Hello, ladies and gentlemen. Thank you for standing by for the First Quarter 2025 Earnings Conference call for VNET Group, Inc. After the management's prepared remarks, there will be a question and answer session. Please note, the Chinese line is in listen-only mode. If you wish to ask questions, please dial in through the English line. Participants from our management include Mr. Ju Ma, Rotating President, Mr. Qiyu Wang, Chief Financial Officer, Ms. Xinyuan Liu, Head of Investor Relations 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 First Quarter 2025 Earnings Conference Call. Our earnings release was distributed earlier today, and you can find a copy on our IR site as well as on 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. Also note that VNET's earnings press release and this conference call include the disclosure of both GAAP and non-GAAP financial matters. VNET's earnings press release contains a reconciliation of the unaudited non-GAAP matters to the unaudited GAAP matters. A summary presentation 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 NewLink.ai to deliver this quarter's prepared remarks by Mr. Ju Ma, our Rotating President, and Mr. Qiyu Wang, our CFO. The management team 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 IR website at ir.vnet.com. Now let's get started with today's presentation. Mr. Ma, please go ahead.

Good morning and good evening, everyone. Thank you for joining our call today. I would like to begin by sharing our primary accomplishment during the first quarter of 2025. As we embarked on the New Year journey, we achieved a strong set of results that set a positive tone for the year ahead. On the operational side, our wholesale IDC business recorded another impressive performance, supported by our robust deliveries and our customers' fast-moving pace. As of March 31, 2025, our wholesale capacity in service grew 18.1% quarter over quarter to 573 megawatts, an increase of 88 megawatts. Wholesale capacity utilized grew 23.9% quarter over quarter to 437 megawatts, a record high increase of 84 megawatts, while the utilization rate increased by 3.6 percentage points to 76.2%, indicating that newly delivered orders are being moved in faster than ever before. Meanwhile, our retail business continued to progress smoothly, benefiting from the rapid deployment of DPC. Furthermore, propelled by our dual-core strategy, we consistently secured high-quality orders from customers across various industries. I will elaborate on this in detail on the next slide. On the financial side, we maintained our solid growth trajectory across both total net revenue and adjusted EBITDA. Our total net revenues increased by 18.3% year over year to RMB 2.25 billion for the first quarter. Notably, wholesale revenues reached a new record high of RMB 673 million for the quarter, representing an impressive year-over-year growth rate of 86.5%, thanks to the rapid growth of our wholesale IDC business. Our adjusted EBITDA for the first quarter also increased by 26.4% year over year to RMB 682 million, with an adjusted EBITDA margin of 30.4%, up 1.9 percentage points year over year. Excluding the one-off impact of asset disposals last quarter, adjusted EBITDA increased by 18.1% quarter over quarter. We also further strengthened our financing capabilities, diversifying our channels at a relatively low cost. In March, we issued $430 million of convertible senior notes due in 2030 at an interest rate of 2.5% per annum. We also secured our first sustainability-linked loan of RMB 500 million with a 3.7% interest rate per annum. Furthermore, our all-in cost for one of our new loan projects reached a record low at 3.05%, and 55 basis points lower than the five-year LPR. Next, let's delve into our first quarter accomplishments in more detail. Moving on to our new order wins on slide five. We continue to win quality wholesale and retail orders in the first quarter. In addition to the wholesale orders we disclosed last quarter—a 55-megawatt order from a leading cloud computing customer and a 64-megawatt order from an Internet customer through our JV project—we won a 6-megawatt wholesale order from an intelligent driving customer for our data centers in the Greater Beijing area. Furthermore, breakthroughs by DeepSeq are propelling growing demand among customers for our retail IDC services to deploy intelligent applications. During the quarter, we secured a combined capacity of around 4 megawatts in retail orders from customers in the Internet, finance, local services, intelligent driving, and gaming sectors. These orders span multiple retail data centers in the Greater Beijing area, the Yangtze River Delta, the Greater Bay Area, and other regions. At the beginning of 2025, China's AI development entered an explosive new phase of growth driven by deep-sea breakthrough technology. This created surging AI-related demand for premium IDC services, boosting the IDC industry's growth. As an industry-leading player known for our high-performance data centers and reliable premium services, we quickly seized growth opportunities, winning quality new orders and driving progress. Notably, fueled by the rising demand for private deployments triggered by DeepSeq, our retail IDC business's revenues from customer private deployments of open-source large language models increased by 309% in March compared to January. Looking ahead, we remain confident in the China market growth potential. We believe that the increasing maturity of open-source model technology and the continuous expansion of intelligent application scenarios will continue to drive high demand for computing power and premium IDC services, further fueling our sustainable high-quality growth. Now let's delve into our business updates, starting with our wholesale business on slide eight. Our wholesale business maintained its robust growth momentum, with capacity in service increasing to 573 megawatts and utilization rate rising to 76.2%. Thanks to our strong delivery capability at our NOR Campus 01 and EJFC Campus 03 and faster-than-expected move-in at our EJS Campus 02 and NHB Campus 01B, we also delivered a mature capacity utilization rate of 94.5%, a relatively high level, and a ramp-up capacity utilization rate of 32.1%. We have a clear growth path for our wholesale data center capacity. Let's move on to slide nine. Our overall wholesale data center capacity continued to grow. In the first quarter, our capacity under construction was 377 megawatts, with a pre-commitment rate for capacity under construction stable at 81.6% as of the end of March. Additionally, capacity held for short-term future development remained relatively steady at 256 megawatts. Capacity held for long-term future development further expanded to 414 megawatts. As we remain confident in China's market growth potential as AI spurs greater demand for premium IDC services, we will maintain our robust expansion plan to ensure we are well-prepared for further business growth. Moving to our retail IDC business on slide ten. Our retail business continued to progress smoothly in the first quarter. Retail capacity in service was 51,960 cabinets, with the utilization rate increasing slightly to 63.7% as of the end of March. MRR per retail cabinet increased to RMB 8,898 this quarter. Turning to our delivery plan on slide eleven. Supported by our robust and efficient delivery capabilities, we successfully delivered a total of 88 megawatts in the first quarter. We currently have eight data centers under construction, with six in the Greater Beijing area and two in the Yangtze River Delta. We plan to deliver 377 megawatts of capacity over the next twelve months, or around 165 megawatts during the second and third quarters of 2025, and around 212 megawatts during the fourth quarter of 2025 and the first quarter of 2026. This ambitious delivery plan reflects strong demand from our customers and our outstanding delivery capabilities. Now turning to our non-IDC business, a key component of our overall business. DISH continued to expand its customer base by acquiring new customers from several state-owned enterprises, as well as the financial services and home appliances sectors, for their premium dedicated Internet services and Internet connection services. What's more, I am pleased to share that DISH recently received approval as a zero-outage supplier for a fifth consecutive year from T-Systems, which is part of Deutsche Telekom, in recognition of the e-saying reliable outstanding services. In conclusion, thanks to the strong execution of our effective dual-core strategy, we delivered robust first-quarter results, propelling progress across both our wholesale and retail businesses. Going forward, we will continue leveraging our high-performance data center network, reliable solutions, and outstanding delivery capabilities to meet our customers' growing demands, driving growth, and advancing the development of China's digital economy. Now I will turn the call over to our CFO, Qiyu Wang, for further discussion of our operating and financial performance.

Thank you, everyone. Good morning and good evening, everyone. Before we start the detailed discussion of our first-quarter performance, please note that unless otherwise stated, all the financials we present today are for the first quarter of 2025 and are in renminbi terms. Furthermore, unless otherwise specified, all the growth rates I am reviewing are on a year-over-year basis. Let's turn to slide thirteen. In the first quarter, we continued to pursue high-quality, high-margin business. Our total net revenues increased by 18.3% to RMB 2.25 billion, mainly driven by the rapid growth of the wholesale business. Our adjusted cash gross profit rose by 26.4% to RMB 967.8 million, while our adjusted EBITDA also grew year over year by 26.4% to RMB 682.4 million. Meanwhile, excluding the one-off impact of asset disposals last quarter, our adjusted cash gross profit and adjusted EBITDA increased by 11.5% and 18.1%, respectively, quarter over quarter. Let's look more closely at our top line. As you can see on slide fourteen, in the first quarter, wholesale revenues, our key revenue growth driver, increased significantly by 86.5% to RMB 673.2 million, mainly attributable to sales at the EGS Campus 02 and HB Campus 01B. Also, excluding the one-off impact of asset disposals last quarter, wholesale revenues increased by 14.1% quarter over quarter. Retail revenues continued to account for the largest part of our total net revenues and increased by 4.8% to RMB 968.3 million. Our non-IDC business remained stable. During the first quarter, we maintained solid margins thanks to our continuous efforts to enhance overall efficiency. As shown on slide fifteen, our adjusted cash gross margins improved to 43.1% from 40.3% in the same period last year. Our adjusted EBITDA margin rose to 30.4% compared with 28.4% in the same period last year. Moving on to liquidity on slide sixteen, we maintained robust and healthy liquidity, bolstered by net operating cash inflow of RMB 195.7 million during the first quarter. Our cash positions remained solid, with total cash and cash equivalents, restricted cash, and short-term investments reaching RMB 5.79 billion as of March 31, 2025. Next, let's take a look at our debt structure on slide seventeen. We maintained our prudent approach to debt management, with our net debt to the trailing twelve months adjusted EBITDA ratio at five and total debt to the trailing twelve months adjusted EBITDA ratio at 6.5, both remaining at a healthy level. Our trailing twelve months adjusted EBITDA to interest coverage ratio improved to 7.5 as of March 31, 2025. We prioritize long-term debt maturity planning in our debt and strategic management to ensure the security of debt repayment. Additionally, the company's short and medium-term debt maturing in 2025 to 2027 comprises 45.6% of our total debt. Turning now to CapEx spending. As you can see on slide eighteen, for the first quarter, our CapEx was RMB 1.82 billion, with the majority allocated to the expansion of our wholesale IDC business. As disclosed last quarter, we expect our CapEx for the full year 2025 to be in the range of RMB 10 billion and RMB 12 billion. The increase is mainly to support our planned delivery of 400 to 450 megawatts in 2025, or approximately three times 2024's total deliveries and surpassing our total deliveries in the past three years combined. Now moving to our full-year guidance for 2025 on slide nineteen. We are reiterating our previous guidance for the full year of 2025, with anticipated total net revenues to be between RMB 9.1 billion to RMB 9.3 billion, representing year-over-year growth of 10% to 13%. Adjusted EBITDA is expected to be in the range of RMB 2.7 billion to RMB 2.76 billion, representing year-over-year growth of 15% to 18%. Based on our new orders and the delivery plan, our capital expenditure for 2025 is still expected to be in the range of RMB 10 billion to RMB 12 billion, representing year-over-year growth of 101% to 141%. Before I conclude, I'd like to briefly update you on our ESG initiatives. In April, we issued our fifth annual ESG report, detailing the company's 2024 endeavors and progress in sustainability, including our verified carbon inventory results. During 2024, we upgraded our shield sustainability system to broaden stakeholder coverage and amplified our impact. We achieved encouraging progress across green power engagement, efficient energy consumption, and employee diversity and equality. Notably, our total energy usage from renewable sources reached about 360,880 megawatt-hours during the year, marking a fivefold increase year over year and accounting for 18% of total resources utilized by VNET. Also, our average annual power usage efficiency reached 1.27, and the percentage of female employees in our management positions increased to 33%. These efforts continue to garner recognition from top ESG rating authorities. This year, we ranked first among Chinese enterprises in the IT service industry in the China edition of the S&P Global Sustainability Yearbook for the third consecutive year and won the 2025 Top 1% and Industry Mover awards. Moving forward, we will remain committed to integrating ESG best practices across our business, facilitating the development of China's green digital economy. In summary, we got off to a strong start for 2025, highlighted by robust business growth and enhanced growth and ability. We will remain dedicated to our sustainable high-quality growth strategy and continue to invest in future development, capturing market opportunities, and creating sustainable long-term value for our stakeholders. This concludes our prepared remarks for today. We are now ready to take questions.

Thank you. We will now begin the question and answer session. Please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Tom Tang from Morgan Stanley. Please go ahead.

Okay. Thanks for the opportunity to ask questions and congrats on a very robust result for the first quarter. So I have one question on the demand side. We know that the H20 chip has been banned by the United States. I wanted to have an update on the customer demand and all the procurement processes after the chip has been banned. Just wondering if there's any changes and if we have any outlooks in the future. Thank you.

Thank you for your question. Yes, as we are aware that the H20 chip embargo was in place starting from this year. And because of that, it has caused a short-term impact on our client's demand, particularly for those hyperscalers. However, there was a quick adjustment. Now everything is back on track. So our current order on hand is sufficient to fill all the capacities to be delivered this year, as well as the first half of next year. Like I said, the hyperscalers quickly adjusted their demand after the short-lived impact because of the chip embargo. Now everything is back on track. And we expect that there is going to be sustained demand from these hyperscalers. They are also asking us to scale up the capacity to be delivered to them. We expect that there is going to be a lot of demand for GPUs used for large language model training as well as scaled-up data centers. Therefore, there's going to be continued and sustained demand from these hyperscalers. Thank you.

Your next question, please. Thank you. As a reminder, for the benefit of all participants on today's call, please ask your question to management in English and then repeat in Chinese. Next question comes from Edison Lee from Jefferies. Please go ahead.

Hi, thank you for taking my questions. I have two quick questions. Number one is on your retail demand. I see that you disclosed four megawatts of new retail contracts. I want to know if these are AI-driven applications, and whether you are charging based on power, router, and cabinets. And number two question is that your MRR has gone up materially in the first quarter of this year; maybe you can share some colors on the drivers behind that increase in MRR.

Thank you for your question. As you rightly mentioned, we did win a four-megawatt order for our retail IDC business in the first quarter. And as you correctly mentioned, most of the demand is from AI-driven applications, covering fintech, local services, Internet companies, as well as intelligent driving. So these are all AI-driven demands for these retail IDC services. Very little of that demand is for cloud-based gaming. I would like to add to what Mr. Ma has mentioned about the drivers behind the MRR. Most of the recent orders that we win for the retail IDC business are indeed from AI-driven applications that require high-voltage cabinets. Therefore, the company has been continuously repurposing some of the cabinets to accommodate such needs. For that, we do charge a higher price, so the bill is higher. So that explains the growing MRR. Thank you.

Next question, please. Your next question comes from Daley Li from Bank of America Securities. Please go ahead.

Hi. Thanks, management, for taking my question. Firstly, congrats on the strong Q1 results. I have two questions here. Number one is regarding our gross profit margin in Q1. We see strong quarter-on-quarter improvement, and could management give us some color on what's driving the gross profit margin improvement? And what should be our future target or normalized gross profit margin? The second question is about our REITs progress. If you look at our peer company, they also submitted the application. How do we see our REITs plan for private REITs or public REITs set up this year?

This is Ju Ma. I will take your questions. First, on the drivers of the improved gross profit margin, reason number one, the share or proportion of our wholesale IDC service is gradually improving. This is a business that has a higher gross profit margin. Therefore, overall, it is contributing to a higher gross profit margin on a corporate level. Reason number two, we are repurposing some of the cabinets to accommodate the demand for retail IDC services. This brings a higher MRR, so we are automatically phasing out some of those low-margin services. These two reasons combined have pushed up the overall gross profit margin, and we expect that to continue in the future. As you rightly mentioned, this year marks a critical year for the Chinese REITs sector. Most of the two peers in the IDC business have also seen fairly smooth progress in terms of their public REITs. As we see it, the valuation of these REITs is reasonable. Our public REITs project is also progressing well. The current situation stands with the current valuation of these private REITs is reasonable, and it is progressing as we have expected. Our private REITs project has been formally accepted and approved by the Shanghai Stock Exchange. Hopefully, we will hear some good results in the second half of the year. With our successful pre-REITs project, we are actively advancing all types of secured asset securitization projects. We will maintain our annual target of recovering RMB 2 billion unchanged, and we are confident in achieving that goal for this year. Thank you.

Next question, please. Thank you. Your next question comes from Louis Tung from Citi.

Okay. Thank you. Thank you very much. Congratulations on the strong results. So I have two quick questions. First of all, I am wondering if we have any plans for the H-share IPO in Hong Kong. If you do, could you share more details? That's my first question. My second question is about the electricity tariff because we spoke that there's some downswing for some electricity tariffs. I am wondering if you see any positive impact on the EBITDA margin or if there's no impact.

Thank you for your question. Yes, we are looking at the potential Hong Kong listing. We know that the Hong Kong Stock Exchange extends its hands wide open to welcome those U.S.-listed companies to do dual listing in Hong Kong. We have held in-depth conversations with the Hong Kong Stock Exchange, and we have also had formal engagement in written form. It's progressing. However, at this moment, I cannot give you a specific timeline on that. With regard to your question on the electricity bills, at the moment, we do not see a declining trend for the utility bills across our IDCs. It's fairly stable, so no change whatsoever on that front. Thank you.

Next question, please. Thank you. Your next question comes from Sara Wang from UBS. Please go ahead.

Thank you for the opportunity to ask a question and congratulations on a solid result. I only have one question on the wholesale business. I noticed that our delivery plan is actually rolling forward by a quarter to cover the first quarter of next year. Does that mean we also have visibility of utilization ramp-up into next year? In other words, given our solid delivery plan, how shall we think about utilization rate for the next three to four quarters?

Thank you. A tricky question. As you rightly mentioned and have observed from our financials, our clients do have a lot of demand for the capacity. To accommodate their capacity needs, we have actively responded and delivered the capacity needed, and they have been moving in fairly quickly. We have just hit a record high in terms of the capacity that's utilized, which we just added for the past quarter. According to the communications with these clients, as well as assessing their willingness and how firm they are about moving in scheduling, we are confident that for the upcoming three quarters plus another quarter next year, we are going to see a very pleasant move-in rhythm from these clients. Thank you.

Ladies and gentlemen, that concludes our conference for today. Thank you for participating. You may now disconnect your line.