Hello, ladies and gentlemen. Thank you for standing by for the third quarter 2022 earnings conference call for VNET Group Inc. At this time, all participants are in a 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 Xinyuan Liu, Investor Relations Director of the company. Please note that today's conference call is being recorded. I will now turn the call over to the first speaker today, Ms. Xinyuan Liu. Please go ahead. Thank you, operator. Hello, everyone, and welcome to our third quarter 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. 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 law. Please also note that VNET's earnings press release and this conference call include the disclosure of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures. VNET's earnings press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures. 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. Thank you, Xinyuan. Good morning and good evening, everyone. This is Jeff. It's a great pleasure to meet and speak with all of you today. I'm deeply honored to take on the role of CEO and excited to explore the great opportunities and prospects ahead for VNET. I look forward to leveraging my cross-industry expertise and working closely with our talented team to drive the company's dual-core growth strategy and cement our commitment to delivering sustainable long-term value to our shareholders. I'd like to start with an overview of our third quarter performance. Against the backdrop of the mounting macroeconomic headwinds, we remain focused on fulfilling market demand for high quality and reliable IDC services. By the end of the third quarter, we had grown total cabinets under management to 82,660 from approximately 65,300 one year ago. Same time, cabinets utilized by customers increased sequentially by 1,027 to approximately 45,530, compared to approximately 38,301 one year ago. As a result, overall utilization rate remained flat at 65.1% as compared with the end of June. In addition, our retail MRR per cabinet ramped up to RMB 9,287 in the third quarter, compared with RMB 9,186 i n the previous quarter. Our third quarter financial results reflect healthy progress in our wholesale and retail business, as well as our effective execution of our dual-core strategy. Our net revenues for the third quarter increased by 16.3% year-over-year to RMB 1.814 billion, adjusted EBITDA reached RMB 455 million. Today's world is preparing for digital as a new norm. For business to attempt and thrive in this new era, digital transformation is paramount. As we witnessed at the 20th National Congress of the CPC, the central government support this transformation as part of China's high-quality growth trajectory. Policy guidelines fueling technological innovation and digital development across a wider spectrum of industries are in place. We are excited to see the digital infrastructure sector at the forefront of this broad-based digitalization effort and believe that it will further fuel market demand for data center services. As a leading player in the IDC space, we are ideally positioned to capture this burgeoning demand and unleash new growth potential going forward. Despite a challenging and a volatile near-term macro environment, we see long-term demand remains strong with fundamentals surrounding cloud and digital transformation still intact. In response to the short-term headwinds, we plan to adopt a more prudent approach to our cabinet delivery for the fourth quarter. We are further revising our 2022 full year cabinet delivery plan to the range of 8,000 - 9,000 from a previous range of 9,400 - 12,400. The current outlook has factored in macro softness, slower move-in, and the COVID-related restrictions. Let's take a closer look at our progress across our business lines during the third quarter. On the wholesale business front, we continue to gain sales momentum. In the third quarter, we signed a new contract of approx 15 MW with a leading cloud service provider in China to build its network infrastructure in the Yangtze River Delta region. Moreover, we recently, once again, extended our wholesale data center services contract with one of our largest existing customers, a leading social platform in China. This new order will generate a capacity of approx 33 MW. Since the launch of our wholesale business in 2019, we have established a strong presence in this market segment, accumulating total constructed capacity in the service of under MOU of 283 MW by the end of the third quarter. Our in-depth industry know-how, methodical resource management, and sophisticated engineering capabilities are key to our success in this sector. On the retail business front, we are pleased to have delivered growth amid a challenging macro environment, highlighted by an expanding customer base and exciting progress in value-added service offerings. In the third quarter, a suite of existing customers in the automobile, financial services, online gaming, local services, and many other sectors expanded their orders with us. At the same time, we also attracted more new customers among financial institutions, the healthcare service providers, and local service platforms. Furthermore, our value-added services continue to attract new prospects to our retail business. In the third quarter, we won several prestigious customers for our interconnectivity services, including a world leading consumer electronics tech brand, a leading insurer in China, and a well-known restaurant chain operator in China. In particular, for this restaurant chain operator, we began to offer our in-house developed interconnectivity solutions built on our innovative SD-WAN technology. Upon implementation, this solution will successfully provide deployment of secure, flexible, and reliable connectivity across a customer's national network with more than 2,000 stores. We view this project as a milestone in the go-to-market of our state-of-the-art SD-WAN technology, as well as a good starting point to roll out the solution into different verticals. Turning to our Blue Cloud business. We have continued to make progress on our cloud landing in China business. In the third quarter, we helped a leading international IoT automation company to manage its cloud-based product offerings accessible to customers in China and are providing operation and maintenance service accordingly. This project illustrates our remarkable value proposition in helping international technology companies find a more efficient and effective way to enter and expand into the China market. In addition, this quarter, we extended a cloud solution to an emerging Chinese smart EV enterprise by developing an integrated and efficient supply chain management system, which is seamlessly tailored to the customer's auto parts procurement process and deeply integrated with other module-based solutions in its digital infrastructure. Going forward, we aim to strengthen our presence in the automotive ecosystem and explore more industry-specific cloud business opportunities across a wide variety of verticals by leveraging our unique strengths in IDC technology and cloud services. Before I wrap up my remarks today, I'd like to take a moment to celebrate our valuable partnership with Changzhou High-tech Jinlong Holding Group, a subsidiary of the CO Changzhou High-tech Group, to form a joint venture with a total investment of RMB 2 billion. The capital contribution from VNET will be up to RMB 700 million. Drawing on both companies' resources and expertise, this new joint venture will pursue new opportunities to acquire, develop, and operate IDC projects across the nation. The JV's initial pipeline of the potential acquisition targets includes a number of high-quality data center assets located in multiple mega-city clusters in China, such as the Greater Beijing area and the Greater Bay Area. This partnership represents an important step towards extending our business horizon and strengthening our presence in the digital infrastructure sector. In summary, we see strong long-term demand and bright future for IDC services in China despite short-term macro turbulence. With government support, our effective and flexible dual-core growth strategy and competitive service offerings, we are well-equipped to navigate near-term challenges and capitalize on future demand prospects. We will continue to execute prudently yet decisively, strategically positioning the company to capture rising opportunities as more industries forge ahead with their digital transformation, creating long-term value for our shareholders along the way. Thank you, everyone. With that, I will now turn the call over to our CFO team to discuss our financial performance for the quarter and our business outlook. Thank you very much, Jeff. Good morning and good evening, everyone. Before we start the detailed discussion 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, including in our earnings press release. Please also note that unless otherwise stated, all the financials we present today are for the third quarter of 2022 in renminbi terms. We're pleased to report another quarter of results which reflects the effectiveness and agility of our dual-core growth strategy in a challenging macro environment. We remain confident in our distinctive growth strategy, outstanding value proposition, and a powerful suite of service offerings which empower us to capitalize on long-term prospects of the data center industry in China. Next, let me walk you through our third quarter financial results. Unless otherwise specified, the growth rates I will be reviewing are all on a year-over-year basis. In the third quarter, our net revenue increased by 16.3% to RMB 1.81 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 business and VPN business. Gross profit was RMB 316.6 million in the third quarter of 2022, representing a decrease of 15.6% from the same period of 2021. Gross margin was 17.5% in the third quarter of 2022, compared to 24% in the same period of 2021. Adjusted cash gross profit, which excludes depreciation, amortization, and share-based compensation expenses, was RMB 707.7 million in the third quarter of 2022, an increase of 4.9% from the same period of 2021. Adjusted cash gross margin in the third quarter of 2022 was 39.0% compared to 43.2% in the same period of 2021. Adjusted operating expenses, which exclude share-based compensation expenses and compensation for post-combination employment in an acquisition, were RMB 275.1 million in the third quarter of 2022, compared to RMB 244.0 million in the same period of 2021. As a percentage of net revenues, adjusted operating expenses in the third quarter of 2022 were 15.2% compared to 15.6% in the same period of 2021. Adjusted EBITDA in the third quarter of 2022 was RMB 455.3 million, representing an increase of 1.1% from the same period of 2021. Adjusted EBITDA in the third quarter of 2022 excluded share-based compensation expenses of RMB 35.2 million. Adjusted EBITDA margin in the third quarter of 2022 was 25.1% as compared to 28.9% in the same period of 2021. Our net loss attributable to ordinary shareholders in the third quarter of 2022 was RMB 425.2 million, compared to a net profit of RMB 156.2 million in the same period of 2021. Basic and diluted loss were both 0.48 per ordinary share and both 2.88 per ADS. Each ADS represents six Class A ordinary shares. Turning to our balance sheet. As of September 30th, 2022, the aggregate amount of the company's cash equivalents, and restricted cash was RMB 3.76 billion. Meanwhile, net cash generated from operating activities in the third quarter of 2022 was RMB 607.4 million, compared to RMB 134.7 million in the same period of 2021. Our CapEx in the third quarter of 2022 was RMB 580.5 million. Moving to our financial outlook, we are maintaining our outlook for the full year of 2022, with net revenues expected to be in the range of RMB 7,250 million-RMB 7,550 million, and adjusted EBITDA expected to be in the range of RMB 1,800 million-RMB 1,950 million. This concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you. We will now begin the question and answer session. To ask a question, please press star one one on your telephone. Once again, that's star one one. Please stand by. First question. Our first question will come from the line of Yang Liu from Morgan Stanley. Your line is open. Yang, your line is open. Hey. Hello. Can you hear me? I have one question regarding the future CapEx plan. Given the company have already decided to set up a JV with partner, how should we think about the future CapEx split or the stakes in the JV for the future expansion? Yeah, I just have this question. Thank you. Okay. In terms of the CapEx plans, I will leave the question to the team. To address the cooperation with Changzhou, I would highlight is per my discussion on VNET will take like 30%-35% of the equity interest in the JV structure with Changzhou, which is kind of the strategic partnership between VNET and Changzhou High-tech Jinlong Holding Group, a subsidiaries of a state-owned group, to form a joint venture with us as of RMB 2 billion. I mean, to given say that I'm joined on the both companies' resources and expertise, this new joint venture will pursue new opportunities in the future to acquire, develop and operate certain projects across the nation. I mean, for VNET the JV's initial pipeline includes a number of the high quality assets located in the Greater Beijing Area and the Greater Bay Area, which is, especially for the Bay Area, which is, I mean, the kind of the strategic exposure to us since we have less exposure there. This partnership also represents an important breakthrough in expanding our business horizon, for example our future fund management and also strengthening our presence in the, in this, the digital infrastructure sectors. Can you hear me? Yes I can. Yes. Yeah. Okay. Basically for the second part of the question, I think you were asking a little bit in terms of the CapEx and impact of sort of CapEx split. I think the, you know, the company is looking at its overall CapEx spend. Obviously the markets are challenging at the moment on the offshore side. But I would stress that overall VNET continues to enjoy very, very strong support from the local onshore RMB banks in terms of project financing and other forms of financing available to us. We are looking at the overall CapEx and cooperation, joint ventures, like the one that Jeff just mentioned, I think are an important way for us to continue to be able to secure the resources necessary for our customers, while at the same time, perhaps moderating the cash spend on our side. It really is an attempt to find ultimately the split between kind of these types of ventures. VNET will depend on the target projects. Jeff's talked about some of the areas that are focused with Changzhou. For those types of projects, obviously then we would have a smaller share or smaller split. The overall scale itself is also capped. I'd say, keep watch over this space, but at the moment, it is a way for us to diversify our funding sources a bit. Thank you. Brody, may I follow up that the company will not put all the new pipeline in the JV, right? Just to pick selective project to, you know, JV. That's correct. That's correct. There are targeted projects, that will be put in, so not the entire pipeline. No. ll strategy or rule, or what is the thought on what type of project will be put in the JV and what will be done by VNET itself or partner with other potential funding partner or other players? Thank you I'll tackle this as well. Jeff just now mentioned sort of Greater Beijing area, Greater Bay area. Those are two areas that we're looking at specific projects with Changzhou on the JV. Obviously, that could expand, but there is a limited pool of capital there as well. That's the initial focus. There are already targeted projects that we're looking at with them. When then we have more details, we'll be sure to disclose it to the market. Got it. Thank you. Most welcome. Thank you. One moment for our next question. Our next question comes line of Edison Lee from Jefferies. Your line is open. Edison Lee from Jefferies, your line is open. Hi. Thank you very much for taking my question. My first question would be very much targeting Jeff, and I want to congratulate Jeff on becoming the CEO. Jeff, can you share with us your near-term objectives in this position? And maybe also your longer term vision for the company. And I think it's important for investors to also find out what your KPIs are, and because there's a privatization deal going on right now. I think investors definitely would like to find out in fact, where the company is heading, right? Under your leadership. That's question number one. Question number two is about the Changzhou JV. I understand that VNET is gonna manage all the projects that will be acquired by this Changzhou JV. I want to know operationally, what are those IDCs that will be acquired by the Changzhou JV will actually be integrated with VNET, and how does that work? Thank you. Okay. Thank you. First questions, I would like to see my goal actually, for short term. I mean, there's a couple of things. The first thing is in terms of the strategy, I will continue to strengthen our wholesale and retail dual-core growth strategy. Second of all is try to improve our operation, optimize the overall operations and diversify our customer base. We'll have some new customers such as the financial institutions and some new economy like the EV sectors, et cetera. Another thing is we've done some restructure from our middle office, try to improve our efficiency as well. For the long term, we will do some cost control and acquire some quality EBITDA increase, et cetera, as you mentioned. That's a first to address the first question. Regarding your second questions, and for the Changzhou, I think most of the people are interested in this part. I would say Changzhou cooperation is more like we team up together to identify some certain assets, and which is kind of the debt restructure on a target. Going forward, we'll try to leverage the Changzhou platform and to expand our AUM and our exposures going forward, which is a key to strategically position ourselves on this prospect. That's my question. Answers. Thank you, Jeff. Can I follow up with another question, which is, will VNET be selling your existing assets into this joint venture? Edison, I'll- I don't think so, either. These are new projects, Edison. We would not. This is not an instrument where we would be selling our existing pipeline into this entity. There are new projects being identified and targeted. Jeff talked about sort of, you know, debt restructuring. These are also projects where perhaps there is an opportunity given the current owners of some of these projects. We're teaming up with someone with the financial firepower to be able to take advantage of these opportunities. I see. Let me clarify that. It seems that the Changzhou joint venture will focus on brownfield projects. That's why VNET will continue to focus on greenfield projects. Would that be an accurate thinking? The current targets, yes, would be potentially a brownfield or otherwise, yes. Less greenfield projects. Okay. Thank you. Yeah, we won't be selling our pipeline into that entity itself. Okay. Yeah. Thank you. That's it for me. Okay. Thanks, Edison. One moment for next question. Our next question on the line is from UBS. Your line. Hi. Thank you for the opportunity to ask a question. I have one question. I noticed that we have revised down the cabinet delivery plan. What's our latest cabinet budget for this year and next year? Also, as Jeff mentioned, cost control is one of the long-term target. Just wondering if there's any timeline target for VNET to achieve, say, positive free cash flow or self-financing? Thank you. Hi, Sara, can you hear me? Yes, we can. Yes. Okay, good. I'll take this one. Your first question was on cabinet delivery. For that, we are, as we mentioned, revising our cabinet delivery into the range of 8,000-9,000. Basically, the outlook for the sort of rest of this year into next year, we've already factored in the overall macro softness that we've seen. Also, the slower move-in. Then, there are some construction delays related to COVID-related restrictions. Those are, I would say, less of a factor, but still a factor in terms of shifting perhaps this year into next. In terms of our outlook in terms of 2023, we'll give some more color in fourth quarter, but we're expecting that next year's delivery will be similar to this year, perhaps a little bit better. What was your second question, Sara? As cost control is one of the long-term target, so just wondering if there's any timeline target for VNET to achieve self-financing? Okay. Like positive free cash flow. Yeah. I think overall, if you look at our financing plans right now, there's a couple of things that we're focused on. One is on the CapEx side and obviously sort of cash out. I would say that we're increasingly selective on our CapEx and sort of prudent CapEx spend. We do also still have very strong support from the domestic banks, onshore financing, and then alternative financing, in terms of the Changzhou Corporation as well as exploring onshore restructures. Last but not least, you know, when you're sort of looking at our overall ramp up, you continue to see the billable cabinets increasing. I would say that just given all these things put together, probably targeting 2024. I think next year still will be quite challenging just given the fact that we were still targeting, something in the range of, RMB 3.5 billion-RMB 4 billion of, CapEx. Again, some of it we can moderate with these, cooperations. Got it. Thank you. Most welcome. One moment for our next question. Our next question comes line of Ethan Zhang from Nomura. Your line is open. Ethan Zhang from Nomura, your line is open. Oh, sorry. Thanks. My question is, I noticed that our third quarter EBITDA margin was down like 3 percentage points compared to 2 Q or 3 Q of last year. Just wonder, could management give us some breakdown or quantitative impact of different negative factors that affect our EBITDA margin? What is the outlook for the EBITDA margin for next year? Thank you. Hi, Ethan. It's Tim here. In terms of overall EBITDA margin, actually the company's been working quite hard on cost controls, because we have seen during the course of this year obviously, costs like utilities and so forth going up. We've managed to moderate that with some cost controls and also deferral of costs for third quarter. In terms of the next year and expectations, I think that we expect that the margin compression will also then flatten out. It will depend on the overall continued ramp up of the business, and that there will be no further changes to our underlying cost of sales. We'll have some more details in fourth quarter in terms of our views as we end this year. Thank you. Got it. Got it. Got it. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Alex Wang from Daiwa. Your line is open. Yeah. Sorry. Can you hear me? Yep, very clear. Okay. Yeah. It's Wang from Daiwa. First two question. First is, you guys should know, more about estimated CapEx for all our existing unfinished project within our pipeline. Second question is, could you share more color on that repayment issue and the pressure from a potential lingering debt? Thanks. Sure. Let me take your second question first. In terms of repayments, we have a small outstanding convertible note that's coming up next year, first half around $70 million. Then our next maturity bump will be our $600 million CB. That's something that we have already started planning for, and we'll be tackling during the course of 2023. In terms of your second question, look, you're talking about CapEx on our outstanding MOU projects or what do you mean by? We have CapEx spend this year obviously for projects that we're delivering in 2023. We also then have the continued development of new projects as well. Just wanted to clarify your question. Yeah, just excluding the partnership with Changzhou. What's the estimated CapEx for our existing unfinished projects within our own pipeline in the next three years? Probably won't be able to give you a next three-year guidance here. We have actually more than one of these Changzhou types of projects under discussion. What I can tell you is that what we're looking at for next year is probably a similar CapEx level as this year, and it includes the remaining deliveries for this year, for deliveries in 2023 and obviously preparations next year for deliveries in 2024, in terms of the power infrastructure and so forth. We could probably, you know, come to you offline and have some discussion on the general parameters for the coming three years. Obviously, as we continue to get new MOUs each quarter, that number will change and shift. We'll have to rerun those numbers as well because we've just had a couple of new MOU wins. Thank you. Okay. Thank you. Thank you. That's all the time we have for Q&A today, ladies and gentlemen. That concludes our conference for today. Thank you for participating. You may now disconnect. Everyone, have a great day.