Gds Holdings Ltd. · HKEX:9698

Gds — Q2 2020 Earnings Presentation

52 slides from Gds's earnings presentation, Aug 18, 2020

  1. Slide 1: 2Q20 Earnings Call

    2Q20 Earnings Call 18 August 2020 NASDAQ: GDS © GDS 2016 0

  2. Slide 2: Disclaimer

    DISCLAIMER This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such a

  3. Slide 3: Business Strategy & Performance Highlights

    Business Strategy & Performance Highlights William Huang, Chairman & CEO © GDS 2016

  4. Slide 4: 2Q20 Highlights

    2Q20 HIGHLIGHTS Sales Momentum • Record organic net additional total area committed of +26,544 sqm • Total area committed increased by 51.0% y/y to 333,461 sqm • 4 organic hyperscale orders between 8-20 MW each Capacity Expansion • Total capacity (in service + under construction) grew by 54.3% y/y t

  5. Slide 5: Sales Achievement

    Sales Achievement Net Additional Total Area Committed (Sqm) by Quarter Net Additional Total Area Committed (Sqm) by Year Organic Acquisition (1) Organic Acquisition (1) 81,215 81,135 46,471 11,862 9,045 68,583 19,927 19,927 20,987 21,617 22,443 22,112 41,485 11,131 69,353 72,090 25,125 9,045 26,544

  6. Slide 6: Hyperscale Orders

    Hyperscale Orders Orders >5 MW Obtained During 2Q20 Data Center Area (Sqm) Power (MW) Contract Commences Organic SH17 Phase 1 6,188 14.1 1H21 CS1 6,060 14.1 2H21 LF5 7,665 20.0 2H21 LF8 2,663 8.0 4Q20 Acquisition BJ10 6,440 13.1 2Q20 BJ11 6,471 12.5 2Q20 BJ12 7,016 12.5 2Q20 © GDS 2016 5

  7. Slide 7: Anchor Order for Shanghai Pujiang Site

    Anchor Order for Shanghai Pujiang Site  Property acquired for Rmb 1,370 mn in 1Q20 Phase 3 Phase 2 SH16  Anchor order for 6,188 sqm (100% of SH17 Phase 1) obtained in 2Q20 SH17  SH16 and SH17 Phase 1 totaling 9,188 sqm currently under construction  Remaining phases totaling ~64,000 sqm held for

  8. Slide 8: Anchor Order for Changshu Site

    Anchor Order for Changshu Site  Changshu campus, serving Shanghai  ~65,000 sqm of total developable net floor area  Sales memorandum with hyperscale customer for ~30,000 sqm  Anchor order under the sales memorandum for 6,060 sqm in CS1  CS1 under construction, with 54.7% of 11,088 sqm pre-commi

  9. Slide 9: Success in Langfang Since 1Q19

    Success in Langfang Since 1Q19 Area NFA Commitment Tenure Status Committed (Sqm) Rate (Sqm) LF9 LF1 Lease In Service 4,949 4,949 100% LF2 Lease Under Construction 4,859 4,859 100% 10 km LF1, 2 LF3 Own Under Construction 11,664 11,664 100% LF7 LF Land LF4 Own Under Construction 14,832 7,416 50.0% Sit

  10. Slide 10: Customer Diversification

    Customer Diversification Customer Segment Breakdown Leading CSP / Large Internet Customer Additions 2011 – 2016 FSI & Large Enterprises (1) 11.1% 2017 Large Internet 17.1% 2018 673 Customers 71.8% +10.3% Y/Y (2) 2019 Cloud Service Providers 2020 Notes: 1. Azure China is operated by a subsidiary of 2

  11. Slide 11: Growing Construction Pipeline – Area Under Construction

    Growing Construction Pipeline – Area Under Construction (U/C) Area U/C (Sqm) & Pre-commitment Rate by Quarter Area U/C (Sqm) & Pre-commitment Rate by Year 71.6% 66.1% 68.4% 63.6% 63.6% 62.3% 62.3% 48.4% 133,208 133,208 39.0% 110,706 27.1% 89,834 89,834 84,765 78,373 65,201 25,055 24,505 2Q19 3Q19 4Q

  12. Slide 12: Strategic Resource Addition – BJ13

    Strategic Resource Addition – BJ13  Located in Tongzhou, new seat of Beijing Municipal Government  21,000 sqm of net floor area with owned land  Strong customer interest to take all capacity  JV with CPE for development phase  Estimated cost to GDS of Rmb 2.6 bn for 100% ownership of completed

  13. Slide 13: Managed Build-to-Suit (BTS) Data Centers

    Managed Build-to-Suit (“BTS”) Data Centers Note: These projects are not included in our KPIs. Number of Data Centers Total Net Floor Area (Sqm) Customer 1 – GIC JV Data Centers Total Projects 12 ~48,000 Projects Under Construction 3 11,665 Project in Service Held for Sale 3 11,665 Project in Service

  14. Slide 14: Resource Progress

    Resource Progress Organic Capacity Expansion 2Q20 (1) (Sqm) Area In Service (Sqm) & Commitment Rate Organic Acquisition 37,771 17,116 (2) 93.7% 91.7% 91.9% 91.9% 94.1% 133,208 110,706 KS2 266,260 LF6 SH16 LF7 225,963 229,986 19,927 SH17 Phase 1 198,097 14,637 CS1 180,441 LF5 LF8 246,333 211,326 Area

  15. Slide 15: New Data Centers In Service

    New Data Centers In Service LF6 LF7 KS2  Two paired buildings for each data center  Located in Kunshan campus alongside KS1 and KS3  Both 100% committed  Owned land  LF6 already 54.4% utilized  100% committed © GDS 2016 14

  16. Slide 16: GDS – Innovative and Unique New IT Infrastructure Platform

    GDS – Innovative and Unique New IT Infrastructure Platform Beijing (1)  Present in all data traffic hubs 24 Data Centers (2)  Multiple data centers in each hub  Low latency access to all major networks  Attracting all public cloud and large enterprises Shanghai 21 Data Centers (2)  Enabling inn

  17. Slide 17: Financial & Operating Review

    Financial & Operating Review Dan Newman, CFO © GDS 2016

  18. Slide 18: 2Q20 P&L Analysis

    2Q20 P&L Analysis Quarterly Financial Review Rmb‘000 (unless indicated) 2Q19 1Q20 2Q20 Y/Y Q/Q Service Revenue 985,094 1,232,589 1,334,475 35.5% 8.3% Equipment Sales 95 7,829 7,730 8,036.8% (1.3%) Total Net Revenue 985,189 1,240,418 1,342,205 36.2% 8.2% Cost of Revenue (723,420) (890,080) (981,103)

  19. Slide 19: 2Q20 Underlying Trends

    2Q20 Underlying Trends Quarterly Financial Review Rmb‘000 (unless indicated) 2Q19 1Q20 2Q20 Y/Y Q/Q Total Net Revenue 985,189 1,240,418 1,342,205 36.2% 8.2% Less: Equipment Sales 95 7,829 7,730 8,036.8% (1.3%) Service Revenue 985,094 1,232,589 1,334,475 35.5% 8.3% Adjusted NOI 521,923 664,938 721,00

  20. Slide 20: Revenue & Area Utilized

    Revenue & Area Utilized Revenue (Rmb Mn) Net Additional Area Utilized (Sqm) & MSR Service Revenue Equipment Sales Organic Acquisition 29,324 18,202 14,988 7.7 7.8 9,057 10,713 7,819 19.6 7,816 7.3 10,383 14,336 0.1 2Q19 3Q19 4Q19 1Q20 2Q20 1,334.5 1,159.6 1,232.6 MSR (Rmb / Sqm / Month) 985.1 1,058.

  21. Slide 21: Underlying Adjusted NOI & EBITDA

    Underlying Adjusted NOI & EBITDA Underlying Adjusted NOI (Rmb Mn) & Margin Underlying Adjusted EBITDA (Rmb Mn) & Margin 53.0% 53.8% 52.8% 53.9% 54.0% 44.3% 45.9% 45.6% 47.4% 47.8% 720.5 664.3 637.5 584.1 612.5 528.5 570.1 485.6 521.9 435.9 2Q19 3Q19 4Q19 1Q20 2Q20 2Q19 3Q19 4Q19 1Q20 2Q20 © GDS 2016

  22. Slide 22: Cost Breakdown & Operating Leverage

    Cost Breakdown & Operating Leverage 2Q20 Cost Breakdown & Operating Leverage (Rmb Mn) % of Service Revenue Service Revenue 1,334.5 2Q19 3Q19 4Q19 1Q20 2Q20 Utility Cost 294.1 23.3% 22.9% 21.4% 20.2% 22.0% Rent, Labour & Other (1) 319.9 23.7% 23.3% 25.8% 25.9% 24.0% Underlying Adjusted NOI 720.5 53.0

  23. Slide 23: Stabilized vs. Ramping-Up Data Centers

    Note: Numbers exclude Managed BTS Data Centers. Stabilized vs. Ramping-Up Data Centers Breakdown of Area In Service as at 2Q20 Stabilized Data Centers Ramping-Up Data Centers Net Floor Area (Sqm) Commitment Rate Utilization Rate Area In Service Net Floor Area (Sqm) Commitment Rate Utilization Rate K

  24. Slide 24: Capital Expenditure

    Capital Expenditure Capex Paid by Quarter (Rmb Mn) (1) Capex Paid by Year (Rmb Mn) (1) Organic Capex FY20: ~10 bn Land / Property Purchase Acquisition Rmb Mn 2Q19 3Q19 4Q19 1Q20 2Q20 BTS Projects ~6,200 Organic Capex 465.4 957.9 1,222.8 1,048.7 936.8 5,131.2 ~1,300 4,733.1 270.2 ~600 Land / Property

  25. Slide 25: Construction Program

    Construction Program Self-Developed Data Centers Organic Capacity Delivery Schedule (Sqm) Net Floor Area Pre-Commitment RFS Date Tenure Type (Sqm) Rate (%) SH12 3Q20 Lease Brownfield 3,653 100% SH15 3Q20 Lease Convert 1,518 100% 49,632 SH16 3Q20 Own Convert 3,000 0.0% KS3 3Q20 Own Greenfield 5,290 1

  26. Slide 26: Acquisition – BJ10/11/12

    Acquisition – BJ10/11/12 Closed on June 5, 2020 Area Utilized / Area In Service / Overall Utilization Rate Area Utilized Area In Service Total Cash Consideration ~50% 75% 847.6 (130.7) (Including Contingent Payment) 19,700 19,927 Acquired Liabilities, Net (1) 1,640.1 ~6,800 14,988 under construction

  27. Slide 27: Financing Obligations & Liquidity

    Financing Obligations & Liquidity Debt & Cash Outstanding Loan Maturity Schedule as at 30/06/20 (Rmb Mn) 30/06/19 31/03/20 30/06/20 Working Capital / LQA Adjusted Rmb Mn Rmb Mn Rmb Mn EBITDA Project Loan Total Loan 7,611.4 9,466.4 11,019.7 4.4 Convertible Bond 4,559 Convertible Bond 2,013.9 2,084.7

  28. Slide 28: Backlog & Move-In Analysis

    Backlog & Move-In Analysis Backlog Build-Up for 2Q20 (Sqm) Backlog by Data Center Status (Sqm) Net Additional Total Area Committed – Organic / Acquisition Backlog for Area In Service Net Additional Area Utilized – Organic / Acquisition Backlog for Area Under Construction 140,299 46,471 29,324 123,15

  29. Slide 29: Updated Business Outlook

    Updated Business Outlook FY20 Revised Guidance Vs Rmb Mn FY19 Actual FY20 Guidance Implied Y/Y Revised Guidance Original Guidance Total Revenue 4,122.4 5,510 – 5,750 33.7% – 39.5% No Change -- Adjusted EBITDA 1,824.0 2,550 – 2,670 39.8% – 46.4% No Change -- Capex (1) 5,131.2 ~7,500 ~46% ~10,000 +33%

  30. Slide 30: Questions & Answers

    Questions & Answers www.gds-services.com ir@gds-services.com © GDS 2016

  31. Slide 31: Appendix

    Appendix © GDS 2016

  32. Slide 32: Our Data Center Portfolio – Beijing & Shanghai Markets

    Our Data Center Portfolio – Beijing & Shanghai Markets Self-Developed Data Centers In Service & Under Construction in Tier 1 Markets (1) Beijing – 20 DCs Shanghai – 21 DCs CS1 BJ5/10/11/12 SH1/2/3/4/6/7/8/ 88 9/10/11/12/14/15 BJ4/6 54 13 50 33 27 SH5 61 BJ1/2/3/9 SH16/17 30 50 SH13 BJ7/8 LF1/2/3/4/5

  33. Slide 33: Our Data Center Portfolio – Greater Bay Area & Chengdu / Chongqing

    Our Data Center Portfolio – Greater Bay Area & Chengdu / Chongqing Self-Developed Data Centers In Service & Under Construction in Tier 1 Markets (1) Great Bay Area – 12 DCs Chengdu / Chongqing – 2 DCs SZ4 GZ1/2/3/6 SZ5 65 45 38 GZ4 SZ6 25 HK1 SZ1/2/3 CD1/2 Note: 1. Distance in km. © GDS 2016 32

  34. Slide 34: Key Operating KPIs

    Key Operating KPIs Last 8 Quarters As at 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 Area In Service (Sqm) 147,342 160,356 171,515 180,441 198,097 225,963 229,986 266,260 Area Under Construction (Sqm) 43,718 65,201 65,736 78,373 84,765 89,834 110,706 133,208 Total Capacity (Sqm) 191,060 225,557 237,251

  35. Slide 35: Data Center Summary By Market

    Data Center Summary By Market As at 30/06/20 (Sqm, Unless Indicated) Area Held for Pre- Area in Area Under Total Area Area Pre- Total Area Area Commitment Utilization Future Commitment # of Self- Service Construction Capacity Committed Committed Committed Utilized Rate Rate Development Rate Market D

  36. Slide 36: Self-Developed Data Centers In Service – Beijing

    Self-Developed Data Centers In Service – Beijing As at 30/06/20 (Sqm, Unless Indicated) Data Center Ready For Service Type Tenure Area in Service Area Committed Commitment Rate Area Utilized Utilization Rate BJ1 2H15 Converted Lease 2,435 2,237 91.9% 2,189 89.9% BJ2 2H17 Converted Lease 5,819 5,802

  37. Slide 37: Self-Developed Data Centers In Service – Shanghai

    Self-Developed Data Centers In Service – Shanghai As at 30/06/20 (Sqm, Unless Indicated) Data Center Ready For Service Type Tenure Area in Service Area Committed Commitment Rate Area Utilized Utilization Rate SH1 2H11 Purpose-Built Lease 6,432 6,300 98.0% 6,128 95.3% SH2 2H15 Purpose-Built Lease 7,7

  38. Slide 38: Self-Developed Data Centers In Service – Greater Bay Area

    Self-Developed Data Centers In Service – Greater Bay Area As at 30/06/20 (Sqm, Unless Indicated) Data Center Ready For Service Type Tenure Area in Service Area Committed Commitment Rate Area Utilized Utilization Rate SZ1 2H14 Converted Lease 4,286 4,272 99.7% 4,264 99.5% SZ2 1H16 Converted Lease 4,3

  39. Slide 39: Self-Developed Data Center In Service – Chengdu / Lower Tier Markets

    Self-Developed Data Center In Service – Chengdu / Lower Tier Markets As at 30/06/20 (Sqm, Unless Indicated) Ready For Commitment Market Data Center Type Tenure Area in Service Area Committed Area Utilized Utilization Rate Service Rate CD1 1H17 Purpose-Built Own 6,262 5,962 95.2% 4,615 73.7% Chengdu

  40. Slide 40: Self-Developed Data Centers Under Construction

    Self-Developed Data Centers Under Construction As at 30/06/20 (Sqm, Unless Indicated) Area Under Area Pre- Pre-Commitment Market Data Center Ready for Service Type Tenure Construction Committed Rate BJ7 4Q20 Converted Lease 11,116 3,857 34.7% BJ8 1H21 Converted Lease 10,911 10,911 100% LF2 3Q20 Conv

  41. Slide 41: Self-Developed Data Center Capacity – Lease Vs Own

    Self-Developed Data Center Capacity – Lease Vs Own At 2Q20 Area Under Area Held for Future Sqm Area In Service Total Construction Development Lease 227,921 48,213 54,286 330,420 Own 28,829 84,995 268,728 382,552 Total 256,750 133,208 323,014 712,972 % Lease 88.8% 36.2% 16.8% 46.3% % Own 11.2% 63.8%

  42. Slide 42: Top Customers

    Top 5 Customers By Total Area Committed (1) By Revenue (1) % of Total Area Number of Data End User End User % of 2Q20 Total Net Revenue Committed as at 2Q20 Centers (2) Customer 1 33.4% 26 Customer 1 26.7% Customer 2 21.6% 16 Customer 2 19.0% Customer 3 7.0% 5 Customer 3 8.7% Customer 4 5.8% 10 Cust

  43. Slide 43: Contract Renewals

    Contract Renewals Contract Renewal Schedule Period Sqm % of Total Area Committed 2H20 16,062 4.8% FY21 28,049 8.4% FY22 18,498 5.5% FY23 30,446 9.1% Thereafter 240,407 72.1% Total Area Committed as at 30/06/20 333,461 100.0% © GDS 2016 42

  44. Slide 44: Principal Shareholders

    Principal Shareholders As at 30/06/20 Pro Forma Ordinary Shares (1) Equivalent ADS Equivalent ADS % of Total ADS Change (3) William Huang (2) 79,654,240 9,956,780 9,956,780 6.2% Directors & Officers 16,542,831 2,067,853 2,067,853 1.3% STT 437,043,684 54,630,460 54,630,460 33.8% Ping An 0 0 4,213,483

  45. Slide 45: Working Capital Management

    Working Capital Management Accounts Receivable Turnover Days (# of Days) Days Payable Outstanding (DPO) (1) 88 77 # of Days 2Q19 3Q19 4Q19 1Q20 2Q20 76 72 70 DPO – Opex 91 110 99 96 114 DPO – Capex 243 231 66 94 106 Total DPO 178 179 72 95 108 Total DPO (Excl. Acquisitions) 163 169 65 82 89 2Q19 3Q1

  46. Slide 46: Historical Financial Results

    Historical Financial Results Condensed Consolidated Statements of Operations Amounts in thousandss Three Months Ended Jun 30, 2019 Sep 30, 2019 Dec 31, 2019 Mar 31, 2020 Jun 30, 2020 RMB RMB RMB RMB RMB USD Net Revenue Service revenue 985,094 1,058,921 1,159,610 1,232,589 1,334,475 188,883 Equipment

  47. Slide 47: Historical Financial Results – Balance Sheets

    Historical Financial Results Condensed Consolidated Balance Sheets Amounts in thousands. As of Jun 30, 2019 Sep 30, 2019 Dec 31, 2019 Mar 31, 2020 Jun 30, 2020 RMB RMB RMB RMB RMB USD Cash 5,730,578 5,752,790 5,810,938 3,611,121 7,742,082 1,095,821 Accounts receivable, net of allowance for doubtful

  48. Slide 48: Historical Financial Results – Cash Flows

    Historical Financial Results Condensed Consolidated Statements of Cash Flows Amounts in thousands Three Months Ended Jun 30, 2019 Sep 30, 2019 Dec 31, 2019 Mar 31, 2020 Jun 30, 2020 RMB RMB RMB RMB RMB USD Net cash provided by (used in) operating activities 115,910 165,219 72,113 (169,799) 186,037 2

  49. Slide 49: Reconciliation from Net Loss to Adjusted NOI

    Reconciliation from Net Loss to Adjusted NOI Adjusted NOI Amounts in thousands Three Months Ended Jun 30, 2019 Sep 30, 2019 Dec 31, 2019 Mar 31, 2020 Jun 30, 2020 RMB RMB RMB RMB RMB USD Net loss (93,159) (108,642) (103,662) (92,031) (101,047) (14,302) Net interest expenses 221,906 241,038 233,615 2

  50. Slide 50: Reconciliation from Net Loss to Adjusted EBITDA

    Reconciliation from Net Loss to Adjusted EBITDA Adjusted EBITDA Amounts in thousands Three Months Ended Jun 30, 2019 Sep 30, 2019 Dec 31, 2019 Mar 31, 2020 Jun 30, 2020 RMB RMB RMB RMB RMB USD Net loss (93,159) (108,642) (103,662) (92,031) (101,047) (14,302) Net interest expenses 221,906 241,038 233

  51. Slide 51: Definition of KPIs

    Definition of KPIs Area In Service Net floor area of data centers (or phases of data centers) which are ready for service Net floor area of data centers (or phases of data centers) which are actively under construction and have not yet reached the stage of being Area Under Construction ready for ser

  52. Slide 52: Analyst Coverage

    Analyst Coverage Broker Analyst Contact BAML Paul Dewberry paul.dewberry@baml.com Citi Arthur Lai arthur.y.lai@citi.com CICC Zhenyang Chen zhenyang.chen@cicc.com.cn Cowen Colby Synesael colby.synesael@cowen.com Credit Suisse Colin McCallum colin.mccallum@credit-suisse.com DBS Tsz Wang Tam tszwangtam

GDS Holdings — Q2 2020 Earnings Presentation on 6ix