Hello, ladies and gentlemen. Thank you for standing by for the second quarter 2024 earnings conference call for VNET Group Inc. After the management's prepared remarks, there will be a question-and-answer session. Participants from our management include Mr. Gavin Shen, Rotating President; Mr. Qiyu Wang, Chief Financial Officer; and Ms. 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 your first speaker today, Ms. Xinyuan Liu. Please go ahead.

Thank you, operator. Hello, everyone, and welcome to our second quarter 2024 earnings conference call. Our earnings release was distributed earlier today, and you can find a copy on our website as well as our newswire services. Please note that today's call 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 obligation to update any forward-looking statements, except as required under applicable laws. Please also note that VNET's earnings release and this conference call include the disclosure of audited GAAP and non-GAAP financial matters. VNET's press release contains a reconciliation of the unaudited non-GAAP matters to the unaudited GAAP matters. A summary presentation, which we will refer to during this conference call, can be viewed and downloaded from our website at ir.vnet.com. Next, I'd like to alert you that we will be utilizing text-to-speech technology powered by Neuralink.ai. To deliver this quarter's prepared remarks are Gavin Shen, our Rotating President; and Qiyu Wang, our CFO. We are excited to showcase just one of the many innovative ways in which VNET is embracing AI trends and maximizing our value. Gavin and Qiyu will join the Q&A session in person. Additionally, this conference is being recorded. A webcast of this conference call will also be available on our website at ir.vnet.com. Now let's get started with today's presentation.

Good morning, and good evening, everyone. Thank you for joining our call today. I will start with an overview of our second quarter results. Let's turn to Slide 4. We delivered another solid quarter thanks to continued strong strategic execution. Our net revenues increased by 9.4% year-over-year to RMB 1.99 billion, and adjusted EBITDA increased by 7.3% year-over-year to RMB 574 million. As we mentioned on our last call, we are now reporting our net revenues and operational metrics for our wholesale and retail IDC businesses separately. Our wholesale business remained a key revenue growth driver, with net revenues from this segment increasing by 81% year-over-year to RMB 402 million. Capacity in service for the wholesale business was steady at 332 megawatts and capacity utilized for the wholesale business increased by 16 megawatts from the first quarter to 252 megawatts, with the utilization rate rising by 4.9 percentage points quarter-over-quarter to 75.9%. Our retail IDC business maintained its smooth development, with capacity in service increasing to 52,177 cabinets and a stable utilization rate of 63.7% as of the end of June. Furthermore, our fundamentals remain robust with a healthy unused credit line and cash position, providing ample support for our parent business operations and investments in future developments. Our reliable high-quality IT services continue to win customers' trust and support in the second quarter. As you can see on Slide 5, following the large orders we won for a flagship campus in Guangdong province in the past year, which totaled around 206 megawatts, we recently achieved another breakthrough with 3 additional order wins totaling 235 megawatts for our wholesale data center in the Greater Beijing Area in Ulanqab IDC Campus. Specifically, we secured a significant 200 megawatt order from an existing customer in the Internet industry during the second quarter, along with 2 new IT services orders for 19 megawatts and 16 megawatts, respectively, recently. We are confident in Ulanqab's growth potential and expect this cutting-edge facility to break the historical growth record set by our flagship campus in Guangdong province. I will introduce our Ulanqab IDC campus in detail later. Next, I'd like to briefly review our differentiated business model and diverse service offerings before moving on to demand trends and detailed business updates. Let's turn to Slide 6. With comprehensive offerings across IDC cloud and VPN services, we can create tailored, holistic data and computing solutions to comprehensively meet customers' mission-critical needs. While IDC is our core business, our non-IDC businesses, including cloud and VPN services, are important contributors to revenue and critical components of our overall growth. We made significant progress in our non-IDC business during the second quarter. For VPN services, we expanded our customer base by acquiring new customers in semiconductor, retail and IT manufacturing industries as well as large SOC customers. Regarding our Blue Cloud business, our efforts to maintain and expand Microsoft's global account base in China continued to yield positive results. During the second quarter, we won new customers in derivative finance, manufacturing and finance. Looking ahead, we are confident of achieving further growth. Our IDC business is driven by the effective dual-core growth strategy divided into wholesale and retail segments as outlined here on Slide 7. By offering a broad variety of services across our wholesale and retail IDC businesses, we can serve enterprises of any size, from hyperscale with massive power and space needs to small and medium enterprises that require a full-service, hands-on approach. We have built a broad diverse customer base with low dependency on any single large customer, serving over 7,500 enterprise customers, of which more than 1,500 enjoy our IDC services. Since our IPO, approximately 90% of our total net revenues have been recurring revenues, demonstrating the solid sustainability of our overall revenue growth. The churn rate for our core IDC business has consistently remained below 1%, reflecting our high level of customer satisfaction. Additionally, in the second quarter of 2024, our top 20 customers contributed 45.7% of our revenue, further highlighting the risk diversification and revenue stability within our customer structure. Now let's turn to Slide 8 for a closer look at the demand trends that shaped our development during the second quarter. AI has definitively entered the mainstream in the digital economy era, with almost every industry seeking AI tech and applications to streamline processes and improve results. As the leading IDC service provider in the new infrastructure industry, we offer state-of-the-art IDC services and premium value-added services to our customers with the AI technology. Particularly, the surge in demand for high-performance computing power for large language model training has led to unprecedented new opportunities in our industry. To capitalize on this rising AI-driven demand, we are planning to strategically invest in AI computing power by expanding our AI-related business and deepening our understanding of customers' AI needs. We are well positioned to unleash our potential and create a new growth engine for the company. We currently cater to AI-driven demand primarily from leading Internet clients and industry leaders in cloud services, short video, local services, and financial tech sectors. Recently, we successfully secured several orders totaling 235 megawatts of capacity, the vast majority of which is set to facilitate AI deployment for our customers. As an industry-leading player, we provide customers with tailored high-performance computing solutions by remaining at the forefront of AI trends. For instance, we're conducting research and development on advanced power modules as well as refrigeration and heat dissipation solutions that can achieve air cooling of up to 30 kilowatts per cabinet and liquid cooling of up to 120 kilowatts per cabinet. Furthermore, during the second quarter, we continued to upgrade our data centers with innovative designs, high-density cabinet deployments, and cutting-edge cooling technology. Currently, over 95% of our wholesale capacity in service is capable of meeting high-performance computing power requirements, positioning us to seamlessly accommodate future AI-driven demand. Moving to Slide 9. We are hard at work on our Ulanqab IDC Campus I mentioned earlier, a state-of-the-art facility, boasting a total plant construction line area exceeding 638 square kilometers, and total planned IT power, exceeding 1.2 gigawatts. As of now, we have secured orders for over 200 megawatts. This campus will support large language model training demand, especially from customers in the Internet, autonomous driving, and financial services sectors. We have neutralized numerous innovative technologies for the Ulanqab IDC Campus, including building standardization, modular data centers, and bus-based electrical systems. For our first order, we expect the timeline from construction to delivery to take 6 months, which represents the leading timeline speed in the industry and showcases our excellent execution capabilities. We also plan to implement standardized construction and operational management to reduce the costs associated with the project life cycle. Meanwhile, we are proactively working to optimize Ulanqab's power utilization, large language model training in the AI era into its massive power consumption. In line with our commitment to ESG best practices, we are collaborating with our customers to explore power innovations that provide sufficient, stable, and more cost-effective power supply to meet AI computing power needs and support our customers' ESG goals. Ulanqab IDC Campus benefits from a host of reasonable advantages. Ulanqab IDC Campus' exceptional geographic location offers abundant land resources and a stable geological structure, while natural cooling capabilities are available for up to 10 months a year, providing significant energy savings. Furthermore, as a computing power hub in these data and web computing initiatives, Ulanqab IDC Campus enjoys optimal electricity prices and preferential policies, making it ideal for large-scale deployment of computing power. Finally, Ulanqab's direct optical cable connection to Beijing ensures high transmission efficiency, enabling us to fulfill enterprises' requirements for high-speed, high-quality data transmission services. In addition to Ulanqab, our broad network of data centers not only covers major cities nationwide but also connects carriers and service providers in various locations through a robust domestic data transmission network. As you can see on Slide 10, the layout of our wholesale capacity and service is well balanced, with the Yangtze River Delta accounting for 52% and the Greater Beijing Area accounting for 48%. Regarding wholesale capacity under construction, the Yangtze River Delta accounts for 45.8%, while the Greater Beijing Area accounts for 54.2%. 82.6% of our wholesale capacity on hold for future development is in the Greater Beijing Area, mainly due to the region's geographical advantages, convenient transportation, abundant green energy resources, and lower utility costs compared to other regions. Notably, the majority of AI-related demand is coming from the Greater Beijing Area. For our retail data centers, our self-built capacity in service was 48,516 cabinets as of the end of June. Specifically, 58.4% of capacity in service is in the Greater Beijing Area, 19.2% is in the Yangtze River Delta, and the rest is distributed among the Greater Bay Area and other regions in line with demand. Now let's delve into our business updates, starting with our wholesale business on Slide 11. Wholesale business continues to drive our overall growth, recording an 81% year-over-year increase in revenue this quarter. Our capacity and service remained robust and stable quarter-over-quarter at 332 megawatts as of the end of June, an increase of 108 megawatts from the end of June of last year. Utilization rate increased to 75.9% with mature capacity utilization rate of 94.9% and ramp-up capacity utilization rate of 45.7%. Base utilization rate improvements reflect our ability to facilitate good customer move-ins during the quarter. We have also established a clear growth path for our wholesale data center capacity. Slide 12 depicts our progress across various aspects of the wholesale business in the second quarter. Notably, utilized capacity increased by 16 megawatts from 236 megawatts in the first quarter to 252 megawatts in the second quarter, primarily driven by strong customer demand from E-JS Campus 02 C. We also began ramping up construction in the second quarter in anticipation of future rising demand, increasing capacity under construction by 140 megawatts to a total of 279 megawatts. This increase is mainly attributed to the large order for our NOR Campus 01 project, which will be developed and constructed in several phases based on customer demand. By the end of June, the precommitment rate for capacity under construction had risen to 85.5%. Given this high precommitment rate and the continuous growth in market demand, we are planning to further expand the capacity of the wholesale data centers, targeting a total capacity of approximately 1 gigawatt to solidify our leadership position in the data center services sector. Moving to our retail business on Slide 13. This segment continued to operate smoothly in the second quarter. Capacity increased to 52,177 cabinets. The utilization rate was stable quarter-over-quarter at 63.7% as of the end of June, with mature capacity utilization rate holding steady at 72.5% and ramp-up capacity utilization rate of 12.7%. Our monthly recurring revenue per retail cabinet increased slightly quarter-over-quarter to RMB 8,753. In addition to our solid capacity and service, our new capacity pipeline for our wholesale business is robust. Slide 14 depicts our source pipeline for the next 12 months. Currently, we have 8 data centers under construction. We plan to deliver IT capacity in a range of approximately 210 to 290 megawatts over the next 12 months, vastly increasing our total capacity by the end of the second quarter of 2025. Our capacity in service for the wholesale business was 332 megawatts as of the end of the second quarter, meaning that our expected new capacity is equivalent to approximately 63% to 87% of our current capacity in service. In terms of the delivery timeline, we are maintaining our delivery target of approximately 100 to 140 megawatts for 2024, and we anticipate delivering approximately 110 to 150 megawatts in the first half of next year. Specifically, in the Yangtze River Delta, we have 4 data centers under construction with 98 megawatts expected to be delivered this year and 30 megawatts in the first half of 2025. In the Greater Beijing Area, we have 4 data centers under construction with 27 megawatts expected to be delivered this year and 124 megawatts in the first half of 2025. In summary, our solid second quarter results reflect our core strength and strategic execution excellence. These assets have positioned VNET as a front runner in the AI era. Going forward, our innovative IDC services, vast high-power density resources, and diverse AI-related capabilities will continue to empower sustainable high-quality growth. We will remain committed to driving innovation and advancing industry development as we grow, delivering value to all of our stakeholders. Thank you, everyone. I'll now turn the call over to Qiyu to discuss more about our operating and financial performance.

Good morning and good evening, everyone. Before we start the detailed discussion of our second quarter performance, please note that unless otherwise stated, all the financials we present today are for the second quarter of 2024 and are in RMB terms. Furthermore, unless otherwise specified, all the growth rates I am reviewing are on a year-over-year basis. Moving on to Slide 16. In the second quarter, we remain focused on high-quality revenue businesses, a tactic that continues to yield positive outcomes. Our total net revenues increased by 9.4% to RMB 1.99 billion. Our adjusted EBITDA also grew year-over-year by 7.3% to RMB 574 million. In addition, our efforts to improve operational efficiency paid off, with operating expenses decreasing by 7.7% year-over-year and 36.8% quarter-over-quarter to RMB 230 million for the second quarter. Going forward, we will continue to refine cost control measures and optimize our working capital to maintain our solid financial position. Additionally, the company has deepened its emphasis on profitability by controlling costs and increasing efficiencies. Through high-quality investments in development, we significantly improved our profitability with a quarterly turnaround in net profit while maintaining solid cash flows. In the second quarter of 2024, the company recorded a net profit of RMB 71.8 million, a significant improvement from the net loss of RMB 159 million in the first quarter of 2024, representing a quarter-over-quarter increase of RMB 230.9 million. In the first quarter, the company recognized a one-time loss of RMB 155.8 million due to stock option grants and the repayment of the convertible senior notes due 2026. Excluding the impact of the above one-off items, the adjusted net loss for the first quarter of 2024 was RMB 3.2 million, and the adjusted net profit for the second quarter was RMB 56.7 million, representing a quarter-over-quarter increase of RMB 59.9 million, primarily due to the company's consistent operational improvements. Let's take a closer look at our top line. As we mentioned on our last call, we have subdivided total net revenues from the IDC business into wholesale and retail IDC business based on the nature and scale of our data center projects, with revenues from non-IDC business remaining separate. As you can see on Slide 17, wholesale revenues remained our key revenue growth driver, increasing by 81% year-over-year to RMB 402 million, mainly driven by the E-JS Campus 02 A, E-JS Campus 02 B, E-JS 02 C, and NHB04 data centers. Our retail revenues continue to account for the largest part of net revenues. Our retail revenues increased sequentially by 4.4% to RMB 965 million, thanks to the increase in monthly recurring revenue per cabinet and some one-off revenues. Our non-IDC business continued to progress smoothly, with revenues increasing by 4% year-over-year to RMB 627 million. We continue to improve overall efficiency and maintained solid margins as we have shown on Slide 18. Adjusted cash gross margins and EBITDA margins remained quite stable. Moving on to liquidity on Slide 19. We maintained a strong liquidity position during the quarter. We recorded net operating cash inflow for the first half of 2024 of RMB 673 million, primarily due to steady payment collection from customers and measured expenditures. The company's net cash inflow from operations in the first half of 2024 was slightly lower than that of the same period for the previous 2 years, mainly due to the time lag of one-off cash inflows, such as tax rebates. Our cash position remains healthy after repaying RMB 600 million in convertible bonds at the end of the quarter. The company's total cash equivalents, restricted cash and short-term investments reached RMB 2.22 billion, an increase of approximately 23% compared to the 1st of February 2024. Next, let's take a look at debt on Slide 20. This quarter's metrics showcase the effectiveness of our prudent approach to debt management. Our net debt to the trailing 12 months adjusted EBITDA ratio was 4.6%, while total debt to the trailing 12 months adjusted EBITDA ratio was 5.5%, remaining at a healthy level. We prioritize long-term debt maturity planning in our debt and strategic management to ensure the security of debt repayment. Notably, the company's short- and medium-term debt maturing in 2024 to 2026 comprises only 32% of our total debt. Turning now to CapEx spending, which we view as a critical investment in our future growth and industry presence. As you can see on Slide 21, our CapEx has remained relatively stable over the past 3 years at between RMB 3 billion and RMB 4 billion. In the first half of 2024, our CapEx was RMB 1.88 billion, of which RMB 1.48 billion was used for wholesale business expansion. Our previous full-year CapEx guidance was from RMB 3.7 billion to RMB 4.2 billion. However, as Gavin mentioned, we have consistently invested in wholesale data centers over the past several years, gaining vast experience and customer recognition. As such, we are steadily winning customers for our hyperscale wholesale data centers in Eastern and Northern China amid recovering market demand as well as mitigating competitive situations. We recently won several new orders, totaling over 200 megawatts of capacity. Due to the tight time requirement for deliveries, most of the orders are already under construction or will begin construction in the near future. As such, we are raising our full-year CapEx guidance to RMB 5 billion to RMB 5.5 billion with CapEx for the second half of the year expected to be RMB 3.1 billion to RMB 3.6 billion. The company consistently upholds stringent requirements for payback when selecting new projects to ensure the internal rate of return of new investment remains at a reasonable level after the allocation of corporate overhead expenses. This, in turn, enabled us to drive sustainable shareholder value through effective high-quality scalability, leveraging our healthy balance sheet and solid cash flow. We have sufficient capital to support the CapEx plan for the second half of this year and the near future while maintaining a reasonable leverage position. Moreover, as previously mentioned, we are proactively accelerating the capitalization for our wholesale IDC projects. If this progresses well as planned, we will be able to further strengthen our cash reserves and reduce the company's debt ratio, which will efficiently support our healthy and sustainable development in the long run. Now moving to our full-year guidance for 2024. On Slide 22, we expect total net revenues to be in the range of RMB 7.8 billion to RMB 8 billion, a year-over-year increase of 5.2% to 7.9%; and adjusted EBITDA to be in the range of RMB 2.22 billion to RMB 2.28 billion, representing a year-over-year increase of 8.9% to 11.8%. This is unchanged from our previous guidance. CapEx is expected to be in the range of RMB 5 billion to RMB 5.5 billion. The expanded range from previous estimates is mainly due to new orders and the increase in projects under construction, as I just mentioned. Before I conclude, I would like to share a brief update on our achievements in ESG. We recently received a score of 53 in the 2023 S&P Corporate Sustainability Assessment, ranking the highest among China's IT services industry and in the top 11% in the industry globally. Our exceptional ESG performance was also recognized by S&P Global, with inclusion in our sustainability yearbook 2024 of the China Edition, our second consecutive year of inclusion. Notably, VNET is the industry's only participant to be included in the yearbook China Edition for 2 consecutive years as a standout among the thousands of companies assessed. Our recognition in the yearbook further affirms the strength and effectiveness of our ESG efforts. Going forward, we will further deepen our commitment to ESG, advancing our goal of bringing green direct current electricity from IDC to millions of households, nurturing a high-quality, low-carbon digital future and delivering sustainable value to all stakeholders. In summary, we delivered another solid quarter highlighted by continued revenue growth and profitability enhancement through strong execution of our effective dual-core strategy. With our robust business fundamentals and healthy cash position, we are well positioned to continue capturing AI-driven opportunities and driving high-quality, sustainable growth. This concludes our prepared remarks for today. We are now ready to take questions.

Two questions from my side. First, congratulations on the big order win. My question is related to that. It's quite encouraging to see that you have three very sizable orders booked in the past quarter and quarter to date. Actually, could you please update us in terms of the underlying demand in China? We saw that your wholesale business booked high double-digit growth. The retail side is largely flat. On the wholesale side, you keep winning new sizable orders. Can we expect that in the foreseeable future, orders will continue to be the primary driver of the core business? And the second question is related to AI. Could management update us in terms of what preparation VNET has done to support potential AI demand? Especially, what we care most about is what will be the expected return on investment or internal rate of return for AI-related data centers compared with traditional ones?

Thank you for your question. I am Gavin, so I'll take your first question. As we can see for the entirety of 2024, there are increasingly more orders from the market, particularly from the wholesale perspective, which is actually more than what we've seen in the previous two months and is increasing significantly. As we have shown in our presentations, we have won orders from two major clients, specifically a large order of 230 megawatts, and another two of 19 megawatts and 16 megawatts. These new orders total around 235 megawatts. We are planning to deliver all of them within a year's time. So as you can see, we have strong customer demand as well as an increasing number of new orders. We anticipate seeing similar types of clients for our capacity in Ulanqab. Our wholesale business is benefiting from strong customer demand. I'm glad that you also mentioned the retail business. Our retail business is growing stably. Regarding your second question, we will definitely increase the proportion of value-added services when it comes to AI. Gradually, we will ramp up our provision of these types of services in our total service portfolio. A quick addition to what I've just said: VNET has evolved from a business mainly targeted towards the retail segment in the past, which has been a core business for us. We have clear advantages in this regard. Our established customer base allows us to offer diverse value-added services. Therefore, we will continue to increase the proportion of value-added services in this AI area to enhance our competitiveness and strengthen client relationships, which will drive up the unit monthly recurring revenue per rack cabinet. Additionally, I want to highlight that our corporate strategy has fully embraced AI. The majority of our new orders are AI-related, and we are actively seeking innovations and upgrades in this area. Most importantly, for today's quarterly financial result presentation, the prepared remarks from Qiyu and me have been synthesized and generated by Neuralink, a product we intend to release soon to the market. Regarding the AI data centers and AI projects, in terms of IRR and ROI for these types of projects, according to our observations, the construction costs for AI-oriented data centers are not significantly different from those for traditional data centers. Overall, the ROI remains consistent. As we scale up our projects in this area, we can further reduce overall costs. Most of these AI-oriented data centers are deployed in Ulanqab, where we benefit from natural advantages concerning utilities as we explore innovative technologies.

Congratulations on the order wins and the good results. I have two questions. Number one is regarding the Ulanqab project; can you provide us with an idea of the CapEx cost per megawatt? Additionally, what kind of EBITDA margin are you expecting from this project? Regarding the 1.2 gigawatt IT capacity you mentioned, how soon do you think you can ramp that up to 1.2 gigawatts? For my second question, in your first half CapEx of RMB 1.8 billion, you mentioned that roughly RMB 1.4 billion is for wholesale. Does this mean that you spent RMB 400 million on retail, and if so, will retail revenue start growing? What is your CapEx plan for your retail segment, and how do you decide how much CapEx to allocate to retail?

Thank you for your question. The majority of the orders for Ulanqab are AI-oriented. The average construction cost per megawatt is lower than the cost for traditional data centers. Currently, predominantly, we are adopting air-cooling solutions for these AI-oriented data centers. However, as we seek innovations in underlying technologies and leverage our economies of scale, we will keep the construction costs per megawatt at a lower level. As for the delivery timeline for the 1.2 gigawatt capacity in Ulanqab, we're planning to complete this in five years, averaging 200 megawatts delivered per year.

I will take your second question. Yes, the majority of our CapEx is indeed for wholesale capacity, while we have dedicated RMB 550 million for retail capacity. This includes RMB 100 million for maintenance expenses to replace some legacy devices and another RMB 400 million for scaling up or repurposing some of our existing devices to high power density cabinets. Additionally, there are some bills payable totaling RMB 550 million. For this year, we do not plan to allocate significant CapEx to retail capacity, but we do reserve a small portion of our wholesale capacity for retail services. However, it is a bit challenging to pinpoint these specific expenses, so we have included them under our wholesale expenses.

Congratulations on the strong results and the strong orders, especially for AI. I have one question regarding our financial plan as we've listed the CapEx guidance for this year. Could management update us on the financing plan and the progress? For example, it could be asset sales and fund-raising in China.

Thank you for your question. You're correct that we have raised our CapEx guidance for this year by about RMB 1.2 billion due to winning significant orders from our clients. Regarding our financing channels, earlier this year, we repaid a considerable amount of convertible debt. Under this backdrop, our current total debt to trailing twelve months EBITDA is around 5.5%. If we were to fully finance all upcoming CapEx for this year through debt, we could still manage to keep the total debt to EBITDA ratio below 6.5%, which is a predetermined red line within the company. I'm pleased to share that we have strong support from our shareholders, and our ability to secure funding or financing onshore has become more favorable. The costs associated with these financing instruments are also decreasing. Concerning the rates, the company is actively exploring private placements as well as loans, negotiating terms and conditions with our trade partners. However, we maintain a prudent attitude towards these options and will update the market when we have further developments. I want to reiterate that while we have raised our CapEx for this year, we are able to keep the total debt to EBITDA below 6.5% even if we were to finance all CapEx through debt if our asset disposal plans do not materialize.

Congratulations on the very solid results. My question is regarding the pricing trend. Could you share the latest pricing trends for the wholesale business, including by different regions? Additionally, on your retail business, it appears that pricing is more stabilized. Are we expecting retail business revenue to see year-on-year growth in the second half of this year?

Thank you for your question. Regarding the wholesale business, I believe everyone is aware that for the past two years, especially in the Yangtze River Delta area and the Beijing surrounding areas, the competitiveness of the IDC business has been quite strong. We are seeing the pricing for these capacities gradually stabilizing and starting to pick up, evidenced by the new orders we've received and the bids we've won. Consequently, we are confident that the pricing for these IDC capacities has the potential to grow in the near future. Concerning your second question, our retail business is stable with minor fluctuations. We are repurposing some of our retail cabinets and racks, changing them to high-power density models. Coupled with this and the upcoming Neuralink AI business release, we are confident that we can further stabilize our retail business moving forward.

I have two quick questions. The first is regarding your utilization rates. How do you expect our wholesale business's utilization rate for the second half or even next year? Secondly, a quick follow-up on our CapEx. I saw that we raised our guidance for full-year CapEx; how should we expect the CapEx intensity for the coming years? Considering the planned 1.2 gigawatt IT power as the base, how should we anticipate future CapEx trends?

As mentioned, the ramp-up speed for retail, in terms of the utilization rate for ramping up capacity in our wholesale segment, is quite quick. We normally expect the utilization rate to be around 90% within 6 to 12 months after delivery.

You might find that at certain time points, the utilization rate for our wholesale capacity may decrease slightly, partly because we will do consolidated delivery in that specific timeframe. However, we will provide more details as we gain greater visibility into these deliveries so that you have a clearer picture of the trends in our wholesale utilization rates.

Regarding the CapEx outlook for the coming years, as you can see, the demand for AI-based and traditional IDC is quite strong and growing significantly this year. Also, we are noticing dynamic shifts in the supply of IDC capacities in China. For 70% of our CapEx planned for this year, it's actually allocated for deliveries scheduled for next year. Over the next two years, management will prioritize the return on investment for these projects, especially given the geographical advantages of Ulanqab. If the ROI for the Ulanqab projects exceeds expectations, we are likely to increase CapEx in that region. Additionally, we are actively exploring asset disposal options and potential partnerships to build capacities. This means we can increase our capabilities without utilizing our balance sheet cash reserves or credit lines. These strategies are actively ongoing, and we will keep you updated as we receive more information.

Operator, we can conclude the call if there are no more questions.

Thank you. There are no further questions at this time. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect your lines.