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VNET Reports Unaudited Third Quarter 2023 Financial Results

BEIJING, Nov. 16, 2023 /PRNewswire/ — VNET Group, Inc. (Nasdaq: VNET) (“VNET” or the “Company”), a leading carrier- and cloud-neutral internet data center services provider in China, today announced its unaudited financial results for the third quarter ended September 30, 2023.

“We recorded another solid performance in the third quarter of 2023, highlighted by smooth and timely deliveries of approximately 3,500 cabinets as well as new order wins for our reliable services,” said Jeff Dong, Chief Executive Officer of VNET. “Notably, we extended a wholesale contract for 45MW of capacity with an existing internet giant customer in August. Computing power needs have surged under rapid AI development and supportive policy measures. With our high power density deployment and service capabilities, we are steadily capturing increasing demand for premium IDC services among new and traditional industry verticals. As a dedicated industry leader, we will continue strengthening our core competencies to fulfill the mounting AI-driven demand and propel our long-term, sustainable growth.” 

Qiyu Wang, Chief Financial Officer of VNET, commented, “In the third quarter of 2023, we continued to concentrate on high-quality revenues. Our net revenues increased by 4.0% year-over-year to RMB1.89 billion and adjusted EBITDA rose by 11.6% year-over-year to RMB507.9 million. Moving forward, we will remain focused on high-quality business growth while advancing our premium IDC offerings to empower digital transformation across a broader swath of industries.”

Third Quarter 2023 Financial Highlights

  • Net revenues increased by 4.0% to RMB1.89 billion (US$258.6 million) from RMB1.81 billion in the same period of 2022.
  • Adjusted cash gross profit (non-GAAP) increased by 4.3% to RMB738.4 million (US$101.2 million) from RMB707.7 million in the same period of 2022. Adjusted cash gross margin (non-GAAP) was 39.1%, compared with 39.0% in the same period of 2022.
  • Adjusted EBITDA (non-GAAP) increased by 11.6% to RMB507.9 million (US$69.6 million) from RMB455.3 million in the same period of 2022. Adjusted EBITDA margin (non-GAAP) in the third quarter of 2023 was 26.9%, compared with 25.1% in the same period of 2022.

Third Quarter 2023 Operational Highlights

  • Total cabinets under management were 88,922 as of September 30, 2023, compared with 86,927 as of June 30, 2023 and 82,660 as of September 30, 2022.
  • Cabinets utilized by customers increased by 1,092 in the third quarter of 2023 to reach 52,408 as of September 30, 2023, compared with 51,316 as of June 30, 2023 and 45,527 as of September 30, 2022.
  • Overall utilization rate of cabinets[1] was 58.9% as of September 30, 2023, compared with 59.0% as of June 30, 2023 and 55.1% as of September 30, 2022.
  • Retail IDC MRR[2] per cabinet was RMB9,495 in the third quarter of 2023, compared with RMB9,530 in the second quarter of 2023 and RMB9,287 in the third quarter of 2022.

 

[1] The overall utilization rate is calculated by dividing the number of customer-utilized cabinets by the total cabinets under management at the end of the period. 

[2] Retail IDC MRR refers to Monthly Recurring Revenues for the retail IDC business.

Third Quarter 2023 Financial Results

NET REVENUES: Net revenues in the third quarter of 2023 were RMB1.89 billion (US$258.6 million), representing an increase of 4.0% from RMB1.81 billion in the same period of 2022. The year-over-year increase was mainly driven by the continued growth of our IDC business and cloud services. 

GROSS PROFIT: Gross profit in the third quarter of 2023 was RMB306.5 million (US$42.0 million), compared with RMB316.6 million in the same period of 2022. Gross margin in the third quarter of 2023 was 16.2%, compared with 17.5% in the same period of 2022. 

ADJUSTED CASH GROSS PROFIT, which excludes depreciation, amortization, and share-based compensation expenses, was RMB738.4 million (US$101.2 million) in the third quarter of 2023, compared with RMB707.7 million in the same period of 2022. Adjusted cash gross margin in the third quarter of 2023 was 39.1%, compared with 39.0% in the same period of 2022.

OPERATING EXPENSES: Total operating expenses in the third quarter of 2023 were RMB274.3 million (US$37.6 million), compared with RMB310.2 million in the same period of 2022. As a percentage of net revenues, total operating expenses in the third quarter of 2023 were 14.5%, compared with 17.1% in the same period of 2022.

Sales and marketing expenses in the third quarter of 2023 were RMB64.1 million (US$8.8 million), compared with RMB80.2 million in the same period of 2022. 

Research and development expenses in the third quarter of 2023 were RMB80.7 million (US$11.1 million), compared with RMB73.4 million in the same period of 2022.

General and administrative expenses in the third quarter of 2023 were RMB137.9 million (US$18.9 million), compared with RMB165.4 million in the same period of 2022.

ADJUSTED OPERATING EXPENSES, which exclude share-based compensation expenses and compensation for postcombination employment in an acquisition, were RMB264.8 million (US$36.3 million) in the third quarter of 2023, compared with RMB275.1 million in the same period of 2022. As a percentage of net revenues, adjusted operating expenses in the third quarter of 2023 were 14.0%, compared with 15.2% in the same period of 2022.

ADJUSTED EBITDA: Adjusted EBITDA in the third quarter of 2023 was RMB507.9 million (US$69.6 million), representing an increase of 11.6% from RMB455.3 million in the same period of 2022. Adjusted EBITDA in the third quarter of 2023 excluded share-based compensation expenses of RMB9.5 million (US$1.3 million). Adjusted EBITDA margin in the third quarter of 2023 was 26.9%, compared with 25.1% in the same period of 2022.

NET LOSS ATTRIBUTABLE TO VNET GROUP, INC.: Net loss attributable to VNET Group, Inc. in the third quarter of 2023 was RMB50.5 million (US$6.9 million), compared with a net loss attributable to VNET Group, Inc. of RMB425.2 million in the same period of 2022.           

LOSS PER SHARE: Basic and diluted loss per share in the third quarter of 2023 were both RMB0.06 (US$0.01), which represented the equivalent of both RMB0.36 (US$0.06) per American depositary share (“ADS”). Each ADS represents six Class A ordinary shares. Diluted loss per share is calculated using adjusted net loss attributable to ordinary shareholders divided by the weighted average number of diluted shares outstanding.

As of September 30, 2023, the aggregate amount of the Company’s cash, cash equivalents and restricted cash was RMB3.02 billion (US$414.5 million).

Net cash generated from operating activities, in the third quarter of 2023, was RMB454.3 million (US$62.3 million), compared with RMB607.4 million in the same period of 2022.

Business Outlook

For the full year of 2023, the Company currently expects total net revenues to be between RMB7,400 million and RMB7,600 million, representing a year-over-year growth of 4.7% to 7.6%, and adjusted EBITDA to be in the range of RMB2,000 million to RMB2,060 million, representing a year-over-year growth of 6.8% to 10.0%. This compares with total net revenues expected between RMB7,600 million and RMB7,900 million and adjusted EBITDA between RMB2,025 million to RMB2,125 million as previously stated. The outlook update is mainly due to the Company’s continuous focus on high-quality revenues to maintain the long-term sustainability of the Company’s operations. 

The forecast reflects the Company’s current and preliminary views on the market and its operational conditions, and is subject to change.

Conference Call

The Company’s management will host an earnings conference call at 8:00 PM U.S. Eastern Time on Wednesday, November 15, 2023, or 9:00 AM Beijing Time on Thursday, November 16, 2023.

For participants who wish to join the call, please access the link provided below to complete the online registration process and dial in 5 minutes prior to the scheduled call start time.

Event Title:                                VNET Third Quarter 2023 Earnings Conference Call
Registration Link:                    https://register.vevent.com/register/BI6b834b8fdb694406b5e76d57b40294f3

Upon registration, each participant will receive a set of dial-in numbers by location, a personal PIN and an email with further detailed instructions, which will be used to join the conference call.

A simultaneous audio webcast and replay of the conference call will be accessible on the Company’s investor relations website at http://ir.vnet.com

Non-GAAP Disclosure

In evaluating its business, VNET considers and uses the following non-GAAP measures defined as non-GAAP financial measures by the U.S. Securities and Exchange Commission as a supplemental measure to review and assess its operating performance: adjusted cash gross profit, adjusted cash gross margin, adjusted operating expenses, adjusted EBITDA and adjusted EBITDA margin. The presentation of these non-GAAP financial measures is 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 more information on these non-GAAP financial measures, please see the table captioned “Reconciliations of GAAP and non-GAAP results” set forth at the end of this press release.

The non-GAAP financial measures are provided as additional information to help investors compare business trends among different reporting periods on a consistent basis and to enhance investors’ overall understanding of the Company’s current financial performance and prospects for the future. These non-GAAP financial measures should be considered in addition to results prepared in accordance with U.S. GAAP, but should not be considered a substitute for, or superior to, U.S. GAAP results. In addition, the Company’s calculation of the non-GAAP financial measures may be different from the calculation used by other companies, and therefore comparability may be limited.

Exchange Rate

This announcement contains translations of certain RMB amounts into U.S. dollars (“USD”) at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to USD were made at the rate of RMB7.2960 to US$1.00, the noon buying rate in effect on September 29, 2023, in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or USD amounts referred could be converted into USD or RMB, as the case may be, at any particular rate or at all. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this earnings release.

Statement Regarding Unaudited Condensed Financial Information

The unaudited financial information set forth above is preliminary and subject to potential adjustments. Adjustments to the consolidated financial statements may be identified when audit work has been performed for the Company’s year-end audit, which could result in significant differences from this preliminary unaudited condensed financial information.

About VNET

VNET Group, Inc. is a leading carrier- and cloud-neutral internet data center services provider in China. VNET provides hosting and related services, including IDC services, cloud services, and business VPN services to improve the reliability, security, and speed of its customers” internet infrastructure. Customers may locate their servers and equipment in VNET’s data centers and connect to China’s internet backbone. VNET operates in more than 30 cities throughout China, servicing a diversified and loyal base of over 7,000 hosting and related enterprise customers that span numerous industries ranging from internet companies to government entities and blue-chip enterprises to small- to mid-sized enterprises.

Safe Harbor Statement 

This announcement contains forward-looking statements. These forward-looking statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “target,” “believes,” “estimates” and similar statements. Among other things, quotations from management in this announcement as well as VNET’s strategic and operational plans contain forward-looking statements. VNET may also make written or oral forward-looking statements in its reports filed with, or furnished to, the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about VNET’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: VNET’s goals and strategies; VNET’s expansion plans; the expected growth of the data center services market; expectations regarding demand for, and market acceptance of, VNET’s services; VNET’s expectations regarding keeping and strengthening its relationships with customers; VNET’s plans to invest in research and development to enhance its solution and service offerings; and general economic and business conditions in the regions where VNET provides solutions and services. Further information regarding these and other risks is included in VNET’s reports filed with, or furnished to, the U.S. Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of this press release, and VNET undertakes no duty to update such information, except as required under applicable law.

Investor Relations Contact:

Xinyuan Liu
Tel: +86 10 8456 2121
Email: ir@vnet.com

 

 VNET GROUP, INC. 

 CONSOLIDATED BALANCE SHEETS 

 (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”)) 

 As of 

 As of  

December 31, 2022

September 30, 2023

 RMB 

 RMB 

 US$ 

 Assets 

 Current assets: 

 Cash and cash equivalents 

2,661,321

2,702,523

370,412

 Restricted cash 

327,673

320,809

43,971

 Accounts and notes receivable, net 

1,763,693

2,090,160

286,480

 Prepaid expenses and other current assets 

2,147,500

2,551,843

349,759

 Amounts due from related parties 

152,089

260,559

35,713

 Total current assets 

7,052,276

7,925,894

1,086,335

 Non-current assets: 

 Property and equipment, net 

11,964,498

12,920,470

1,770,898

 Intangible assets, net 

1,497,131

1,409,782

193,227

 Land use rights, net 

576,020

606,075

83,069

 Operating lease right-of-use assets, net 

3,503,925

4,111,044

563,465

 Goodwill 

1,364,191

1,364,191

186,978

 Restricted cash 

500

882

121

 Deferred tax assets, net 

196,098

300,854

41,235

 Long-term investments, net 

242,194

748,374

102,573

 Amount due from related parties 

18,500

2,536

 Other non-current assets 

551,572

514,852

70,566

 Total non-current assets 

19,896,129

21,995,024

3,014,668

 Total assets 

26,948,405

29,920,918

4,101,003

 Liabilities and Shareholders’ Equity 

 Current liabilities: 

 Short-term bank borrowings 

30,000

4,112

 Accounts and notes payable 

713,628

765,448

104,913

 Accrued expenses and other payables 

2,410,479

2,573,780

352,766

 Advances from customers 

1,157,963

1,573,747

215,700

 Deferred revenue 

95,078

119,482

16,376

 Income taxes payable 

42,017

41,003

5,620

 Amounts due to related parties 

6,928

357,567

49,009

 Current portion of long-term borrowings 

484,020

563,722

77,265

 Current portion of finance lease liabilities  

206,260

128,288

17,583

 Current portion of deferred government grants 

3,646

7,807

1,070

 Current portion of operating lease liabilities  

674,288

795,877

109,084

 Convertible promissory notes 

537,778

4,261,215

584,048

 Total current liabilities 

6,332,085

11,217,936

1,537,546

 Non-current liabilities: 

 Long-term borrowings 

3,049,856

4,570,655

626,460

 Convertible promissory notes 

5,859,259

1,794,130

245,906

 Non-current portion of finance lease liabilities  

1,047,640

1,161,949

159,258

 Unrecognized tax benefits 

87,174

87,174

11,948

 Deferred tax liabilities 

682,580

758,168

103,916

 Deferred government grants 

2,672

92,628

12,696

 Non-current portion of operating lease liabilities 

2,905,283

3,360,070

460,536

 Total non-current liabilities 

13,634,464

11,824,774

1,620,720

 Shareholders’ equity 

 Ordinary shares  

60

60

8

 Additional paid-in capital 

15,239,926

15,225,122

2,086,777

 Accumulated other comprehensive income 

11,022

9,535

1,307

 Statutory reserves 

77,996

77,996

10,690

 Accumulated deficit 

(8,369,868)

(8,758,547)

(1,200,459)

 Treasury stock 

(349,523)

(161,892)

(22,189)

 Total VNET Group, Inc. shareholders’ equity 

6,609,613

6,392,274

876,134

 Noncontrolling interest 

372,243

485,934

66,603

 Total shareholders’ equity 

6,981,856

6,878,208

942,737

 Total liabilities and shareholders’ equity 

26,948,405

29,920,918

4,101,003

 

 

 

 VNET GROUP, INC. 

 CONSOLIDATED STATEMENTS OF OPERATIONS 

 (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 

 Three months ended  

 Nine months ended  

September 30, 2022

June 30, 2023

September 30, 2023

September 30, 2022

September 30, 2023

 RMB 

 RMB 

 RMB 

 US$ 

 RMB 

 RMB 

 US$ 

 Net revenues 

1,814,210

1,821,744

1,886,924

258,624

5,184,559

5,514,450

755,818

 Cost of revenues 

(1,497,627)

(1,478,995)

(1,580,446)

(216,618)

(4,154,678)

(4,512,843)

(618,537)

 Gross profit 

316,583

342,749

306,478

42,006

1,029,881

1,001,607

137,281

 Operating income (expenses) 

 Other operating income 

5,763

13,895

26,706

3,660

47,048

73,980

10,140

 Sales and marketing expenses 

(80,245)

(63,068)

(64,077)

(8,782)

(235,554)

(192,921)

(26,442)

 Research and development expenses 

(73,350)

(81,126)

(80,673)

(11,057)

(222,705)

(241,549)

(33,107)

 General and administrative expenses 

(165,436)

(128,017)

(137,931)

(18,905)

(486,717)

(393,395)

(53,919)

 Reversal (allowance) for doubtful debt 

3,096

8,833

(18,316)

(2,510)

6,574

(7,034)

(964)

 Total operating expenses 

(310,172)

(249,483)

(274,291)

(37,594)

(891,354)

(760,919)

(104,292)

 Operating profit 

6,411

93,266

32,187

4,412

138,527

240,688

32,989

 Interest income 

9,455

10,038

12,887

1,766

22,818

28,606

3,921

 Interest expense 

(78,733)

(71,709)

(91,800)

(12,582)

(200,382)

(233,295)

(31,976)

 Impairment of long-term investment 

(11,115)

(1,523)

(11,115)

(1,523)

 Other income 

2,169

14,192

7,536

1,033

10,456

22,892

3,138

 Other expenses 

(3,174)

(320)

(10,975)

(1,504)

(4,219)

(14,887)

(2,040)

 Changes in the fair value of convertible promissory notes 

13,179

154

266

36

71,136

21,718

2,977

 Foreign exchange (loss) gain  

(317,157)

(271,630)

24,606

3,373

(612,283)

(168,391)

(23,080)

 Loss before income taxes and (loss) gain from equity method investments 

(367,850)

(226,009)

(36,408)

(4,989)

(573,947)

(113,784)

(15,594)

 Income tax expenses 

(55,717)

(12,545)

(6,317)

(866)

(133,363)

(63,748)

(8,737)

 (Loss) gain from equity method investments 

(384)

983

2,842

390

2,753

3,651

500

 Net loss 

(423,951)

(237,571)

(39,883)

(5,465)

(704,557)

(173,881)

(23,831)

 Net (profit) loss attributable to noncontrolling interest 

(1,260)

4,692

(10,579)

(1,450)

(7,151)

(27,167)

(3,724)

 Net loss attributable to VNET Group, Inc. 

(425,211)

(232,879)

(50,462)

(6,915)

(711,708)

(201,048)

(27,555)

 Loss per share 

 Basic 

(0.48)

(0.26)

(0.06)

(0.01)

(0.80)

(0.23)

(0.03)

 Diluted 

(0.48)

(0.26)

(0.06)

(0.01)

(0.84)

(0.24)

(0.03)

 Shares used in loss per share computation 

 Basic* 

888,443,329

888,705,981

889,058,872

889,058,872

886,886,953

888,724,901

888,724,901

 Diluted* 

888,443,329

888,705,981

889,058,872

889,058,872

920,886,954

899,884,241

899,884,241

 Loss per ADS (6 ordinary shares equal to 1 ADS)

 Basic

(2.88)

(1.56)

(0.36)

(0.06)

(4.80)

(1.38)

(0.18)

 Diluted

(2.88)

(1.56)

(0.36)

(0.06)

(5.04)

(1.44)

(0.18)

 * Shares used in loss per share/ADS computation were computed under weighted average method. 

 

 

 

 VNET GROUP, INC. 

 RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS  

 (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”)) 

 Three months ended  

 Nine months ended  

September 30, 2022

June 30, 2023

September 30, 2023

September 30, 2022

September 30, 2023

 RMB 

 RMB 

 RMB 

 US$ 

 RMB 

 RMB 

 US$ 

 Gross profit 

316,583

342,749

306,478

42,006

1,029,881

1,001,607

137,282

 Plus: depreciation and amortization*  

388,217

400,173

431,933

59,201

1,077,613

1,233,983

169,131

 Plus: share-based compensation expenses 

2,876

(1,330)

 Adjusted cash gross profit 

707,676

742,922

738,411

101,207

2,106,164

2,235,590

306,413

 Adjusted cash gross margin 

39.0 %

40.8 %

39.1 %

39.1 %

40.6 %

40.5 %

40.5 %

 Operating expenses 

(310,172)

(249,483)

(274,291)

(37,594)

(891,354)

(760,919)

(104,293)

 Plus: share-based compensation expenses 

32,355

8,006

9,475

1,299

127,291

25,817

3,539

 Plus: compensation for postcombination employment in an acquisition 

2,685

37,398

 Adjusted operating expenses 

(275,132)

(241,477)

(264,816)

(36,295)

(726,665)

(735,102)

(100,754)

 Operating profit 

6,411

93,266

32,187

4,412

138,527

240,688

32,989

 Plus: depreciation and amortization* 

410,988

433,735

466,285

63,910

1,146,473

1,332,649

182,655

 Plus: share-based compensation expenses 

35,231

8,006

9,475

1,299

125,961

25,817

3,539

 Plus: compensation for postcombination employment in an acquisition 

2,685

37,398

 Adjusted EBITDA 

455,315

535,007

507,947

69,621

1,448,359

1,599,154

219,183

 Adjusted EBITDA margin 

25.1 %

29.4 %

26.9 %

26.9 %

27.9 %

29.0 %

29.0 %

* Before the deduction of government grants for three months ended June 30, 2023, three months ended September 30, 2023 and nine months ended September 30, 2023.

 

 

 

 VNET GROUP, INC. 

 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS 

 (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”)) 

 Three months ended  

September 30, 2022

June 30, 2023

September 30, 2023

 RMB 

 RMB 

 RMB 

 US$ 

 CASH FLOWS FROM OPERATING ACTIVITIES 

 Net loss 

(423,951)

(237,571)

(39,883)

(5,465)

 Adjustments to reconcile net loss to net cash generated from operating activities: 

     Depreciation and amortization 

410,988

433,015

461,603

63,268

     Share-based compensation expenses 

35,231

8,006

9,475

1,299

     Others 

436,876

357,787

130,633

17,905

 Changes in operating assets and liabilities 

     Accounts and notes receivable 

64,291

8,388

(70,896)

(9,717)

     Prepaid expenses and other current assets 

84,574

70,627

(48,380)

(6,631)

     Accounts and notes payable 

(47,279)

33,434

21,763

2,983

     Accrued expenses and other payables 

158,009

(5,950)

(54,577)

(7,480)

     Deferred revenue 

20,086

(35,743)

36,008

4,935

     Advances from customers 

(33,711)

(114,977)

124,816

17,107

     Others 

(97,697)

(93,540)

(116,249)

(15,935)

 Net cash generated from operating activities 

607,417

423,476

454,313

62,269

 CASH FLOWS FROM INVESTING ACTIVITIES 

 Purchases of property and equipment 

(563,546)

(394,812)

(946,444)

(129,721)

 Purchases of intangible assets 

(16,976)

(10,178)

(18,228)

(2,498)

 (Payments for) proceeds from investments 

(36,631)

(655,815)

144,516

19,808

 Proceeds from other investing activities 

2,670

9,295

70,010

9,596

 Net cash used in investing activities 

(614,482)

(1,051,510)

(750,146)

(102,815)

 CASH FLOWS FROM FINANCING ACTIVITIES 

 Proceeds from bank borrowings 

273,169

169,204

756,101

103,632

 Repayments of bank borrowings 

(73,070)

(55,865)

(78,050)

(10,698)

 Repayments of 2025 Convertible Notes 

(380,333)

(148,842)

(20,400)

 Payments for finance lease 

(116,896)

(67,172)

(30,366)

(4,162)

 (Payments for) proceeds from other financing activities  

(10,438)

285,013

216,711

29,703

 Net cash generated from (used in) financing activities 

72,765

(49,153)

715,554

98,075

 Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash  

74,119

51,314

(12,476)

(1,710)

 Net increase (decrease) in cash, cash equivalents and restricted cash 

139,818

(625,873)

407,245

55,819

 Cash, cash equivalents and restricted cash at beginning of period 

3,616,255

3,242,842

2,616,969

358,685

 Cash, cash equivalents and restricted cash at end of period 

3,756,073

2,616,969

3,024,214

414,504