VNET Group Reports Strong Q2 2025 Results Driven by AI-Focused Data Center Growth

VNET Group VNET Q2 2025 Earnings Call Transcript | The Motley Fool

Wholesale IDC capacity in service-- Grew by 17.5% quarter over quarter in Q2 2025, reaching 674 megawatts at June 30, 2025, with customer-utilized capacity growing 17% to 511 megawatts, and utilization rate at 75.9%. Total net revenues-- Increased 22.1% year over year to RMB 2,430,000,000 for Q2 2025, driven by wholesale segment growth. Wholesale revenues-- Reached RMB 854,100,000, up 112.5% year over year, mainly from sales at NOR Campus 01 and EJS Campus 03. Adjusted EBITDA-- Rose 27.7% year over year to RMB 732,500,000 in the second quarter of 2025, with an adjusted EBITDA margin of 30.1%, a 1.3 percentage point increase year over year. Adjusted cash gross profit-- Increased 34.9% year over year to RMB 1,060,000,000 in the second quarter of 2025; adjusted cash gross margin improved to 43.6% in Q2 2025 from 39.5% in Q2 2024. Retail revenues-- Accounted for the largest portion of total net revenues at RMB 959,000,000; retail capacity in service reached 52,131, with utilization rising to 63.9%; MRR per retail cabinet climbed to RMB 8,915. Non-IDC revenues-- Recorded at RMB 621,000,000, reflecting expansion into consulting, and intelligent driving verticals. New orders secured-- Won approximately 4 megawatts in retail (IT Services, Internet, AIoT, Financial Services), and a 20 megawatt wholesale order from a major cloud services provider for the Hebei project. Capacity under construction-- Reported at 326 megawatts as of June 2025, with a precommitment rate of 55.2% at June 30, 2025, alongside 374 megawatts reserved for short-term, and 418 megawatts for long-term future development. Delivery plan-- Targeting delivery of 326 megawatts over the next twelve months -- 227 megawatts in the second half of 2025, and 99 megawatts in 2026. Liquidity position-- Ended the quarter with RMB 4,660,000,000 in cash and equivalents, restricted cash, and short-term investments; net operating cash inflow was RMB 366,600,000. Debt metrics-- Net debt to trailing twelve months adjusted EBITDA was 5.3; 44.1% of total debt matures from 2025 to 2027. CapEx-- Incurred RMB 3,890,000,000 in capital expenditures year to date in 2025; full-year 2025 CapEx expected at RMB 10,000,000,000-RMB 12,000,000,000. Buyback authorization-- Board approved a share repurchase program up to US$50,000,000 over twelve months. Upgraded 2025 guidance-- Fiscal 2025 total net revenue (GAAP) is guided to RMB 9,150,000,000-RMB 9,350,000,000 (up 11%-13%), adjusted EBITDA (non-GAAP) to RMB 2,760,000,000-RMB 2,820,000,000 (up 14%-16%) for the full year; adjusted EBITDA growth would be 18%-20% excluding RMB 87,700,000 EJS 02 disposal gain in 2024. Fiscal 2025 period ends Dec. 31, 2025. AIDC hyperscale 2.0 strategy-- Announced aim to manage 10 gigawatts of data center assets by 2036, leveraging modular and standardized build technologies for faster, more flexible deployments. ESG recognition-- Received "A grade" from the Carbon Disclosure Project for supplier engagement, with acknowledgment as a supplier engagement leader in low-carbon technology, and energy efficiency initiatives. VNET Group(VNET -3.57%) reported accelerated growth in wholesale data center capacity and revenues in Q2 2025, fueled by robust customer demand and rapid move-ins, particularly within AI-focused sectors. Management highlighted new strategic wins across both retail and wholesale segments, supported by technology-driven efficiencies that reduce build times and enhance operational flexibility. The company raised its fiscal 2025 guidance for both revenue and adjusted EBITDA (non-GAAP), citing strong execution and elevated customer commitments. New modular construction techniques were showcased as a driver for future scalability, targeting a tenfold capacity expansion by 2036. Management emphasized prudent balance sheet measures, including a new share buyback and active debt maturity management, while maintaining high liquidity. Recent ESG accolades further advance the company's narrative around sustainable growth and industry leadership. Ju Ma said, "the demand for AI remains unchanged," and indicated customer orders continue to be predominantly AI-driven. Management noted a "one-off income" in wholesale MRR attributed to increased electricity bill revenues during Q2 2025. Ju Ma confirmed a "recovery of RMB 2,000,000,000" through ongoing REIT-related projects in 2025. Management reported that "the orders at hand for our client will not be affected" by AI chip supply constraints, but continues to monitor developments with suppliers such as NVIDIA. There was acknowledgment of a slight sequential revenue decline in retail IDC during Q2 2025, which management characterized as "within the reasonable range," and projected a stable or increasing trend going forward. IDC: Internet Data Center; a facility to house servers and IT infrastructure for cloud, managed hosting, and network connectivity services. AIDC: Artificial Intelligence Data Center; a data center specially designed and equipped for AI workloads, such as training and inference operations. MRR: Monthly Recurring Revenue; recurring monthly income earned per unit (e.g., per data center cabinet). MSR: Monthly Service Revenue; monthly revenue generated per major service contract, particularly in wholesale data center operations. REIT: Real Estate Investment Trust; a vehicle for financing and managing income-producing real estate, in this context, referring to securitization of data center assets via public or private market structures. Xinyuan Liu: Thank you, Operator. Hello, everyone, and welcome to our Second 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 US 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 laws. Please also note that VNET's earnings press release and this conference call include the disclosure of unaudited GAAP and non-GAAP financial matters. VNET's earnings press release contains reconciliation of the unaudited non-GAAP matters to the unaudited GAAP matters. A summary presentation 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 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. Ju Ma: Good morning and good evening, everyone. Thank you for joining our call today. I'll start with an overview of our major accomplishments during 2025. We delivered strong quarterly results thanks to continued effective strategic execution. On the operational side, our wholesale IDC business maintained its significant growth momentum, supported by our customers' fast move-in pace. As of 06/30/2025, our wholesale capacity in service grew by 17.5% quarter over quarter to 674 megawatts, an increase of around 101 megawatts. Wholesale capacity utilized by customers rose by 17% quarter over quarter to 511 megawatts, an increase of around 74 megawatts, while the utilization rate was stable at 75.9%, reflecting a fast move-in pace in our wholesale data centers. Our retail IDC business continued to progress smoothly, supported by growing AI-driven demand from customers. Both our high-quality wholesale and retail IDC services continue to attract customers from various industries in the second quarter. I'll dig into those details on the next slide. On the financial side, both our revenues and adjusted EBITDA maintained solid growth. Specifically, our total net revenues increased by 22.1% year over year to RMB 2,430,000,000 for the second quarter. Notably, wholesale revenues reached RMB 854,000,000 for the quarter, representing impressive year-over-year growth of 112.5%, fueled by the rapid growth of our wholesale IDC business. Our adjusted EBITDA for the second quarter also increased by 27.7% year over year to RMB 732,000,000, with an adjusted EBITDA margin of 30.1%, up 1.3 percentage points year over year. Moving on to our new order wins on slide five. In the second quarter, driven by growing demand from customers for intelligent deployment, we secured a combined capacity of around four megawatts in retail orders from customers in the IT Services, Internet, AIoT, and Financial Services Sectors. These orders span multiple retail data centers in the Greater Beijing area, the Yangtze River Delta, the Greater Bay Area, and other regions. Furthermore, we recently won a 20 megawatt wholesale order from a leading cloud services provider for the project we operate in Hebei province with our joint venture partner. As AI permeates every aspect of the world, new growth opportunities for data centers, the bedrock of AI infrastructure, continue to emerge. AI-driven demand remains especially robust in China, including training and inference demand from customers across multiple industries conducting intelligent deployments. To capture these opportunities and strengthen our competitiveness, we unveiled our hyperscale 2.0 framework for the future of our AIDC development at our Investor Day in Wulan Chabu in late June. We also outlined our blueprint for growing the capacity of our data center assets under management to 10 gigawatts by 2036. Driven by the proliferation of AI, the data center industry's development has reached an inflection point where traditional IDCs are shifting to AIDCs to meet dynamic market demand. In parallel, data centers' business model is evolving from simply providing project-based capacity delivery to serving as a platform offering comprehensive AIDC solutions. As a pioneer in AIDC development with strong fundamentals and deep industry know-how, VNET is poised to shape this trend through our hyperscale 2.0 framework. Our innovative technologies enable us to construct high-quality, flexible AIDCs faster, ensuring rapid deliveries to meet customer needs. For example, our building standardization technology utilizes standardized modules as data centers' core building units, allowing us to rapidly construct data centers tailored to diverse customer needs. This method cuts construction cycles by one-third compared to traditional construction methods. Additionally, our modular data center technology integrates various functions, including power supply systems, cooling systems, etc., into separate functional modules. These modules are manufactured and pretested in factories and shipped to data center sites for installation, which significantly enhances our installation efficiency. They can also be swapped out, allowing us to selectively upgrade only specific modules instead of entire systems, reducing improvement costs and extending data centers' life cycles. By leveraging these technologies, we can build quickly and combine modules with different functions flexibly to meet customer-specific requirements, ensuring fast capacity delivery to our customers. We believe these innovations position us as a front-runner in the IDC industry going forward. Execution of our hyperscale 2.0 framework is already underway, starting in Inner Mongolia, Hebei Province, and Beijing, where we plan to establish data center hubs encompassing megawatt-scale cabinets, 100 megawatt-scale buildings, and gigawatt-scale campuses. Ultimately, as I mentioned earlier, we aim to manage a 10 gigawatt integrated data center asset cluster by 2036 that seamlessly combines computing power and energy management across multiple campuses, empowering us to shape the future development of AIDC solutions. Now let's delve into our business updates, starting with our wholesale business on slide eight. Our wholesale business continued to grow rapidly, with capacity in service increasing by around 101 megawatts quarter over quarter to 674 megawatts, and utilization rate remaining stable at 75.9%, mainly attributable to our strong delivery capabilities at our NOR Campus 01 and faster than expected move-ins at our NOR Campus 01 and EJS Campus 03. Our mature capacity utilization rate also reached 94.6%, a relatively high level. 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 maintained its growth trajectory in the second quarter. Our capacity under construction was around 326 megawatts, with a precommitment rate for capacity under construction of 55.2% as of June. Capacity held for short-term future development was around 374 megawatts, and capacity held for long-term future development was around 418 megawatts, as we remain confident in the long-term growth potential of AI-driven demand. Moving to our retail IDC business on Slide 10. Our retail business continued to progress smoothly in the second quarter. Retail capacity in service was 52,131 with the utilization rate increasing slightly to 63.9% as of June. MRR per retail cabinet increased to RMB 8,915 this quarter. Turning to our delivery plan on slide 11. With our robust and efficient delivery capabilities, we successfully delivered a total of around 188 megawatts in 2025. 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 around 326 megawatts of capacity over the next twelve months, or around 227 megawatts during the second half of 2025 and around 99 megawatts during 2026. This ambitious delivery plan reflects strong demand from our customers and our delivery prowess. Now turning to our non-IDC business. A key component of our business further expanded its customer base by winning new customers in the consulting and intelligent driving industries for its premium dedicated Internet services, VPN services, IDC services, and cloud services. In conclusion, our robust second quarter results further validate our core strengths and effective strategic execution. Looking ahead, we will continue to sharpen our competitive advantages with faster deliveries and consistently reliable IDC services as we embark on our ambitious hyperscale 2.0 framework to build greener, more intelligent data centers for the AI era. And as always, we will remain committed to driving innovation and fostering industry development as we grow, delivering value to all of our stakeholders. Now I will turn the call over to our CFO, Qiyu Wang, for further discussion of our operating and financial performance. Thank you, everyone. Qiyu Wang: 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 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 13. In the second quarter, we continued to pursue high-quality, high-margin business. Our total net revenues increased by 22.1% to RMB 2,430,000,000, mainly driven by the rapid growth of our wholesale business. Our adjusted cash gross profit rose by 34.9% to RMB 1,060,000,000, while our adjusted EBITDA also grew year over year 27.7% to RMB 732,500,000. Let's look more closely at our top line. As you can see on Slide 14, in the second quarter, wholesale revenues, our key revenue growth driver, increased significantly by 112.5% to RMB 854,100,000, mainly attributable to sales at the NOR Campus 01 and EJS Campus 03. Retail revenues continue to account for the largest part of our total net revenues, reaching RMB 959,000,000 for the second quarter. Our non-IDC business revenues were RMB 621,000,000 for the second quarter. During the second quarter, we maintained solid margins thanks to our continuous efforts to enhance overall efficiency. As shown on slide 15, our adjusted cash gross margins improved to 43.6% from 39.5% in the same period last year. Our adjusted EBITDA margin rose to 30.1% compared with 28.8% in the same period last year. Moving on to liquidity. On slide 16, we maintained robust and healthy liquidity, bolstered by a net operating cash inflow of RMB 366,600,000 during the second quarter, bringing the net operating cash flow for the first half of the year to RMB 562,300,000. Our cash positions remain solid with total cash and cash equivalents, restricted cash, and short-term investments reaching RMB 4,660,000,000 as of 06/30/2025. Next, let's take a look at our debt structure on slide 17. We maintained our prudent approach to debt management. As of 06/30/2025, our net debt to the trailing twelve months adjusted EBITDA ratio was 5.3, and total debt to the trailing twelve months adjusted EBITDA ratio was 6.4, both remaining at healthy levels. Also, our trailing twelve months adjusted EBITDA to interest coverage ratio was 6.9. 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 44.1% of our total debt. Turning now to CapEx spending. As you can see on slide 18, for 2025, our CapEx was RMB 3,890,000,000, with the majority allocated to the expansion of our wholesale IDC business. We still expect our CapEx for the full year 2025 to be in the range of RMB 10,000,000,000 and RMB 12,000,000,000. 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. Furthermore, in late June, our board authorized a buyback program under which we may repurchase up to US dollar 50,000,000 from time to time on the open market over the ensuing twelve months. The buyback program underscores our deep commitment to delivering value to shareholders and our confidence in VNET's future development and growth prospects. Now moving to our full-year guidance for 2025. On slide 19, as we announced in a press release in late June, we have increased our full-year revenue and adjusted EBITDA guidance, fueled by faster than anticipated move-ins among wholesale IDC customers and ongoing operational efficiency gains. We now expect total net revenues to be in the range of RMB 9,150,000,000 to RMB 9,350,000,000, a year-over-year increase of 11% to 13%, and adjusted EBITDA to be in the range of RMB 2,760,000,000 to RMB 2,820,000,000, representing a year-over-year increase of 14% to 16%. If the RMB 87,700,000 on disposal gain of EJS 02 data center were excluded from the adjusted EBITDA calculation for 2024, the year-over-year growth would be 18% to 20%. Before I conclude, I'd like to briefly update you on our ESG efforts. We are pleased to receive an A grade, the highest rating, in the 2024 supplier engagement assessment by the Carbon Disclosure Project. We were also recognized as a supplier engagement leader for our collaboration with supply chain partners on low-carbon technology R&D, enhancing our IDC operational energy efficiency, and empowering our partners to save energy and reduce emissions. Looking ahead, we will remain steadfast in our pursuit of ESG excellence, embracing and promoting a green future. In summary, we maintained our business' vibrant momentum with strong financial results during the second quarter. Supported by our effective dual-core strategy and new hyperscale 2.0 framework, we are well-positioned to lead the AIDC transformation, capturing surging AI-driven opportunities, and delivering sustainable, long-term value for all stakeholders. This concludes our prepared remarks for today. We are now ready to take questions. Thank you. Operator: If you wish to ask a question, please press 1 on your telephone and wait for your name to be announced. For the benefit of all participants on today's call, please ask your question to management in English, and then repeat in Chinese. Your first question comes from Tom Tang with Morgan Stanley. Tom Tang: Thanks, management, for the opportunity to ask questions. And first of all, congratulations on a very strong quarterly result, especially on the wholesale business. So my question is mainly about the future demand and orders. So we noticed that NVIDIA has regained its permission to ship the new chipsets to China again last month. Just wondering based on all of our communication with our big customers, what is our current expectation of their future demand and their order tendering? Thank you. Ju Ma: Thank you for your question. Now the market is relatively active. According to the report of these third-party institutions, we find that in the regions where the digital economy is relatively active, for example, in the Greater Beijing area and in the Yangtze River Delta, the AI demand is relatively strong, and also the relation between supply and demand has improved a lot. Your question also mentioned the bidding and the demand for the big client. Since you also have noticed that this year, our delivery plan is over 400 megawatts, it is all relatively large. The new orders should be delivered in six months. We will pay more attention to the demand released around September. In addition to the 20 megawatt wholesale business, we are also paying a lot of attention to the potential demand and we are also communicating for this potential demand. I think most of them are highly relevant to the AI. Operator: Next question, please. Your next question comes from Edison Lee with Jefferies. Edison Lee: Hi. Yes. Thank you for taking my questions. I have two. Number one, can you update us on the build-out of wind power in Yuran's hub? And when they will actually come into effect and how that's going to impact the revenue and also the margin of the company? Number two, can you comment on your MSR on wholesale? Because it seems that your MSR or your MRR on the wholesale in the second quarter is actually up on a year-on-year basis. So maybe if you can explain a little bit of what is driving that unit price that would be great. Ju Ma: Thank you for your question. The Winner Power project is well underway. By the end of this year and also in the beginning of next year, it will deliver power. This is relatively a new trial for us, so we cannot expect the impact on our P&L. However, it will mainly deliver a positive impact on our IR. The detailed statistics and figures will be offered when it begins to deliver power. For the second question, it has two factors. The first one is that the wholesale price is relatively very stable. The improvement in the MSR is mainly due to the signal effect in terms of the increase in the revenue from the electricity bills. In this quarter, we have the one-off income. Operator: Next question, please. Your next question comes from Daley Li with BofA Securities. Daley Li: Hi, management. Thanks for taking my question. I have two questions here. The first one is regarding our gross margin. Our adjusted gross margin was quite healthy growth and improvement. For our GAAP level, gross margin seems to have dropped a little bit. What is the reason behind this? How do you think the future normalized gross profit margin? My second question is about the new financing channel, the REITs. Could you please update us on the progress of the private REITs and the series going forward? Ju Ma: Thank you for your question. For the changes in the GP margin, it's affected by the timing of turning the CID into PPE and also the depreciation. There can be some seasonal factors that lead to the fluctuation. If we exclude the cash duty margin, it's still on a healthy and steady increase. For the projects, we have been actively promoting the REIT projects. We have the public and also the private REITs. We have four to five. As mentioned, this year through the REIT project, we have to have our recovery of RMB 2,000,000,000. Operator: Next question. Next question, please. Your next question comes from Timothy Zhao with Goldman Sachs. Timothy Zhao: Great. Thank you for taking my question and congrats on the very strong results. Two questions here as well. First is regarding your full-year guidance. I'm pretty glad to see that you raised guidance actually two months ago. But after the very strong first half result, just wondering how management thinks about the second half outlook. If my calculation is correct, I think toward the high end of your guidance, the second half growth implied only around single-digit growth. Just wondering how should we think about the second half outlook. Secondly is regarding the retail IDC business. As I see, there's some revenue decline on this retail IDC revenue in the second quarter of this year versus a stronger first quarter. Just wondering what is the reason behind. Ju Ma: Thank you for your question. You have mentioned in spite of the upgrading in the guidance, the guidance for the second half of this year is still relatively conservative. Our consideration is that we needed to watch and see if the utilization speed and the pace of our customer or client will not be affected by the chips. If our wholesale utilization business can maintain its speed, we can upgrade the guidance for the second half of the year. Your second question is related to the RDC revenue for the retail business. Yes, there can be some slight decline, but it's still within the reasonable range. The revenue for the retail IDC will maintain relatively stable and even some increase. Operator: Next question, please. Your next question comes from Andy Yu with DBS. Andy Yu: Hi. Thank you for taking my question. Congratulations on solid results. I have a question regarding the second half outlook. Could management share some color on whether the rapid momentum of client looking can be sustained? Also, do we expect that the impact of AI chips supply constraints could affect new orders or customer moving in the second half of 2025? Ju Ma: Thank you for your question. The outlook for the second half of this year is relatively optimistic. If we take into account the delivery in the first half of this year, we will also closely follow the rules of the new orders unleashed by our client. We are generally optimistic about the second half of this year. As for the move-in pace of our client, according to practice, once the order is confirmed, we usually have a very fast move-in pace. As for the supply of the chips of AI, we will closely follow companies like NVIDIA's chips and also the domestic chips. The expectation will be very clear very soon. According to our experiences of serving our clients or our customers, once the order is confirmed, the move-in pace will be very fast. As for the wholesale business, we have also confirmed with the core client that the orders at hand for our client will not be affected. Operator: Next question, please. Your next question comes from Sara Wang with UBS. Sara Wang: Thank you for the opportunity to ask a question. And again, congratulations on the very solid results. I only have one question: management just mentioned that there could be potential new tenders from the customer. Do we expect similar customers and similar workload going forward, or could there be some change? Ju Ma: Thank you for your question. I think our client will unleash their demand gradually. From the demand side, in terms of the business, the demand for AI remains unchanged. Operator: Next question, please. Your next question comes from Minran Lee with CICC. Your line is open with CICC. Mingran Lee, your line is open for your question. We will just pause for a moment to see if we'll have Mingran back in the queue. That does conclude our call and conference for today. Thank you for participating. You may now disconnect.

VNET : 2Q25 Earnings Call Transcript

* Xinyuan Liu; VNET Group, Inc.; Head of Investor Relations * Ju Ma; VNET Group, Inc.; Rotating President * Qiyu Wang; VNET Group, Inc.; Chief Financial Officer Participants * Tom Tang; Morgan Stanley; Analyst * Edison Lee; Jefferies; Analyst * Daley Li; Bank of America Securities; Analyst * Timothy Zhao; Goldman Sachs; Analyst * Andy Yu; DBS Bank; Analyst * Sara Wang; UBS; Analyst Operator Hello, ladies and gentlemen. Thank you for standing by for the Second Quarter 2025 Earnings Conference Call for VNET Group, Inc. (Operator Instructions) 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. Xinyuan Liu VNET Group, Inc. - Head of Investor Relations Thank you, operator. Hello everyone and welcome to our second quarter 2025 earnings conference call. Our earnings release was distributed earlier today, and you can find a copy on our IR website, as well as on newswire services. Please note that 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 obligations to update any forward-looking statements, except as required under applicable laws. Please also note that VNET's earnings press release and this conference call include the disclosure of unaudited GAAP and non-GAAP financial measures. VNET's earnings press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures. A summary presentation, which we will refer to during this conference call, can be viewed and downloaded from our IR website at https://ir.vnet.com/. Next, I'd like to alert you that we will be utilizing text-to-speech technology powered by Neolink.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 https://ir.vnet.com/. Now, let's get started with today's presentation. Mr. Ma, please go ahead. Ju Ma VNET Group, Inc - Rotating President Good morning and good evening, everyone. Thank you for joining our call today. I'll start with an overview of our major accomplishments during the second quarter of 2025. We delivered strong quarterly results thanks to continued effective strategic execution. On the operational side, our wholesale IDC business maintained its significant growth momentum, supported by our customers' fast move-in pace. As of June 30, 2025, our wholesale capacity in service grew by 17.5% quarter over quarter to 674 megawatts, an increase of around 101 megawatts. Wholesale capacity utilized by customers rose by 17% quarter over quarter to 511 megawatts, an increase of around 74 megawatts, while the utilization rate was stable at 75.9%, reflecting a fast move-in pace in our wholesale data centers. Our retail IDC business continued to progress smoothly, supported by growing AI-driven demand from customers. Both our high-quality wholesale and retail IDC services continued to attract customers from various industries in the second quarter. I'll dig into those details on the next slide. On the financial side, both our revenues and adjusted EBITDA maintained solid growth. Specifically, our total net revenues increased by 22.1% year over year to RMB2.43 billion for the second quarter. Notably, wholesale revenues reached RMB854 million for the quarter, representing impressive year-over-year growth of 112.5%. Fueled by the rapid growth of our wholesale IDC business, our adjusted EBITDA for the second quarter also increased by 27.7% year over year to RMB732 million, with an adjusted EBITDA margin of 30.1%, up 1.3 percentage points year over year. Moving on to our new order wins on Slide 5. In the second quarter, driven by growing demand from customers for intelligent deployment, we secured a combined capacity of around 4 megawatts in retail orders from customers in the IT services, Internet, AIoT, and financial services sectors. These orders span multiple retail data centers in the Greater Beijing Area, the Yangtze River Delta, the Greater Bay Area, and other regions. Furthermore, we recently won a 20-megawatt wholesale order from a leading cloud services provider for the project we operate in Hebei Province with our joint venture partner. As AI permeates every aspect of the world, new growth opportunities for data centers, the bedrock of AI infrastructure, continue to emerge. AI-driven demand remains especially robust in China, including training and inference demand from customers across multiple industries conducting intelligent deployments. To capture these opportunities and strengthen our competitiveness, we unveiled our Hyperscale 2.0 framework for the future of our AIDC development at our Investor Day in Ulanqab in late June. We also outlined our blueprint for growing the capacity of our data center assets under management to 10 gigawatts by 2036. Driven by the proliferation of AI, the data center industry's development has reached an inflection point, where traditional IDCs are shifting to AIDCs to meet dynamic market demand. In parallel, data centers' business model is evolving from simply providing project-based capacity delivery to serving as a platform offering comprehensive AIDC solutions. As a pioneer in AIDC development with strong fundamentals and deep industry know-how, VNET is poised to shape this trend through our Hyperscale 2.0 framework. Our innovative technologies enable us to construct high-quality, flexible AIDCs faster, ensuring rapid deliveries to meet customer needs. For example, our Building Standardization technology utilizes standardized modules as data centers' core building units, allowing us to rapidly construct data centers tailored to diverse customer needs. This method cuts construction cycles by one-third compared to traditional construction methods. Additionally, our Modular Data Center technology integrates various functions, including power supply systems, cooling systems, etc., into separate functional modules. These modules are manufactured and pre-tested in factories and shipped to data center sites for installation, which significantly enhances our installation efficiency. They can also be swapped out, allowing us to selectively upgrade only specific modules instead of entire systems, reducing improvement costs and extending data centers' lifecycles. By leveraging these technologies, we can build quickly and combine modules with different functions flexibly to meet customers' specific requirements, ensuring fast capacity delivery to our customers. We believe these innovations position us as a frontrunner in the IDC industry going forward. Execution of our Hyperscale 2.0 framework is already underway, starting in Inner Mongolia, Hebei Province, and Beijing, where we plan to establish datacenter hubs encompassing megawatt-scale cabinets, 100-megawatt-scale buildings, and gigawatt-scale campuses. Ultimately, as I mentioned earlier, we aim to manage a 10-gigawatt integrated data center asset cluster by 2036 that seamlessly combines computing power and energy management across multiple campuses, empowering us to shape the future development of AIDC solutions. Now let's delve into our business updates, starting with our wholesale business on Slide 8. Our wholesale business continued to grow rapidly, with capacity in service increasing by around 101 megawatts quarter over quarter to 674 megawatts and utilization rate remaining stable at 75.9%, mainly attributable to our strong delivery capabilities at our N-OR Campus 01, and faster-than-expected move-ins at our N-OR Campus 01 and E-JS Campus 03. Our mature capacity utilization rate also reached 94.6%, a relatively high level. We have a clear growth path for our wholesale data center capacity. Let's move on to Slide 9. Our overall wholesale data center capacity maintained its growth trajectory in the second quarter. Our capacity under construction was around 326 megawatts, with a pre-commitment rate for capacity under construction of 55.2% as of the end of June. Capacity held for short-term future development was around 374 megawatts, and capacity held for long-term future development was around 418 megawatts, as we remain confident in the long-term growth potential of AI-driven demand. Moving to our retail IDC business on Slide 10. Our retail business continued to progress smoothly in the second quarter. Retail capacity in-service was 52,131 cabinets, with the utilization rate increasing slightly to 63.9% as of the end of June. MRR per retail cabinet increased to RMB8,915 this quarter. Turning to our delivery plan on Slide 11. With our robust and efficient delivery capabilities, we successfully delivered a total of around 188 megawatts in the first half of 2025. 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 around 326 megawatts of capacity over the next 12 months, or around 227 megawatts during the second half of 2025, and around 99 megawatts during the first half of 2026. This ambitious delivery plan reflects strong demand from our customers and our outstanding delivery prowess. Now turning to our Non-IDC business, a key component of our business. DYX further expanded its customer base by winning new customers in the consulting and intelligent driving industries for its premium dedicated internet services, VPN services, IDC services, and cloud services. In conclusion, our robust second quarter results further validate our core strengths and effective strategic execution. Looking ahead, we will continue to sharpen our competitive advantages with faster deliveries and consistently reliable IDC services as we embark on our ambitious Hyperscale 2.0 framework to build greener, more intelligent data centers for the AI era. And as always, we will remain committed to driving innovation and fostering industry development as we grow, delivering value to all of our stakeholders. Now, I will turn the call over to our CFO, Qiyu, for further discussion of our operating and financial performance. Thank you, everyone. Qiyu Wang VNET Group, Inc. - Chief Financial Officer 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 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 13. In the second quarter, we continued to pursue high-quality, high-margin business. Our total net revenues increased by 22.1% to RMB2.43 billion, mainly driven by the rapid growth of our wholesale business. Our adjusted cash gross profit rose by 34.9% to RMB1.06 billion, while our adjusted EBITDA also grew year over year by 27.7% to RMB732.5 million. Let's look more closely at our topline. As you can see on Slide 14, in the second quarter, wholesale revenues, our key revenue growth driver, increased significantly by 112.5% to RMB854.1 million, mainly attributable to sales at the N-OR Campus 01 and E-JS Campus 03. Retail revenues continued to account for the largest part of our total net revenues, reaching RMB959 million for the second quarter. Our non-IDC business revenues were RMB621 million for the second quarter. During the second quarter, we maintained solid margins thanks to our continuous efforts to enhance overall efficiency. As shown on Slide 15, our adjusted cash gross margins improved to 43.6% from 39.5% in the same period last year. Our Adjusted EBITDA margin rose to 30.1%, compared with 28.8% in the same period last year. Moving on to liquidity on Slide 16. We maintained robust and healthy liquidity, bolstered by a net operating cash inflow of RMB366.6 million during the second quarter, bringing the net operating cash flow for the first half of the year to RMB562.3 million. Our cash positions remained solid, with total cash and cash equivalents, restricted cash, and short-term investments reaching RMB4.66 billion as of June 30, 2025. Next, let's take a look at our debt structure on Slide 17. We maintained our prudent approach to debt management. As of June 30, 2025, our net debt to the trailing twelve months adjusted EBITDA ratio was 5.3 and total debt to the trailing twelve months adjusted EBITDA ratio was 6.4, both remaining at healthy levels. Also, our trailing twelve months adjusted EBITDA to interest coverage ratio was 6.9. 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 44.1% of our total debt. Turning now to CapEx spending. As you can see on Slide 18, for the first half of 2025, our capex was RMB3.89 billion, with the majority allocated to the expansion of our wholesale IDC business. We still expect our capex for the full year 2025 to be in the range of RMB10 billion and RMB12 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. Furthermore, in late June, our Board authorized a buyback program, under which we may repurchase up to US$50 million from time to time on the open market over the ensuing 12 months. The buyback program underscores our deep commitment to delivering value to shareholders and our confidence in VNET's future development and growth prospects. Now moving to our full-year guidance for 2025 on Slide 19. As we announced in a press release in late June, we have increased our full-year revenue and adjusted EBITDA guidance, fueled by faster-than-anticipated move-ins among wholesale IDC customers and ongoing operational efficiency gains. We now expect total net revenues to be in the range of RMB9.15 billion to RMB9.35 billion, a year-over-year increase of 11% to 13%, and adjusted EBITDA to be in the range of RMB2.76 billion to RMB2.82 billion, representing a year-over-year increase of 14% to 16%. If the RMB87.7 million on disposal gain of E-JS02 data center were excluded from the adjusted EBITDA calculation for 2024, the year-over-year growth would be 18% to 20%. Before I conclude, I'd like to briefly update you on our ESG efforts. We were pleased to receive an "A" grade, the highest rating, in the 2024 Supplier Engagement Assessment by the Carbon Disclosure Project. We were also recognized as a "Supplier Engagement Leader" for our collaboration with supply chain partners on low-carbon technology R&D, enhancing our IDC operational energy efficiency and empowering our partners to save energy and reduce emissions. Looking ahead, we will remain steadfast in our pursuit of ESG excellence, embracing and promoting a green future. In summary, we maintained our business's vibrant momentum with strong financial results during the second quarter. Supported by our effective dual-core strategy and new Hyperscale 2.0 framework, we're well-positioned to lead the AIDC transformation, capturing surging AI-driven opportunities and delivering sustainable, long-term value for all stakeholders. This concludes our prepared remarks for today. We are now ready to take questions. Operator (Operator Instructions) Your first question comes from Tom Tang with Morgan Stanley. Tom Tang Morgan Stanley - Analyst Thanks, management, for the opportunity to ask questions. First of all, congratulations on very strong quarterly results, especially on the wholesale business. So my question is mainly about the future demand and orders. So we noticed that NVIDIA has regained its permission to ship their new chipsets to China again last month. So just wondering, based on our communication with our big customers, what is our current expectation of their future demand and the pattern of their order tendering? Thank you. (Speaking in Foreign Language). Ju Ma VNET Group, Inc - Rotating President (Interpreted) Thank you for your questions. And now the market is relatively active. And according to the report of the third-party institutions, we find that in the regions where the digital economy is relatively active, for example, in the Greater Beijing Area and in the Yangtze River Delta, I think the AI demand is relatively strong, and also the relation between supply and demand has improved a lot. And your question also mentioned the bidding and the demand for the big client. Since you have also noticed that this year, our delivery plan is over 400 megawatts, it is relatively large. And also, the new orders should be delivered in six months. So we will pay more attention to the demand released in the second half of the year, especially around September. And we will try our best to secure as many of these orders as possible. So in addition to the 20-megawatt wholesale order, I think we are also paying a lot of attention to the potential demand. And we are also communicating about these potential demands. I think most of them are highly relevant to AI. Operator Your next question comes from Edison Lee with Jefferies. Edison Lee Jefferies - Analyst Thank you for taking my questions. I have two questions. Number one, can you update us on the build-out of wind power in Ulanqab? And when they will actually come into effect, and how that's going to impact the revenue and also the margin of the company? Number two, can you comment on your MSR on wholesale? Because it seems that your MSR or your MRR on the wholesale in the second quarter is actually up on a year-on-year basis. So maybe if you can explain a little bit what is driving that unit price, that will be great. (Speaking in Foreign Language). Qiyu Wang VNET Group, Inc. - Chief Financial Officer (Interpreted) I think now the wind power project in Ulanqab is well underway. I think by the end of this year or in the beginning of next year, it will going to deliver power. I think this is a relatively new trial for us, so currently we cannot expect specific impacts on our P&L. However, I think it will mainly deliver positive impacts on our IRR. So I think the details, the statistics and the figures will be offered when it begins to deliver power. And so for the second question, I think it has two factors. The first one is, I think the wholesale price is relatively very stable. And you also mentioned that the improvement in the MSR, I think it's mainly due to the seasonal factors because of the increase in the revenue from the electricity bills. And also in this quarter, we have a one-off income. Operator Your next question comes from Daley Li with Bank of America Securities. Daley Li Bank of America Securities - Analyst Thanks for taking my questions. I have two questions here. The first one is regarding our gross margin. Our adjusted gross margin was quite a healthy growth and improvement. And for our GAAP level gross margin, if we look at quarter-on-quarter, it seems dropped a little bit and what's the reason behind this? And how do you think the future normalized gross profit margin? My second question is about the new financing channel, the REITs. Could you please update us on the progress of the private REITs and the C-REITs going forward? (Speaking in Foreign Language). Qiyu Wang VNET Group, Inc. - Chief Financial Officer (Interpreted) Thank you for your questions. For the changes in the GP (Gross Profit) margin, I think it's affected by the timing of turning the CIP (Construction In Progress) into PPE (Property, Plant and Equipment), and also the depreciation. So there can be some seasonal factors that lead to the fluctuation. But if we only consider the cash GP margin, which excludes the seasonal factors, I think it's still on a healthy and steady increase. And also for the REITs project, we have been actively promoting the REITs projects. We have 4 to 5 projects, including the public and also the private REITs, as well as some other similar projects that are in progress. And also, as mentioned, this year, through the REITs project, we plan to gain net proceeds of RMB 2 billion. This goal remains unchanged. We hope to bring some good news to the market soon. Operator Your next question comes from Timothy Zhao with Goldman Sachs. Timothy Zhao Goldman Sachs - Analyst Great. Thank you, management, for taking my questions, and congrats on the very strong results. Two questions here as well. First is regarding your full-year guidance, pretty glad to see that you raised guidance actually two months ago. But after the very strong first-half results, just wondering how management thinks about the second-half outlook? So if my calculation is correct, I think towards the high end of your guidance, I think the second-half growth implies only around single-digit growth. Just wondering how do we think about the second-half outlook? Secondly is regarding the retail IDC business. As I see, there is some revenue decline in this retail IDC revenue in the second quarter of this year, versus a stronger first quarter. Just wondering what is the reason behind? (Speaking in Foreign Language). Qiyu Wang VNET Group, Inc. - Chief Financial Officer (Interpreted) Thank you for your question. As mentioned, in spite of the upgrading in the guidance, I think the guidance for the second half of this year is still relatively conservative. So our consideration is that we need to watch and see, and if the move-in pace of our customers or clients is not affected by the chip supply, and our wholesale business can maintain its move-in pace, I think we will consider a further raise in the guidance for the second half of the year. And your second question is relatively to the IDC revenue for the retail business. Yes, there was a very slight quarter-over-quarter decline, but I think it's still within a reasonable range. And I think the revenue for the retail IDC business maintains relatively stable and we expect there will be even some increase for this segment going forward. Operator Your next question comes from Andy Yu with DBS. Andy Yu DBS - Analyst Hi. Thank you for taking my question. Congratulations on the solid results. I have a question regarding the second-half outlook. Could management share some color on whether the rapid momentum of our client movement can be sustained? Also, do we expect that the impact of AI chip supply constraints could affect new orders or customer movements in the second half of 2025? Let me translate the question. (Speaking in Foreign Language). Ju Ma VNET Group, Inc - Rotating President (Interpreted) So, as for the outlook for the second half of this year, I think if we compare the second half with the first half of this year, I think I am relatively optimistic about the second half's demand development. Based on our deliveries in the first half of this year, we analyze and learn about the patterns of the new orders unleashed by our clients. We will closely follow the patterns and try to secure these orders. So we will be very optimistic generally about the second half of this year. Furthermore, according to our rich practices, once the order has been confirmed, the customers usually have a very fast move-in pace. And also as for the supply of the AI chips, we are watching closely on both NVIDIA's chips and also the domestic chips, and I think the outlook will soon become much clearer. As also according to our experiences of serving our clients or customers, I think once the order is confirmed, the move-in pace will be very fast. And also, as for the wholesale business, we have confirmed with the core clients that the move-in pace of most orders on hand will not be affected. Operator Your next question comes from Sara Wang with UBS. Sara Wang UBS - Analyst Thank you for the opportunity to ask a question. And again, congratulations on the very solid results. I only have one question is that management just mentioned that there could be potential new tenders from the customers. Do we expect similar customers and similar workload going forward? Or there could be some change? (Speaking in Foreign Language). Ju Ma VNET Group, Inc - Rotating President (Interpreted) So thank you for your question. I think our clients will unleash their demand gradually. And from the demand side, I think in terms of the business, the demand for AI remains unchanged. Operator That does conclude our call and conference for today. Thank you for participating. You may now disconnect.

JOYY : 2025Q2 Earnings Call Prepared Remarks

Ladies and gentlemen, thank you for standing by, and welcome to JOYY Inc.'s Second Quarter 2025 Earnings Call. 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. I'd now like to hand the conference over to your host today, Jane Xie, the company's Senior Manager of Investor Relations. Please go ahead, Jane. Thank you, operator. Hello everyone, welcome to JOYY's Second Quarter 2025 earnings conference call. Joining us today are Ms. Ting Li, Chairperson and CEO of JOYY; and Mr. Alex Liu, the Vice President of Finance. For today's call, management will first provide a review of the quarter, and then we will conduct a Q&A session. The financial results and webcast of this conference call are available at ir.joyy.com. A replay of this call will also be available on our website in a few hours. Before we continue, I would like to remind you that we may make forward-looking statements, which are inherently subject to risks and uncertainties that may cause actual results to differ from our current expectations. For detailed discussions of the risks and uncertainties, please refer to our latest annual report on Form 20F and other documents filed with the SEC. We will also discuss certain non-GAAP financial measures. They are included as additional clarifying items to aid investors in further understanding the Company's performance and the impact that these items and events had on the financial results. The non-GAAP financial measures provided above should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. You may find a reconciliation of differences between GAAP and non-GAAP financial measures in our earnings release. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in USD. I will now turn the call over to our Chairperson and CEO, Ms. Ting Li. Please go ahead, Ms. Li. Hello everyone, I'm Li Ting. Thank you for joining us today. This call marks my first anniversary as CEO, and I'm excited to share some of our latest progress with you. We stabilized our livestreaming business while driving robust growth in our non-livestreaming businesses, particularly our ad tech business. We continue our transformation into a global tech company powered by multiple growth engines. Today I will first briefly summarize our Q2 results, followed by a review of our progress over the past year to highlight the key pillars that will guide our growth. Finally, I will share detailed updates on each of our business units. Starting with our Q2 results. We delivered a solid performance as our livestreaming business reached a stable footing, while our advertising business achieved robust and accelerated growth. We recorded total revenue of $508 million, representing 2.7% QoQ growth. Our non-GAAP operating profit reached $38 million, with YoY growth of 27.9%. Non-GAAP EBITDA reached $48 million, growing 25.7% YoY. To break this down, livestreaming revenue grew 1.1% QoQ, while non-livestreaming revenue achieved 25.6% YoY growth, contributing 26.1% of total revenues. Meanwhile, our operating cash flow reached $58 million. As of June 30, we maintained $3.3 billion in net cash on our balance sheet, a sign of our strong financial resilience. Next, I want to highlight the four keywords that have driven our progress in the past year and will continue to guide our growth: high-quality operations, sustainable growth, AI-driven innovation, and organizational vitality. First, high-quality operations. Temporary app removals in late 2024 prompted us to take decisive actions to further enhance our community safety infrastructure and proactively strengthen our business ecosystem. By turning adversity into opportunity, we have emerged more resilient and better positioned for the future. We are committed to continuous improvement as a cornerstone of our competitive advantage, building a robust business that delivers long-term value while pursuing our vision of creating a great enterprise. Next, sustainable growth. Our strong operational foundation has allowed us to cultivate our dual growth engine and achieve sustainable growth. Building on a diverse product portfolio, localized operations and enhanced global market penetration, our livestreaming operations continue to generate reliable profits and cash flow. Leveraging our operational strength and technological expertise accumulated in the 2C sector, we accelerated our expansion into the 2B sector, and we have seen huge progress in our ad tech business in the past year. Thirdly, AI-driven innovation. We believe that AI holds tremendous potential to empower our business. Today, we are applying AI extensively in our recommendation systems and advertising algorithms. In livestreaming, our AI usage is all about boosting user engagement. Early this year, for instance, we launched multilingual real-time voice recognition and translation functions for our products. This enables users across languages to interact in real time, strengthening relationships between people from vastly different backgrounds and driving monetization. We've merged large language models with multimodal content understanding to create dynamic topic summaries and interactive comments that deepen the user-streamer connection. Our use of AIGC has transformed how we produce virtual items and emojis. We are able to create personalized, localized items in a much shorter time span. In advertising, we leverage AI to deeply analyze and dynamically model user intentions, interests, and behavioral patterns. This allows us to precisely profile mid- to long-tail traffic segments, greatly enhancing targeting accuracy, especially in cold-start scenarios. AI powers our entire advertising value chain, from user profiling and targeting to generative ad creation, real-time bidding, and dynamic budget allocation. Our automated, data-driven decision-making is constantly improving, driving higher conversion rates, better third-party developer monetization, and fueling BIGO Ads' expansion across more verticals. Lastly, organizational vitality. After 20 years of building milestone successes, we are channeling our entrepreneurial drive into enhancing organizational execution and efficiency. By modularizing our foundational R&D and operational processes, we are building agile, scalable capabilities that empower us to replicate past wins across emerging products and businesses. We are also prioritizing the creation of an empowering workplace for our global talents. Above all, our people are the cornerstone of our ability to achieve our strategic ambitions. Next, let me share with you the latest updates for our respective businesses. In the second quarter, our group's livestreaming revenue reached $375 million, with BIGO livestreaming revenue at $355 million, both stabilizing QoQ. During the quarter, our global average mobile MAUs grew sequentially to 263 million. We continued to refine our user acquisition with an ROI-driven approach. As a result, Bigo Live's user numbers grew 2.3% QoQ, while 30-day ROI from new devices improved 4.4% sequentially. Our organic user growth was also strong, driven by an improving user experience. Today, majority of our total global MAUs are from our IM product. High-frequency usage and strong user stickiness, fueled by enhanced features such as HD audio-video calling and rich media messaging, have been pivotal to IM's organic expansion. In the second quarter, the MAUs of our IM increased by 3 million, with average daily user time spent up 12.8% YoY. We are building our long-term strategy on a foundation of high-quality global traffic that drives sustained monetization across livestreaming, advertising, and potentially others. As we prioritize quality over volume, we will continue to closely monitor the effectiveness of our user acquisition through ROI and our long-term user stickiness. We enhanced content quality and refined the paying user experience during the second quarter, which drove higher user engagement and conversion efficiency. Specifically, we optimized Bigo Live's cross-regional content distribution algorithms and real-time AI translation. These changes significantly drove continued growth in cross-regional tipping, particularly in Europe and the Americas. We launched the Streamer Academy, which provides tiered training, enhanced livestreaming tools, and operational support to help streamers improve quality and reach. This fueled a 1.6% QoQ increase in active streamers on Bigo Live. We also revamped Bigo Live's premium paying user benefits system during the quarter, introducing refined tiered incentives and exclusive privileges. This drove a 13% QoQ increase in premium paying users. As a result, BIGO's overall livestreaming paying users grew 3.7% QoQ. Looking at our performance by region. In the second quarter, our livestreaming revenue in developed countries returned to positive QoQ growth. In particular, Bigo Live's revenue in Europe rose 6.5% QoQ, marking the first significant rebound in the region since we implemented a series of content strategy optimizations in the second half of last year. Our livestreaming revenue in Southeast Asia was also up QoQ, with Bigo Live revenue in these markets rising 3.9%. We anticipate continued growth in paying users in the second half from heightened localized campaigns, enhanced content and payment experiences, and the incremental contribution from our new audio product lineup in the Middle East. We are confident that our livestreaming business will regain momentum and continue to deliver sustainable cash flow. In the second quarter, BIGO Ads, achieved $87 million in ad revenue, representing approximately 29% YoY growth and 9% QoQ growth. In particular, revenues from our ad network recorded mid double-digit YoY growth. Last quarter, I outlined our strategic rationale for entering into the ad tech business and how we can utilize our inherent advantages to build a sustainable competitive edge. Today, I want to focus on where we stand in this trillion dollar market, and BIGO Ads' strategic positioning for long-term growth. We are building significant scale on the traffic side. Our reach spans roughly 263 million users through our own social apps, and we extend this reach substantially by seamlessly integrating developer traffic across major channels. Our first-party traffic monetization remains stable We delivered steady first-party ads revenue with strong profitability, and we expect to maintain growth through improved user engagement and ad fill rates. In the meantime, we have significantly scaled our third-party network traffic through successful integrations with AppLovin Max and Unity Levelplay mediation platforms. Growing developer SDK adoption has driven nearly 80% traffic growth versus the second half of 2024, while new integrations with multi-channel platforms further expanded our traffic reach, including CTV. Meanwhile, we saw robust growth across IAP, IAA, and web-based channels, with daily transaction volumes reaching record levels. Web-based lead-generation continued to post double-digit gains, powered by Pixel feature optimization, enriched customer data feedback, and improved bidding strategies. In IAA, we expanded partnerships with top gaming companies, with firms including Tripledot, Peoplefun and Fugo expanding their campaigns on BIGO Ads, which contributed to faster sequential growth. Geographically speaking, we are seeing strong performance in multiple regions. In the first half of 2025, North America delivered approximately 24.2% sequential growth. In Europe, where we kicked off our expansion during the second quarter, revenue grew by a high single-digit percentage QoQ. Finally, our proprietary user data asset, enhanced by customer feedback and multi-channel attribution, continuously improves our profiling and targeting precision. Deep synergies across our business segments, including accumulated vertical insights, data assets, established algorithm capabilities and relevant experiences in cold-start scenarios, have given us a head start in developing specialized models tailored to each vertical. Additionally, our global network infrastructure and tech capabilities, originally built for our livestreaming businesses, offer significant cost advantages. In summary, our advertising business has delivered consistent sequential growth and profitability for multiple consecutive quarters. This success stems from a number of key strengths, including expansion of our traffic, rising advertiser demand across channels and verticals, and quickly evolving algorithm, supported by our global tech and network infrastructure, fostering a self-reinforcing strategic flywheel. BIGO Ads has emerged as our second major growth engine, representing a strategic long-term priority for the group. We're pursuing expansion in North America, Japan and Europe, unlocking substantial new opportunities. Leveraging JOYY's ecosystem and deep insights into e-commerce and social media verticals, we are accelerating the training and optimization of AI-driven models to establish a distinct competitive advantage. On our product front, we are enriching our ad formats, strengthening integration with attribution platforms, enhancing advertiser data feedback, and advancing algorithms to maximize targeting precision and drive long-term ROI. Bigo Ads' structural advantages, combined with our proven execution capabilities and the vast market opportunity ahead, reinforce our commitment to building a meaningful and lasting presence in the ad tech industry. We are determined to execute on our strategic plan and retain full confidence in our team and ability to drive long-term success. Finally, let's turn to capital allocation. As discussed previously, we are actively exploring new growth engines and have already seen promising initial results. In the short term, we expect to prudently expand headcounts and marketing resources to support our ad tech business while maintaining healthy profit margins. In the medium to long term, once our non-livestreaming businesses reach a certain scale, investments in infrastructure upgrades, tech development, talent expansion and marketing efforts are all potentially high-return capital allocation options. From January 1 through June 30, we have distributed $135 million to our shareholders through dividends and share buybacks. We view our shares as substantially undervalued and remain committed to actively utilizing buybacks under the previously approved program. Looking forward, with our livestreaming business stabilizing and the rising revenue and profit from advertising and other emerging businesses, we expect the company's consolidated operating profit to continue to improve, and our shareholders to benefit from long-term profitable growth. In closing, our core livestreaming business has stabilized in Q2, positioning us for sustained growth. Our ad tech platform is rapidly scaling as our second growth engine, and we are building our long-term capabilities, particularly in our data and algorithm, and establishing our differentiated competitive advantages across markets and verticals. We look forward to sharing ongoing positive developments in the coming quarters. I will now turn the call over to Mr. Alex Liu, the Vice President of Finance, to provide our financial updates. Thanks, Ms. Li. Hello, everyone. I will now dive deeper into our financial performance for the second quarter. In the second quarter of 2025, we recorded total net revenues of 507.8 million, securing a QoQ growth of 2.7%. This was achieved as our livestreaming reached a stable footing and delivered our first sequential recovery in the past several quarters. Our non-livestreaming business, particularly advertising business, sustained strong growth momentum in the past consecutive quarters. We expect our livestreaming business to gradually regain momentum, and our non-livestreaming revenues to continue to deliver impressive growth in the following quarters. Our non-GAAP operating income was 38.3 million, up by 27.9% year over year, beating market expectations. Non-GAAP EBITDA for the quarter was 48.2 million, up by 25.7% year over year. We are disclosing our non-GAAP EBITDA metric since this quarter, as we believe it's a standardized measure of operational performance, which strips out non-operating factors like interest, taxes, and non-cash expenses, which could help our shareholders better assess the performance of our core business. Our total livestreaming revenues were 375.4 million for the second quarter, 355.3 million of which was from BIGO segment, both up quarter-over-quarter. Our ROI-driven user acquisition and continued optimization of our content quality and paying user experience have contributed to improved paying conversion, with BIGO's total paying users increasing by 3.7% QoQ during the quarter. By region, total livestreaming revenues from Developed Countries increased by 3.4% QoQ, while livestreaming revenues from Southeast Asia increased by 2.1% QoQ. Our non-livestreaming revenues were 132.4 million during the second quarter, up by 25.6% year over year. Non-livestreaming now contributes 26.1% of our total group revenues, up from only 18.7% contribution in the same period last year. In particular, BIGO's non-livestreaming revenues, primarily advertising revenues, increased by 29.0% year over year and 8.9% quarter over quarter to 87.4 million. As Ms. Li just shared, BIGO Ads has emerged as our second major growth engine with exceptional momentum. We are making substantial progress on all fronts, including expansion of our traffic, and rising advertiser demand across different channels and verticals. As we accumulate in scale, we are accelerating the training and optimization of our algorithms to further improve our campaign performance and ROI, which we believe in turn will drive accelerating growth in advertiser's demand and publisher traffic, fostering a self-reinforcing strategic flywheel. At present, BIGO Ads has made a positive contribution to our bottom-line. We expect it to be increasingly meaningful over time. All other segment's non-livestreaming revenues was 45.2 million, increasing by 19.0% year over year. Group's gross profit was 185.2 million in the quarter, with a gross margin of 36.5%, up from 35.2% last year. While BIGO's gross margin was relatively stable, All other segment's gross margin was substantially up by 9.5 percentage points year over year to 43.5%, due to growth in higher-margin SAAS revenues. Our group's operating expenses for the quarter were 179.8 million, compared with 198.7 million in the same period of 2024. Our GAAP G&A expenses was higher during the quarter, due to a non-operational impairment of certain equity investments, while we saw decline in other operating expenses. The decline in our other operating expenses was in line with our current operating strategies across both livestreaming and non-livestreaming businesses. For our livestreaming business, we are consistently optimizing our user acquisition expenses to enhance ROI. For our non-livestreaming business, while it has seen robust revenue growth, we maintained prudent and disciplined in spending, with our operating expenses rising at a slower rate than revenue. Our group's non-GAAP operating income for the quarter was 38.3 million in this quarter, up by 27.9% from 30.0 million year over year. Non-GAAP net income attributable to controlling interest of JOYY in the quarter was 77.0 million, up by 3.9% year over year. The Group's non-GAAP net income margin was 15.2% in the quarter. For the second quarter of 2025, we booked net cash inflows from operating activities of 57.6 million. Our balance sheet remains healthy with a strong net cash position of 3.3 billion as of June 30, 2025. Now moving to capital allocation. Shareholder return continued to be an important component of our capital allocation strategy. We have returned 49.4 million to our shareholders through dividends during the second quarter, and repurchased 36.5 million worth of our shares during the year as of June 30, 2025. We remain firmly committed to actively utilize our outstanding share repurchase program. Turning now to our business outlook. At group level, we expect our net revenues for the third quarter of 2025 to be between 525 million and 539 million. Our guidance accounts for certain seasonality fluctuations and reflects our preliminary views on the current market, operational conditions and business adjustment decisions, which are subject to changes. In conclusion, our efforts to cultivate dual growth engines continue to bear fruit, as evidenced by the impressive revenue growth of BIGO Ads and our livestreaming business reaching a stable footing and continuing to contribute strong operating profits. With our global operational capabilities, tech infrastructure, and vibrant ecosystem, we are well positioned to establish a distinct competitive edge and build a meaningful and lasting presence in the ad tech industry, while delivering sustainable, profitable growth and long-term value for our shareholders. That concludes our prepared remarks. Operator, we would now like to open up the call to questions.

FinVolution : Q22025 Earnings Call Transcript

Tiezheng Li, Chief Executive Officer Jiayuan Xu, Chief Financial Officer Yam Cheng, Head of Capital Markets Cindy Wang, China Renaissance Dongping Zhou, CICC Operator: Hello, ladies and gentlemen. Thank you for participating in the Second Quarter 2025 Earnings Conference Call for FinVolution Group. After management's prepared remarks, there will be a question-and-answer session. Today's conference call is being recorded. I will now turn the call over to your host, Yam Cheng, Head of Capital Markets for the Company. Yam, please go ahead. Yam Cheng: Thank you, Rocco. Hi, everyone, welcome to our second quarter 2025 earnings conference call. The Company's results were issued via newswire services earlier today and are posted online. You can download the earnings release and sign up for the Company's email alerts by visiting the IR section of our website at ir.finvgroup.com. Mr. Tiezheng Li, our Chief Executive Officer, and Mr. Jiayuan Xu, our Chief Financial Officer, will start the call with their prepared remarks and conclude with a Q&A session. During this call, we will be referring to several non-GAAP financial measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation, or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP measures and reconciliation of GAAP measures, please refer to our earnings press release. Before we continue, please note that today's discussion 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 involve inherent risks and uncertainties. As such, the Company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties are included in the Company's filings with the U.S. Securities and Exchange Commission. The Company does not assume any obligation to update any forward-looking statements except as required under applicable laws. Finally, we posted a presentation on our IR website providing details of our results for the quarter. I will now turn the call over to our CEO, Mr. Tiezheng Li. Tiezheng, please go ahead. Tiezheng Li: Thanks, Yam. Hello, everyone. Welcome to our earnings call. Following a solid first quarter of 2025, I'm pleased to share that FinVolution sustained its healthy momentum in the second quarter, supported by our robust growth in our international business and steady performance in China. Net revenue reached RMB3.6 billion, up 13% year-over-year, driven by a 10% increase in transaction volume in China and a 39% surge in international transaction volume. Net income also showed solid growth, reaching RMB751 million, representing an increase of 36% year-over-year and 2% quarter over quarter. Since our transition to institutional funding model in 2021, we have now delivered 18 consecutive quarters of year-over-year growth in both transaction volume and revenue, a strong testament to our resilient business fundamentals in today's fast-changing macro landscape. As discussed in last quarter's earnings call, regulations in China's consumer finance sector have been evolving. With the implementation of the new regulation of the Internet Loan Facilitation Business in October, we believe it may have implication to the loan mix and risk profile of the assets in the industry. And we are closely monitoring the latest developments and dynamics of the sector. We maintain active dialogue with our funding partners, which expanded from 114 to 119 in the second quarter, to maintain relatively stable funding supply and prepare in advance for the potential impacts on our transaction volumes and risk metrics. Our risk infrastructure, tested across multiple economic and regulatory cycles, positions us well to adapt swiftly and effectively to these changes. In the long run, we view that these measures will ultimately foster more sustainable growth across the sector and benefit the leading platforms like ours. Part of our resilient business hinges on the international operations, which offer valuable diversification benefit and growth. In the second quarter, international transaction volume increased 39% year-over-year to RMB3.2 billion, and loan balance rose 50% to RMB2.1 billion. Notably, our international operations contributed 22% of net revenue, up from 18% in the same period last year. Underpinning the growth is our expanding customer base. We onboarded 1.6 million new borrowers during the second quarter, a 96% year-over-year increase. This marked our fourth consecutive quarter surpassing 1 million new borrowers, thanks to our effective AI-powered marketing strategy and diverse user acquisition channels. In China, the transaction volume from new borrowers reached RMB7.1 billion, up 20% year-over-year. In our international markets, we attracted 1.1 million new borrowers, up 126% year-over-year. New borrower growth from our international markets also outpaced that in China for the fifth consecutive quarter. Fueled by diversified services we provide in the ecosystem through partnership with leading e-commerce and technology platforms, we expect this trend to continue. On the technology front, we continue to leverage AI in our risk management. We have built effective defenses against sophisticated AI fraud like deepfakes, achieving 98.8% detection accuracy. Our proprietary visual AI analyzes background patterns, document authenticity, and pixel-level anomalies, resulting in 95% detection of digital artifacts in forged images. We combine this with multi-layered verification including dynamic facial recognition, randomized voice checks, and real-time video authentication. Looking ahead, we are evolving from single-mode to multi-mode detection that simultaneously analyzes video and audio, keeping us ahead against evolving financial fraud. ESG remains core to our long-term strategy. We published our seventh annual ESG report in July, underscoring our unwavering commitment to sustainable inclusive finance. Throughout 2024, we made substantial progress by combining technology innovation, process improvements, and ecosystem partnerships, particularly in enhancing our anti-fraud capabilities and optimizing service quality. These efforts have meaningfully advanced consumer protection, with our intelligent fraud prevention system now detecting over 7,000 suspicious activities daily. In 2024, we've blocked more than 26,000 fraud attempts, protecting financial institutions from potential losses over RMB 300 million, while maintaining 98% user satisfaction rate. Also worth noting, FinVolution Group secured two prestigious honors at the FinanceAsia 2025 Awards in June, the Best Strategic Initiative award for the Philippines as well as the Most Innovative Use of Technology award for Mainland China. This recognition affirms the positive value our fintech solution has brought to financial institutions across multiple markets. Finally, an update on our capital market activity. We completed a US$150 million convertible bond offering in June, the first capital markets transaction since our IPO in 2017. The funding will support our strategic priorities: accelerating international expansion and then lowering capital cost. The transaction also helped us diversify our investor base and deepen engagement with a broader group of investors. We are encouraged by the positive reception from the convertible bond investors, as well as the improvement in our stock's liquidity following the transaction. In summary, our second quarter performance reflects outstanding execution of our Local Excellence, Global Outlook strategy. We are encouraged by the resilience of our China business and the strength of our international business. Bolstered by ongoing investments in technology, customer acquisition and international expansion, we are well-positioned to continue driving sustainable growth and delivering long-term value. Now, I'll hand the call over to our CFO, Jiayuan Xu, for a closer look at our financials. Jiayuan Xu: Thank you, Tiezheng. Hello, everyone. Let me go through our key results for the second quarter. I'll begin with our performance in China. Despite global trade tensions and macro uncertainty, China's economy demonstrated resilience that GDP expanded 5.2% year-over-year, exceeding market expectations. Also, consumer sentiment improved on the back of a 4.8% increase in overall spending in June. It's encouraging to see continued regulatory support to increase credit supply for the consumer finance to boost economy. Against this background, we delivered solid results in China. Our take rate remained stable at 3.4%, while the average loan tenor extended slightly to 8.3 months. Risk metrics stayed broadly stable, with day-1 delinquency rate rising 10 basis points quarter-over-quarter to 4.7%, while 30-day collection rate remaining steady at 89%. We maintained our prudent approach to provision, supported by a healthy provision coverage ratio of 543%. Turning to our international business, we drove continued growth despite the spillover impact from Ramadan in early Q2. Domestic macro indicators in our key Southeast Asian markets were largely stable, while the underlying consumer demand for credit remained strong. Total international transaction volume grew 39% year-over-year and 6% quarter-over-quarter, surpassing RMB3 billion for the second consecutive quarter, while outstanding loan balance rose to RMB2.1 billion, up 50% year-over-year and 13% sequentially. Unique borrowers soared by an impressive 122% year-over-year to reach 2.3 million, breaking the 2 million mark for the first time. As a result, revenue from international markets increased to RMB 797 million, up 42% year-over-year. In Indonesia, while macroeconomic conditions showed slight moderation amid the tariff tensions, our business demonstrated strong resilience. We maintained momentum by offering longer-tenor products to higher credit quality borrowers, which drove better asset quality and an improving take rate. We also continue to expand partnership with local platforms to acquire new borrowers. These initiatives delivered solid results. Loan volume grew 9% year-over-year, with outstanding loan balance increasing 25% to RMB 1.3 billion. One important and encouraging update on Indonesia, at the end of July, the OJK, Indonesia's financial services authority, issued a new circular that keeps the daily fee cap for consumer funding unchanged from its 2024 level. This is a welcome development because it effectively replaces the previous policy, which would have required a 0.1% annual reduction in the fee cap through 2026. This decision provides much-needed stability. It addresses concerns that further fee cuts could pressure revenue and profitability, and it ensures a healthier, more sustainable environment for our business going forward. We see this as a strong vote of confidence in the industry and a positive step for our long-term growth in Indonesia. Our business in the Philippines continued to outperform this quarter. Business activity in the Philippines remained high nationwide, with an average PMI of 50.7. Thanks to ongoing regulatory support for digital finance innovation, as well as our brand awareness through effective marketing strategy, our loan volume more than doubled year-over-year to RMB1.4 billion, accounting for 45% of our international business. Buy-now-pay-later products contributed 32% of volume, up from 13% in the same period of last year, driven by our collaboration with TikTok Shop and efforts to expand new platform partnerships. Moving forward, we are optimistic over the transaction volume growth in the Philippines as we deepen our market presence, broaden our funding partnerships, and diversify our business offerings to capture emerging opportunities. Overall, our strong operational performance this quarter produced impressive financial results across the board. Net revenue reached RMB3.6 billion, reflecting robust year-over-year growth of 13% and a sequential increase of 3%. Net income also saw significant momentum, rising 36% year-over-year to RMB751 million, underscoring our ability to drive profitable growth. Our financial position remains solid, with RMB7.9 billion in cash and short-term investments, providing ample liquidity to support our strategic priorities. We continue to maintain a prudent balance sheet, with a leverage ratio of 2.6x, defined as risk-bearing loans to shareholders' equity. Finally, we continued returning capital to shareholders and have repurchased US$63.8 million of shares in the first half of 2025, including repurchases made in conjunction with the convertible bond issuance in June. The CB proceeds to fund our international business will optimize capital cost and accelerate expansion. In short, we maintained our strong growth trajectory through disciplined execution of our "Local Excellence, Global Outlook" strategy. We remain confident in our ability to adapt quickly to the evolving regulatory environment in China, while driving growth in untapped international markets. We believe the new regulation may foster a healthy development of the industry and benefit leading players' market share in the long term. As such, we are reiterating our full year 2025 revenue guidance of RMB14.4 billion to 15.0 billion, a 10% to 15% year-over-year growth. With that, I will now open the call for questions. Operator, please continue. Operator: Thank you. (Operator Instructions). Cindy Wang with China Renaissance. Cindy Wang: (Speaking Foreign Language). Congrats for the good result in second quarter. So I have two questions here. First, regarding new regulation on loan facilitation in China, how do you see the impact to your business? Would you slow down new loan volume in second half to adjust loan structure and ensure asset quality? Second, the new loan volume in international market in second quarter maintained rapid growth. What is the current run rate in July and August? And is there any target customer profile change in Indonesia and Philippines in the second half? Jiayuan Xu: Okay. Thanks, Cindy. Yes, I will take your questions. Your first question is about the new regulation in China. The new regulations on Internet loan facilitation business will come into effect in October 1st. We think it will provide more order to the industry and in the long run, promote the consolidation. There might be some impact on the different types of assets right now, and for those high-priced assets, the funding supply has reduced. And the funding partners now become more cautious and selective on the cooperation with the platforms. They'd like to choose the platform which can bring the good economics, or have a manageable risk-reward. And for those high-quality assets where our core business is, liquidity and funding costs remain stable. So the tightening of the industry, liquidity has introduced some challenges, but the overall impact to us remains manageable for three reasons. First, we have the knowhows for acquiring and operating the high-quality assets; we have long been focusing on the sourcing and the pricing high-quality assets from the information feeds channels. Now the funding market shifts to the high-quality assets, we should benefit. And second, as proven in the previous credit cycle, we have been disciplined on risk management. Thanks to the efforts on the high-quality customer strategy and the continuously build the competitive capabilities, we saw the delinquency rate staying at a reasonable and manageable range. We will continue to dynamically balance the risk exposure and the transaction volume as we step into the second half of year. So we expect maybe the regulatory uncertainty will continue to weigh on the industry. And third, our international business continued to be a growth driver and more important resource, a source of our diversification to our business. In the second quarter, as transaction volume increased by around 40% year-over-year and the revenue contribution surpassed 22%, we also see a better profitability trajectory than expected in our international markets. This structural growing trend in international markets provides a cushion to the short-term volatility in China market. So in conclusion, we expect maybe a low-single-digit quarter-over-quarter decline in the transaction volume in the China market, but with a reasonable fluctuation in risk levels and largely stable take rate. So we are maintaining our full year revenue growth guidance of 10% to 15% subject to the industry not significantly different in the coming quarters. And your second question is about our overseas business. Well, as we mentioned, in the first half of 2025, our international markets continued its very strong momentum, the transaction volume was up nearly 40% year-over-year and 11% quarter-over-quarter. And I'm very happy to share that this strong trend here is steady right into the July and August. Based on our current trend, we are projecting both Indonesia and the Philippines to deliver the solid double-digit quarterly growth in Q3. As for Indonesia, the most important update is on regulation. In the late July, the OJK confirmed its new interest rate policy. It will effectively maintain the interest rate cap, which we have been operating since the end of last year. The directive issued in 2023 was to reduce the interest rate cap gradually from 0.4% to 0.1% in 2026. With the latest circular, the reduction is revoked. This removal of the uncertainty is a huge positive for the entire industry and allows us to plan for the long term with much greater clarity. And in terms of the business, we are continuing to deliver the diversified product offerings. As for our online cash loan, we proactively launched the marketing initiatives to go after better-quality customers in the first half-year. For example, we offered attractive terms and repayment flexibility to those high-quality customers to appeal to customer base we are able to reach. And for the offline front, we have acquired the multi-finance license last year. We are expanding into the offline installment scenarios like the smartphones, motor bikes and home appliance. We have partnered with the major Chinese electronic brands and the local brands to offer offline installment loan options at the point of sale. While this business is still relatively small at the moment, we are quite confident it could be a market of very substantial potential. And for the Philippines, it's our second-largest overseas market. It has been consistently exceeding our expectations as the macro-environment remains very favorable. For our Buy-Now-Pay-Later cooperation with the TikTok Shop, it continued to be a very huge success. It's already contributed 32% of Philippines' total transaction volume, and its product line has already become profitable. Building on this success, we have recently expanded partnerships with other local telecom operator to fund phone credits with Buy- Now-Pay-Later products. So with these partnerships, we aim to onboard a new customer base that we haven't served before. Looking forward, we continue to expand and diversify the consumption scenarios and the partners' ecosystems to build our financial product metrics that covers the wider user base, to speed up the overseas business growth. So look ahead to the second half of year, although the Philippines might experience some typhoon-related seasonal impact in Q3, we will stay prudent in our customer acquisition strategies. But given the powerful momentum from our ecosystem partners and our expanding product offerings, we are very confident in maintaining the growth trajectory for the full year. Okay. Thank you. Cindy Wang: Thank you, very clear. Operator: Alex Ye with UBS. Alex Ye: (Speaking Foreign Language). I'll translate for my question. First question is about asset quality. So can you give us more color on the drivers for the Q-on-Q movement into your day-1 delinquency ratio and day-30 collection ratio? And how has been the trend you have seen in July and August? So are you concerned about the potential spillover risk for your core customer base from the current regulatory uncertainty? Second question is about your overseas business. Can you walk us through how has been the development of your overseas business compared to a plan in the beginning of the year, in particular, given you have issued convertible notes in June, so how has that expected to be contribute to your overseas growth in the coming quarters? Should we expect the overseas growth to further accelerate from here? Jiayuan Xu: Okay. Thanks, Alex. Yes, let me take your questions. Your first question is about the domestic business again, so let's wrap back to the domestic business. Well, overall risk level was largely in check in Q2, although we observed a moderate up trend in the July and August, we started to see the early spillover of the risk from high-priced assets to high-quality assets, but it remained under control as we preemptively manage the loan portfolio. In Q2, our key risk metrics remained largely stable, as we mentioned, it also factored in the slightly long tenure of the portfolio in the quarter. The day-1 delinquency rate held steady at 4.7%. Our 30-day loan collection rate remained strong at 89%. The vintage delinquency rate was 2.5%. In July, we saw a bit of upward movement. Our day-1 delinquency rate ticked up slightly by 20 bps to 4.9%. We moved quickly to adjust our risk management strategies, and by August, the day-1 delinquency rate has stabilized at 4.9% level and our 30-day loan collection rate held firm at around 89%. But in view of the up trend of risk, we have proactively tightened our risk management in the following aspects. First, we reduced our exposure to the assets from those low-quality channels, which historical carries higher risk. And for those high-quality channels, maybe the information feeds channels, we further adopt a different credit strategy for our borrowers. For example, we reduced the credit limit to borrowers of the higher debt, offer better terms to borrowers of better credit score and removed the credit limit that are underutilized. And in terms of the loan collection, we employed the AI technology to identify and alert high-risk borrowers who are in the early stage of the past-due, and set up the collection efforts accordingly. So looking ahead, while we continue to be vigilant on risk for Q3 and Q4, we also have a risk buffer in place. Our provision coverage ratio has climbed to 543%, up significantly from 465% in Q1. So we will remain flexibility and adapt to the market dynamics. We are confident to stay constructive over the long-term development of the industry and the position of the leading platforms. So that's for your first question. And your next question is about the overseas business and the impact of the convertible bonds. Well, regarding our international performance, as we mentioned, the first half of the year has played out very much as we expected. The transaction volume hit RMB 6.2 billion, up 38% from last year. The outstanding balance grew to RMB 2.1 billion, a 50% increase and the revenue reached RMB 1.5 billion, up 30% and now making up 21% of the group's total revenue. The funding cost in international markets has held steady, and we have continued to deepen relationships with more financial institutions. As we mentioned before, we are focused on attracting high-quality borrowers in Indonesia, where we have seen a 15% improvement in credit cost comparing to the start of the year. The credit cost in the Philippines has held steady. This has driven a steady improvement in our take rate. On top of that, the recent removal of the regulatory uncertainty in Indonesia could normalize the liquidity and provide us the stable environment to execute the consistent customer acquisition and our risk pricing strategy going forward. And for our new markets, such as Pakistan, after we get the NBFC (non-banking finance company) license last year, we just recently secured a Buy-Now-Pay-Later license in July, and can make us the first fintech platform that can operate both online and offline, representing a powerful endorsement from the regulators. Now our plan is to roll out more diversified consumer finance product offerings to serve our customers throughout their lifecycles. Finally, I want to touch on how we are funding this growth. Our US$150 million convertible bond issuance in June was a strategic move. We used around US$61 million for concurrent buyback, and the rest is gradually deployed to fund our international business. Our average overseas funding cost is about 12% comparing to the 2.5% coupon from the CB, that's roughly 10% potential savings from the working capital management perspective. So on top of that, this CB funding gives us more flexibility on funding cost when we engage with the local funding partners. All this positive development, together gradual use of the CB funding, led us to expect better profitability from our international business. We now expect the profit contribution from our international business of no less than US$15 million this year, up from our prior estimate of US$10 million. Okay. Thank you, Alex. Operator: Dongping Zhou with CICC. Dongping Zhou: (Speaking Foreign Language). And let me translate. And I would like to inquire about the company's future shareholders' returns' progress. We noticed that the company has repurchased about US$63.8 million in shares during the first half of this year. And I wonder if you could give me some color on the future progress of the repurchase? And in addition, the company previously raised the year's dividend payout ratio to the range of 20% to 30%. Is there a more specific dividend ratio plan available for disclosure to the shareholder at present? That's all. Jiayuan Xu: Okay. Thanks, Dongping, I will take your question. Well, return capital to our shareholders is always a very important strategy for us. We were the first in our industry to launch the capital return program back in 2018, and since then, our commitment has been substantial. We have cumulatively returned approximately US$830 million to our shareholders, representing around 35% of our current market cap. And regarding the two pillars of the return, the dividend and the buyback, first for the dividend, we are deeply committed to a growing dividend. Our DPS reached US$0.277 for 2024, up a strong 17% year-over-year. That actually marks our fifth consecutive year of growth with an impressive 18% CAGR. And this year in March, our Board approved a significant upgrade to our dividend policy, moving from a minimum of 10% of net profit to a new range of 20% to 30% annually. Given this enhanced policy and our performance, we will track the DPS growth rate to ensure a sustainable dividend growth strategy. Second, as for the share repurchase, we see the buybacks as a powerful and complementary tool. We had our US$150 million buyback program in place until March 2027. In the first half of the year, we have repurchased US$63.8 million, representing a 12% increase year-over-year. So we believe this new buyback and upgraded dividend policy send a clear message. We are committed to returning capital to our shareholders, and a sign of our confidence is sustained growth, profit potential and expanding the international presence. Okay. Thanks. Operator: This concludes our question-and-answer session. I would now like to turn the call back over to management for closing remarks. Yam Cheng: All right. Thank you. Thank you once again for joining us today. If you have any further questions, feel free to contact our IR team. Thank you again for joining. Operator: The conference has now concluded. Thank you for your participation. You may now disconnect your lines.