our ESG strategy while strongly affirming our long-term investment value and development prospects. Moving into 2023, While economic recovery is still underway and may need time to realize full rebounds, we remain confident in the long-term growth potential of China's market as well as the IDC service industry as a whole. As a result, we set our 2023 delivery plan in the range of 8,000 to 9,000 cabinets. We believe supportive government policies will accelerate China's digitalization across multiple industries. and our proven dual-core growth strategy and industry-leading service capabilities will keep us at the helm of the market recovery. We will remain agile as we navigate shifting market dynamics and capitalize our future growth opportunities, creating sustainable and long-term value for our shareholders. Thank you, everyone. I will now turn the call to our CFO team to discuss our financial performance for the quarter and our business outlook.
spk06: Thank you, Jeff. Good morning and good evening, everyone. Before we start the detailed discussions of our financials, please note that we will present non-GAAP measures today. Our non-GAAP results exclude certain non-cash expenses which are not part of our core operations. The details of these expenses may be found in the reconciliation tables included in our earnings press release. Please also note that unless otherwise stated, All the financials we present today are for the fourth quarter of 2022 and in MMB terms. As Jeff just mentioned, we concluded 2022 with resilient operating and financial performance amidst a myriad of external challenges, which speaks to our outstanding execution. Next, let me walk you through our fourth quarter financial results. Unless otherwise specified, The growth rates I will be reviewing are all on a year-over-year basis. In the fourth quarter, our net revenue increased by 7.7% to $1.88 billion from the same period last year, mainly due to increased customer demand for our highly scalable carrier and cloud-neutral IDC solutions and VPN services. Gross profit was $328.4 million in the fourth quarter of 2022, representing a decrease of 13.6% from the same period of 2021. Gross margin was 17.5% in the fourth quarter of 2022, compared to 21.8% in the same period of 2021. Adjusted cash gross profit, which excludes depreciation, amortization, and share-based compensation expenses, was $740.1 million in the fourth quarter of 2022, an increase of 3.7% from the same period of 2021. Adjusted cash gross margin in the fourth quarter of 2022 was 39.4%, compared to 40.9% in the same period of 2021. Adjusted operating expenses, which exclude share-based compensation expenses, compensation for post-compensation employment and acquisition, impairment of loan receivable to potential investee, and impairment of long-lived assets were $355.4 million in the fourth quarter of 2022 compared to $273.7 million in the same period of 2021. As a percentage of net revenues, adjusted operating expenses in the fourth quarter of 2022 were 18.9% compared to 15.7% in the same period of 2021. Adjusted EBITDA in the fourth quarter of 2022 was $424.3 million, representing a decrease of 8.3% from the same period of 2021. Adjusted EBITDA in the fourth quarter of 2022 excluded a reversal of share-based compensation expense of $7.8 million. Adjusted EBITDA margin in the fourth quarter of 2022 was 22.6% compared to 26.5% in the same period of 2021. Our net loss attributable to ordinary shareholders in the fourth quarter of 2022 was $64.2 million compared to a net loss of $27.3 million in the same period of 2021. Basic and diluted loss were both 0.07 per ordinary share and both 0.42 per ADS. Each ADS represents six Class A ordinary shares. Now turning to our balance sheet, as of December 31st, 2022, the aggregate amount of the company's cash, cash equivalents, and restricted cash was 2.99 billion. Meanwhile, net cash generated from operating activities in the fourth quarter of 2022 was 569.6 million, compared to $664 million in the same period of 2021. Our CapEx in the fourth quarter of 2022 was $1.21 billion, and the total CapEx for the full year 2022 was $3.35 billion. Now moving to our outlook. We expect net revenues for the full year of 2023 to be in the range of 7,600 million to 7,900 million, representing a year-over-year increase of 7.6% to 11.8%. And adjusted EBITDA to be in range of 2,025 million to 2,125 million, representing a year-over-year increase of 8.1%, to 13.5%. Looking forward, we will continue to execute on our dual core growth strategy and remain focused on our core business as well as higher quality revenues. In addition, we will continue to explore more capital resources to further strengthen our financial position. This concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you.
spk11: Thank you. At this time, we will conduct the question and answer session. As a reminder to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.
spk16: Our first question comes from the line of Yang Liu of Morgan Stanley. Please proceed with your question.
spk22: Good morning. Thanks for the opportunity to ask questions.
spk20: Two questions from my side. The first one is about moving. Could management share the color here today? What does moving look like from your retail and wholesale customer? And what should be the utilization rate by the end of this year if we add another 8,000 to 9,000 cabinets Yeah, that's the first question. And the second question is, we're glad to see that company onboard a new wholesale customer with pretty big order size. When should we expect the financial contribution will be visible in future? Thank you.
spk14: Hi, Yang. Can you hear me?
spk20: Yes, I can.
spk06: Okay. Let me take the second question, and then I'll pass back to Jeff and the team on the first question on the ramp-ups. For the new customer that we've announced just now, we're expecting the financial contribution to take place basically end of this year, early next year. So obviously it's going to take us time to deliver the cabinets. So by the time meaningful financial contribution takes place, I think it will be 2024. I hope that's helpful. Let me pass the ramp up in terms of what we've been seeing in fourth quarter and the first few months of the first quarter to Jeff and team.
spk27: Hi, yeah, it's Jeff. We wrap up, regarding the wrap up, at the end of 2022, it will be 55% utilization rates We expect more for this year. And let me give you some colors on the new customers just Tim mentioned. Essentially, it's actually the large majority of the available cabinets in Q4. So we can see, as you mentioned, the moving from the internet players is very good and faster than what we expect from the cloud service providers. Given the contribution to our financials, I would say in terms of this contract, we will see by the end of this year, it's about over 70 megawatts will be next year. So we see substantially uneligible financial contributions will come up by the end of this year, early next year.
spk16: One moment for our next question.
spk11: Our next question comes from the line of Sarah Wang of UBS. Please proceed with your question.
spk10: Hi. Thank you for the opportunity to ask a question. So I have one question. Would management please walk us through the financing plan and also the major cash inflows and outflows for this year, especially given one of the comfortable bonds might be put full early next year?
spk15: Thank you.
spk06: Thanks, Sarah, for the question. It's Tim here. With regards to the overall financing plan, we've obviously started already at the end of last year going through the alternatives available to the company. We see with quite positive news that the public markets are gradually opening up. As to the major inflows and outflows, obviously the business continues to generate very healthy operating cash flow. would be mainly the CapEx. And at this moment, we're expecting CapEx to be quite similar to what it was in 2022, which is between 3 to 3.5 billion RMB. However, I would then point out next is that this CapEx is not all committed or contracted. So we do have the ability to ratchet back during the course of the year. and we'll do so really for two areas. One is as we see the customer demand and also the customer requirements in terms of delivery dates. If they shift, you've seen us also in 2022 adjust during the course of the year as required. And then secondly, obviously, is we are planning our overall cash flow for the potential refinancing of the convertible bond that would be in first quarter of 2024. So that's something that we're keeping a very close eye on and obviously looking to the various alternatives. Obviously, given where share prices are for us and our peers, we will be looking mainly at debt and convertible as the main instruments. Also, something that we've already mentioned last year and we continue to work on would be onshore renminbi financings, both in the form of private and public REITs. I hope that answers your question, Sarah.
spk10: Thank you. And just a quick follow-up. On the operating cash flow for 2022, it seems it was 2.6 billion RMB. So how shall we think about the operating cash flow level for 2023?
spk06: Thank you. Yeah, I would say that, look, the working capital points will not move very, very much. So you're looking at underlying EBITDA as a good proxy. So obviously, we've given some guidance on EBITDA.
spk07: I think you'd use that as a proxy on where directionally we expect operating capital to go as well.
spk15: Got it. That's clear. Thank you.
spk07: Thank you, Sarah.
spk11: As a reminder, to ask a question, please press 911 on your telephone. Please stand by.
spk16: One moment, please.
spk11: Our next question comes from the line of Edison Lee of Jefferies. Please proceed with your question.
spk08: Okay, thank you. Hi, Tim and Jeff. Thank you for the presentation. I have two questions. Number one is, on this new customer that you have signed up for over 100 years, for over 100 MW. So based on your comment a little bit earlier, I assume that the 3,000 cabinets that you are including in your 2023 guidance is not related to this customer. I just want to confirm that. And also, could you give us some color on the pricing and also on the potential for 401 orders for this particular customer in the same region or in the same data center campus? And my number two question is, is it possible for you guys to give us an update on your joint venture IDC fund with the Chengzhou government? And in fact, is that being factored into your 2023 guidance or how much of that is being factored into that? Yeah, that would be great. Thank you.
spk27: Editing, let me answer your question. The first one, in terms of new customers, yes, it is. We included 3,000 cabinets this year, which is from the first phase of the new customer.
spk08: Sorry, Jeff. Can I confirm that this 3,000 cabinets will be delivered toward the end of the year, so that's why the financial contribution
spk06: That's correct. We're expecting that these will be delivered at the very tail end of the year. I don't expect, at least from my side, any meaningful financial contribution, probably a little bit at the very beginning of it, but really the meaningful contribution will be in 2024, first quarter.
spk08: Can I also follow up with just one related question? Will this 100 megawatts be fully delivered within 2024 or it's going to go into 2025?
spk27: It's going to be divided into different phases. The first phase will be this year and early next year we will deliver two thirds and the remaining will be delivered next year.
spk18: or it will be completely delivered in 2024? No, no, no.
spk03: No, no, sorry.
spk06: The first phase, the first part is going to be mainly in the 2023 into the early part of 2024. But the balance, we will need to see whether the customer will give us the heads up. So it depends on their move-in rate. If the move-in rate is very, very strong, they may give us an earlier go-ahead, in which case, yes, it would be in 2024. But if not, it could actually drag into the outer years.
spk17: I'm sorry. I want to further clarify, because I think that's an important point.
spk08: So this 100 megawatt contract, you already signed the MOU with the customer. However, the timing of delivery is actually not specified in the MOU. Is this understanding correct?
spk06: Only part of it is specified, and the balance is not.
spk03: Based on the indication that they've given us, yes, correct.
spk27: Tim, let me put it this way. Edison, we will be fully delivered within the three years per the MOU with the customer.
spk08: Okay, and in the same location, right? All these capacities are the same location?
spk24: Yes, same location, yes.
spk08: Okay, thank you.
spk00: Yeah, in terms of the second question. Yeah.
spk12: Sorry, Jeff, please go ahead.
spk27: Okay, let me answer your questions in terms of the JV with Changzhou. We recently signed an SPA in Langfang area with one project which is the largest one from the identified portfolio. The JV has already committed over 500 million RMB and as a proportion we also committed the capital. And this long-form project will achieve IT scale of about 140 megawatt and also will be delivered cabinets, more than 17,000 cabinets. in total. So that's what we have done so far. And some other projects we are also closely in discussion with Changzhou and will be ramped up soon, probably by the end of this year, including Shenzhen, Dongguan, and also in central Beijing areas.
spk08: Thank you. Just a follow-up. So will this long-term project be contributing profitability to VNet this year?
spk27: I wouldn't say it contributes to VNet financials, but it's also divided into different phases. Phase 1 and Phase 2 already has customers. And we are sending the SPA on Phase 3 and Phase 4, which is a Greenfield project with a full regulatory license. Hopefully, it will be delivered by the end of this year and ramping maybe next year.
spk28: Okay. Thank you very much.
spk11: Ladies and gentlemen, that concludes our conference today. Thank you for participating. You may now disconnect.
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