VNET Group, Inc. (Nasdaq: VNET) (“VNET” or the “Company”), a leading carrier- and cloud-neutral Internet data center services provider in China, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2021. The Company will hold a conference call at 9:00 PM on March 30, 2022, U.S. Eastern Time (9:00 AM on March 31, 2021, Beijing time) to discuss the financial results. Dial-in details are provided at the end of this release.
Fourth Quarter 2021 Financial Highlights
- Net revenues increased by 29.4% to RMB1.75 billion (US$273.9 million) from RMB1.35 billion in the same period of 2020.
- Adjusted cash gross profit (non-GAAP) increased by 22.7% to RMB713.8 million (US$112.0 million) from RMB581.9 million in the same period of 2020. Adjusted cash gross margin (non-GAAP) was 40.9%, compared to 43.2% in the same period of 2020.
- Adjusted EBITDA (non-GAAP) increased by 18.8% to RMB463.0 million (US$72.7 million) from RMB389.8 million in the same period of 2020. Adjusted EBITDA margin (non-GAAP) was 26.5%, compared to 28.9% in the same period of 2020.
Full Year 2021 Financial Highlights
- Net revenues increased by 28.2% to RMB6.19 billion (US$971.3 million) from RMB4.83 billion in the full year of 2020.
- Adjusted cash gross profit (non-GAAP) increased by 32.2% to RMB2.63 billion (US$413.3 million) from RMB1.99 billion in the full year of 2020. Adjusted cash gross margin (non-GAAP) was 42.6%, compared to 41.3% in the full year of 2020.
- Adjusted EBITDA (non-GAAP) increased by 32.4% to RMB1.75 billion (US$275.2 million) from RMB1.32 billion in the full year of 2020. Adjusted EBITDA margin (non-GAAP) was 28.3%, compared to 27.4% in the full year of 2020.
Fourth Quarter 2021 Operational Highlights
- Total cabinets under management net increased by 13,276 in the fourth quarter of 2021 to 78,540 as of December 31, 2021, a 46.7% year-over-year growth, compared to 53,553 as of December 31, 2020, and 65,264 as of September 30, 2021.
- Retail IDC MRR[1] per cabinet was RMB9,301, compared to RMB9,131 in the same period of 2020 and RMB9,296 in the third quarter of 2021.
- Compound utilization rate was 61.6%, compared to 59.8% in the third quarter of 2021.
- Utilization rate for mature cabinets, which consisted of cabinet deliveries prior to and during 2019, was 76.7%, compared to 75.5% in the third quarter of 2021.
- 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 third quarter of 2021.
Fourth Quarter 2021 Financial Results
NET REVENUES: Net revenues in the fourth quarter of 2021 was RMB1.75 billion (US$273.9 million), representing an increase of 29.4% from RMB1.35 billion in the same period of 2020 and an increase of 11.9% from RMB1.56 billion in the third quarter of 2021. The year-over-year and quarter-over-quarter increase was mainly due to the increased demand from both wholesale and retail IDC customers, as well as the growth of revenue from cloud business.
GROSS PROFIT: Gross profit in the fourth quarter of 2021 was RMB380.0 million (US$59.6 million), representing an increase of 29.1% from RMB294.4 million in the same period of 2020 and an increase of 1.3% from RMB375.2 million in the third quarter of 2021. Gross margin in the fourth quarter of 2021 was 21.8%, compared to 21.8% in the same period of 2020 and 24.0% in the third quarter of 2021. The quarter-over-quarter decrease in gross margin was primarily attributable to the massive delivery of new cabinets in the fourth quarter of 2021, which usually have a ramp-up phase to reach the expected profit level.
ADJUSTED CASH GROSS PROFIT, which excludes depreciation, amortization, and share-based compensation expenses, was RMB713.8 million (US$112.0 million) in the fourth quarter of 2021, compared to RMB581.9 million in the same period of 2020 and RMB674.5 million in the third quarter of 2021. Adjusted cash gross margin in the fourth quarter of 2021 was 40.9%, compared to 43.2% in both the same period of 2020 and the third quarter of 2021.
OPERATING EXPENSES: Total operating expenses in the fourth quarter of 2021 were RMB649.7 million (US$102.0 million), compared to RMB369.2 million in the same period of 2020 and RMB261.3 million in the third quarter of 2021. As a percentage of net revenues, total operating expenses in the fourth quarter of 2021 were 37.2%, compared to 27.4% in the same period of 2020 and 16.7% in the third quarter of 2021.Sales and marketing expenses in the fourth quarter of 2021 were RMB85.5 million (US$13.4 million), compared to RMB88.9 million in the same period of 2020 and RMB36.4 million in the third quarter of 2021.
Research and development expenses in the fourth quarter of 2021 were RMB63.0 million (US$9.9 million), compared to RMB42.2 million in the same period of 2020 and RMB53.6 million in the third quarter of 2021.
General and administrative expenses in the fourth quarter of 2021 were RMB390.9 million (US$61.3 million), compared to RMB162.9 million in the same period of 2020 and RMB161.9 million in the third quarter of 2021. The increase was primarily due to one-off share-based compensation expenses.
ADJUSTED OPERATING EXPENSES, which exclude share-based compensation expenses, compensation for postcombination employment in an acquisition, impairment of loan receivable to potential investee and impairment of long-lived assets, were RMB273.7 million (US$43.0 million) in the fourth quarter of 2021, compared to RMB215.5 million in the same period of 2020 and RMB244.0 million in the third quarter of 2021. As a percentage of net revenues, adjusted operating expenses in the fourth quarter of 2021 were 15.7%, compared to 16.0% in the same period of 2020 and 15.6% in the third quarter of 2021.
ADJUSTED EBITDA: Adjusted EBITDA in the fourth quarter of 2021 was RMB463.0 million (US$72.7 million), representing an increase of 18.8% from RMB389.8 million in the same period of 2020 and an increase of 2.8% from RMB450.4 million in the third quarter of 2021. Adjusted EBITDA in the fourth quarter of 2021 excluded share-based compensation expenses of RMB253.0 million (US$39.7 million). Adjusted EBITDA margin in the fourth quarter of 2021 was 26.5%, compared to 28.9% in both the same period of 2020 and the third quarter of 2021.
NET PROFIT/LOSS: Net loss attributable to ordinary shareholders in the fourth quarter of 2021 was RMB27.3 million (US$4.3 million), compared to a net loss of RMB1.02 billion in the same period of 2020 and a net profit of RMB156.2 million in the third quarter of 2021. Net loss attributable to ordinary shareholders in the fourth quarter of 2021 included impairment of long-lived assets of RMB109.3 million (US$17.1 million) and gains from changes in the fair value of convertible promissory notes of RMB227.8 million (US$35.8 million) due to the decrease in the Company’s stock price.
PROFIT/LOSS PER SHARE: Basic and diluted loss per share were RMB0.03 (US$0.005) and RMB0.28 (US$0.04) in the fourth quarter of 2021, respectively, which represented the equivalent of RMB0.18 (US$0.03) and RMB1.68 (US$0.24) per American depositary share (“ADS”), respectively. Each ADS represents six Class A ordinary shares.
As of December 31, 2021, the aggregate amount of the Company’s cash and cash equivalents, restricted cash, and short-term investments was RMB1.71 billion (US$268.1 million).
Net cash generated from operating activities, in the fourth quarter of 2021 was RMB664.0 million (US$104.2 million), compared to RMB283.8 million in the same period of 2020 and RMB134.7 million in the third quarter of 2021.
Full Year 2021 Financial Results
NET REVENUES: Net revenues in the full year of 2021 increased by 28.2% to RMB6.19 billion (US$971.3 million) from RMB4.83 billion in the full year of 2020.
GROSS PROFIT: Gross profit in the full year of 2021 was RMB1.44 billion (US$225.7 million), representing an increase of 33.6% from RMB1.08 billion in the full year of 2020. Gross margin in the full year of 2021 was 23.2%, compared to 22.3% in the full year of 2020.
ADJUSTED CASH GROSS PROFIT, which excludes depreciation, amortization, and share-based compensation expenses, was RMB2.63 billion (US$413.3 million) in the full year of 2021, compared to RMB1.99 billion in the full year of 2020. Adjusted cash gross margin in the full year of 2021 was 42.6%, compared to 41.3% in the full year of 2020.
OPERATING EXPENSES: Total operating expenses in the full year of 2021 were RMB1.42 billion (US$222.3 million), compared to RMB959.4 million in the full year of 2020. As a percentage of net revenues, total operating expenses in the full year of 2021 were 22.9%, compared to 19.9% in the full year of 2020.
Sales and marketing expenses in the full year of 2021 were RMB255.4 million (US$40.1 million), representing an increase of 8.7% from RMB235.0 million in the full year of 2020.
Research and development expenses in the full year of 2021 were RMB188.5 million (US$29.6 million), representing an increase of 67.0% from RMB112.9 million in the full year of 2020.
General and administrative expenses in the full year of 2021 were RMB842.4 million (US$132.2 million), representing an increase of 57.4% from RMB535.1 million in the full year of 2020.
ADJUSTED OPERATING EXPENSES, which exclude share-based compensation expenses, compensation for postcombination employment in an acquisition, impairment of loan receivable to potential investee and impairment of long-lived assets, were RMB965.7 million (US$151.5 million) in the full year of 2021, compared to RMB756.2 million in the full year of 2020. As a percentage of net revenues, adjusted operating expenses in the full year of 2021 were 15.6%, compared to 15.7% in the full year of 2020.
ADJUSTED EBITDA: Adjusted EBITDA in the full year of 2021 was RMB1.75 billion (US$275.2 million), representing an increase of 32.4% from RMB1.32 billion in the full year of 2020. Adjusted EBITDA in the full year of 2021 excluded share-based compensation expenses of RMB320.0 million (US$50.2 million). Adjusted EBITDA margin in the full year of 2021 was 28.3%, compared to 27.4% in the full year of 2020.
NET PROFIT/LOSS: Net profit attributable to ordinary shareholders in the full year of 2021 was RMB500.1 million (US$78.5 million), compared to net loss attributable to ordinary shareholders of RMB3.18 billion in the full year of 2020. Net profit attributable to ordinary shareholders in the full year of 2021 included gains from changes in the fair value of convertible promissory notes of RMB829.1 million (US$130.1 million) due to the decrease in the Company’s stock price.
PROFIT/LOSS PER SHARE: Basic profit per share and diluted loss per share were RMB0.57 (US$0.09) and RMB0.36 (US$0.06), respectively, which represents the equivalent of RMB3.42 (US$0.54) and RMB2.16 (US$0.36) per ADS. Diluted profit/loss per share is calculated using adjusted net profit/loss attributable to ordinary shareholders divided by the weighted average number of diluted shares outstanding.
Net cash generated from operating activities in the full year of 2021 was RMB1.39 billion (US$217.8 million), compared to RMB714.2 million in the full year of 2020.
Financial Outlook
For the full year of 2022, the Company expects net revenues to be in the range of RMB7,450 million to RMB7,750 million. Adjusted EBITDA is expected to be in the range of RMB1,975 million to RMB2,125 million. The midpoints of the Company’s updated estimates imply an increase of 22.8% and 16.9% year over year in net revenues and adjusted EBITDA, respectively.
The forecast reflects the Company’s current and preliminary views on the market and its operational conditions, which does not factor in any of the potential future impacts caused by the ongoing COVID-19 pandemic, and is subject to change.
Conference Call
The Company will hold a conference call at 9:00 P.M. on Wednesday, March 30, 2022, U.S. Eastern Time, or 9:00 A.M. on Thursday, March 31, 2022, Beijing Time, to discuss the financial results.
In advance of the conference call, all participants must use the following link to complete the online registration process to receive a unique registrant ID and a set of participant dial-in numbers to join the conference call.
