Gds Holdings Ltd. · HKEX:9698

Gds — Q1 2023 Earnings Presentation

55 slides from Gds's earnings presentation, May 25, 2023

  1. Slide 1: 1Q23 Earnings Call

    1Q23 Earnings Call 25 May 2023 NASDAQ: GDS HKEX: 9698 © 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: Strategic Priorities – Mainland China

    Strategic Priorities – Mainland China Business Objectives 1. Prioritize delivery of Rmb 6 bn backlog, sufficient to drive >60% increase in revenue (1) 2. Selectively target new business based on available capacity, move-in rate, and returns • Shorten lead time from investment to move-in to <2 years

  5. Slide 5: Strategic Priorities – International

    Strategic Priorities – International Business Objectives 1. Develop a 2nd growth engine for GDS shareholders 2. Fulfill requirements of our home market customers 3. Win reference global customers 4. Leverage development cost advantage and speed of execution 5. Build standalone business which is syne

  6. Slide 6: 1Q23 Highlights

    1Q23 HIGHLIGHTS (1)(2) Customer Commitments • New customer commitments (gross) of +11,669 sqm • Total area committed increased by 10.2% y/y to 633,611 sqm, or 1,433 MW Customer Move-In • Gross additional area utilized of +12,573 sqm • Total area utilized of 376,632 sqm, +13.4% y/y, and utilization r

  7. Slide 7: Gross Additional Area Committed (Organic Only)

    Gross Additional Area Committed (Organic Only) By Quarter (Sqm) By Year (Sqm) (1) Mainland China International (1) Mainland China International 32,402 99,197 95,362 4,085 80,506 19,894 68,098 28,331 222 27,069 14,145 14,066 99,197 1,040 11,669 91,277 68,098 19,672 6,385 52,175 13,105 14,066 11,669 5

  8. Slide 8: Net Additional Area Committed

    Net Additional Area Committed By Quarter (Sqm) By Year (Sqm) (1) (1) Organic - Mainland China Organic - International Organic - Mainland China Organic - International (2) B-O-T Acquisition (3) B-O-T (2) Acquisition (3) 161,558 30,315 27,911 118,722 38,006 22,864 18,188 92,800 3,440 9,045 4,085 222 2

  9. Slide 9: Largest Hyperscale Orders In 1Q23

    Largest Hyperscale Orders In 1Q23 SH18 Phase 2: 4,572 Sqm / 9.0 MW NTP4: 6,385 Sqm / 25.6 MW NTP1/2/3 (Site 1) NTP4 (Site 2) SH18 NTP Site 4 NTP Site 3 © GDS 2016 8

  10. Slide 10: Gross Additional Area Utilized

    Gross Additional Area Utilized By Quarter (Sqm) By Year (Sqm) 86,929 15,822 80,630 14,218 13,705 12,192 12,573 55,937 48,623 12,573 1Q22 2Q22 3Q22 4Q22 1Q23 FY19 FY20 FY21 FY22 1Q23 © GDS 2016 9

  11. Slide 11: Net Additional Area Utilized

    Net Additional Area Utilized By Quarter (Sqm) By Year (Sqm) 14,184 84,744 13,659 78,709 12,545 10,685 51,073 47,696 6,085 6,085 1Q22 2Q22 3Q22 4Q22 1Q23 FY19 FY20 FY21 FY22 1Q23 © GDS 2016 10

  12. Slide 12: Total Area Utilized & Utilization Rate

    Total Area Utilized & Utilization Rate By Quarter (Sqm) By Year (Sqm) 72.6% 72.6% 71.8% 71.8% 68.5% 70.5% 70.3% 67.4% 67.9% 65.5% 370,547 376,632 370,547 376,632 359,862 345,678 332,019 319,475 234,731 156,022 1Q22 2Q22 3Q22 4Q22 1Q23 FY19 FY20 FY21 FY22 1Q23 © GDS 2016 11

  13. Slide 13: Backlog For Area In Service

    Backlog For Area In Service By Quarter (Sqm) By Year (Sqm) 136,940 137,844 138,364 128,208 122,285 122,285 110,448 110,448 81,063 55,582 1Q22 2Q22 3Q22 4Q22 1Q23 FY19 FY20 FY21 FY22 1Q23 © GDS 2016 12

  14. Slide 14: Backlog For Area Under Construction

    Backlog For Area Under Construction By Quarter (Sqm) By Year (Sqm) Mainland China International Mainland China International 146,531 137,884 130,299 146,531 137,884 37,656 106,050 104,532 31,271 122,306 37,656 31,271 31,271 3,162 4,202 98,983 3,162 64,939 108,875 122,306 102,888 106,613 100,330 99,0

  15. Slide 15: Capacity Expansion

    Capacity Expansion Net Additional Area In Service By Year (Sqm) Delivery Schedule For Current Projects (Sqm) Mainland China International 154,030 73,592 66,480 14,882 104,002 56,787 7,440 24,497 69,495 58,710 59,040 27,904 32,290 2,730 FY19 FY20 FY21 FY22 1Q23 2Q23 - 4Q23 2024 2025 & Beyond © GDS 20

  16. Slide 16: Area In Service & Commitment Rate

    Area In Service & Commitment Rate By Quarter (Sqm) By Year (Sqm) 95.3% 95.9% 95.6% 95.5% 95.5% 93.9% 94.6% 93.8% 93.9% 92.1% 510,511 515,787 518,517 515,787 518,517 492,344 504,383 487,883 333,853 229,851 1Q22 2Q22 3Q22 4Q22 1Q23 FY19 FY20 FY21 FY22 1Q23 © GDS 2016 15

  17. Slide 17: Area Under Construction & Pre-Commitment Rate

    Area Under Construction & Pre-Commitment Rate By Quarter (Sqm) By Year (Sqm) 74.4% 71.5% 71.5% 77.4% 71.5% 63.1% 64.1% 74.4% 66.5% 61.3% 192,713 196,858 182,355 192,713 196,858 168,128 163,102 40,434 46,819 14,501 40,434 158,035 161,515 40,434 46,819 14,501 7,061 14,501 97,610 7,061 153,627 148,601

  18. Slide 18: Financial & Operating Review

    Financial & Operating Review Dan Newman, CFO © GDS 2016

  19. Slide 19: Financial Objectives

    Financial Objectives Mainland China International 1. Target mid-teens % Adj. EBITDA CAGR 1. De-risk investment with firm pre- commitments 2. Free cash flow positive within 3 years 2. Target same returns as for Mainland China 3. Deleverage to below 5x 3. Contribute >10% of Adj. EBITDA within 3 4. Mon

  20. Slide 20: 1Q23 P&L Analysis

    1Q23 P&L Analysis Quarterly Financial Review Rmb‘000 (Unless Indicated) 1Q22 4Q22 1Q23 Y/Y Q/Q Service Revenue 2,243,535 2,404,034 2,408,449 7.4% 0.2% Equipment Sales 59 0 509 762.7% N/A Total Net Revenue 2,243,594 2,404,034 2,408,958 7.4% 0.2% Cost of Revenue (1,757,177) (1,916,000) (1,917,271) 9.1

  21. Slide 21: 1Q23 Underlying Trends

    1Q23 Underlying Trends Quarterly Financial Review Rmb‘000 (Unless Indicated) 1Q22 4Q22 1Q23 Y/Y Q/Q Total Net Revenue 2,243,594 2,404,034 2,408,958 7.4% 0.2% Less: Equipment Sales 59 0 509 762.7% N/A Service Revenue 2,243,535 2,404,034 2,408,449 7.4% 0.2% Adjusted GP 1,174,648 1,224,697 1,259,376 7.

  22. Slide 22: Revenue & Area Utilized By Quarter

    Revenue & Area Utilized By Quarter Total Revenue (Rmb Mn) Net Additional Area Utilized (Sqm) & MSR Organic B-O-T 2,404.0 2,409.0 2,367.6 13,659 14,184 2,243.6 2,310.4 12,545 Net of 6,488 sqm of churn mainly due to a 10,685 single customer 5,361 redeploying between 5,089 8,780 GDS data centers 2,736

  23. Slide 23: Underlying Adjusted GP & EBITDA By Quarter

    Underlying Adjusted GP & EBITDA By Quarter Underlying Adjusted GP (Rmb Mn) & Margin Underlying Adjusted EBITDA (Rmb Mn) & Margin 52.4% 50.9% 50.7% 50.9% 52.3% 47.1% 46.0% 45.1% 44.4% 47.2% 1,259.4 1,201.3 1,224.7 1,137.1 1,174.6 1,171.9 1,055.9 1,068.9 1,066.8 1,058.2 1Q22 2Q22 3Q22 4Q22 1Q23 1Q22 2

  24. Slide 24: Capex Paid

    Capex Paid (1) Past 5 Quarters (Rmb Mn) Past 5 Years (Rmb Mn) (2) Mainland China Acquisition International Rmb Mn 1Q22 2Q22 3Q22 4Q22 1Q23 13,691.5 Mainland China (2) 1,512.7 1,194.7 1,558.5 1,557.0 1,440.6 996.3 11,274.9 3,992.4 9,378.0 1,980.8 Acquisition 2,770.3 328.0 377.2 (4.3) 151.3 143.8 1,35

  25. Slide 25: Financing Obligations & Liquidity

    Financing Obligations & Liquidity Debt & Cash Outstanding Loan Maturity Schedule At 31/03/23 31/03/22 31/12/22 31/03/23 Working Capital Project Loan Convertible Bond / LQA Adjusted Rmb Mn Rmb Mn Rmb Mn EBITDA 25,836.3 27,142.0 27,957.3 6.2 6,387 To ta l L o a n 6,042 C o n v e rtib le B o n d 5,804.

  26. Slide 26: Capital Structure Plan – Mainland China

    Capital Structure Plan – Mainland China Target Net Debt Capped At Current Levels Target Deleverage To <5x (Net Debt / Adj. EBITDA) 7x Leverage < 5x Leverage FY23 Target Next 3-4 Years Net Debt YE22 Asset Operating Cost to Target 3-Year Monetisation Cashflow Complete for Net Debt Backlog Delivery Tar

  27. Slide 27: International Current Status

    International Current Status Data Centers Under Construction IT Power Capacity Customer IT Power Commitment Name Ready For Service (MW) Commitments (MW) Rate (1) HK1 2Q23 19 18 98% HK2 1Q25 18 - - NTP Site 1 (NTP1/2/3) 2H23 – 1H24 64 64 100% NTP Site 2 (NTP4) 2H24 26 26 100% Notes: 1. Includes right

  28. Slide 28: Business Outlook

    Business Outlook Confirming FY23 Guidance Unchanged Rmb Mn FY22 Actual FY23 Guidance Implied Y/Y Total Revenue 9,325.6 9,940 – 10,320 +6.6% – 10.7% Adjusted EBITDA 4,251.4 4,430 – 4,600 +4.2% – 8.2% Capex (1) 11,274.9 ~7,500 -33.5% Notes: 1. Refers to net cash used in investing activities, including

  29. Slide 29: Questions & Answers

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

  30. Slide 30: Appendix

    Appendix © GDS 2016

  31. Slide 31: 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 (1Q23) Beijing – Tianjin – Hebei: 43 DCs (1) Yangtze River Delta: 30 DCs (1) BJ5/10/11/12/15/16/20/21/22/23 CS1/2/3 SH1/2/3/4/6/7/8/9/ BJ4/6 10/11/12/14/15/19 BJ13/14

  32. Slide 32: 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 (1Q23) Greater Bay Area: 17 DCs (1) Chengdu – Chongqing: 3 DCs (1) SZ5 SZ8 GZ1/2/3/6 SZ4 HZ1 GZ4 SZ6/9/10 SZ11 SZ1/2/3 CD1/2 CQ1 Notes: 1. Excludes Hong Ko

  33. Slide 33: Our Data Center Portfolio – International

    Our Data Center Portfolio – International Self-Developed Data Centers Under Construction in Hong Kong & South East Asia (1Q23) Hong Kong – 2 DCs South East Asia – 4 DCs NTP1/2/3/4 HK1/2 © GDS 2016 32

  34. Slide 34: Key Operating KPIs

    Key Operating KPIs Past 8 Quarters As At 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 Area In Service (Sqm) 426,543 454,354 487,883 492,344 504,383 510,511 515,787 518,517 Area Under Construction (Sqm) 165,175 157,227 161,515 168,128 163,102 182,355 192,713 196,858 Total Capacity (Sqm) 591,718 611,581 64

  35. Slide 35: Data Center Summary By Market

    Data Center Summary By Market At 31/03/23 (Sqm, Unless Indicated) (1) # of Self- Area Held for Pre- Area In Area Under Area Area Pre- Total Area Commitment Utilization Developed Total Capacity Future Area Utilized Commitment Market Service Construction Committed Committed Committed Rate Rate Data De

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

    Self-Developed Data Centers In Service – Beijing / Tianjin / Hebei At 31/03/23 (Sqm, Unless Indicated) Data Center Ready For Service Type Tenure Area In Service Area Committed Commitment Rate Area Utilized Utilization Rate BJ1 2H15 Convert Lease 2,435 2,423 99.5% 2,367 97.2% BJ2 2H17 Convert Lease 5

  37. Slide 37: Self-Developed Data Centers In Service – Yangtze River Delta

    Self-Developed Data Centers In Service – Yangtze River Delta At 31/03/23 (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 6,104 94.9% 5,894 91.6% SH2 2H15 Purpose-Built L

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

    Self-Developed Data Centers In Service – Greater Bay Area At 31/03/23 (Sqm, Unless Indicated) Ready For Data Center Type Tenure Area In Service Area Committed Commitment Rate Area Utilized Utilization Rate Service SZ1 2H14 Convert Lease 4,286 4,274 99.7% 4,261 99.4% SZ2 1H16 Convert Lease 4,308 4,30

  39. Slide 39: Self-Developed Data Centers In Service – Chengdu / Chongqing & Other

    Self-Developed Data Centers In Service – Chengdu / Chongqing & Other At 31/03/22 (Sqm, Unless Indicated) Ready For Area Commitment Market Data Center Type Tenure Area In Service Area Utilized Utilization Rate Service Committed Rate CD1 1H17 Purpose-Built Own 6,262 5,910 94.4% 3,921 62.6% Chengdu – 8

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

    Self-Developed Data Centers Under Construction At 31/03/23 (Sqm, Unless Indicated) Area Under Market Data Center Ready For Service Type Tenure Area Pre-Committed Pre-Commitment Rate Construction BJ13 Phase 2 2024 Purpose-Built Own 8,404 8,404 100% BJ14 Phase 1 2024 Purpose-Built Own 8,140 8,140 100%

  41. Slide 41: Forming Consolidated JVs For Selected B-O-T Projects

    Forming Consolidated JVs For Selected B-O-T Projects B-O-T Data Centers At 1Q23 Market Data Center RFS Status GDS Ownership Net Floor Area Utilization Rate ZB1 1H18 In Service 100% 5,132 94.9% ZB2 2H18 In Service 100% 4,662 94.5% ZB3 2H18 In Service 100% 4,662 94.6% Beijing – Tianjin – Hebei ZB4 1H2

  42. Slide 42: Self-Developed Data Center Capacity By Tenure

    Self-Developed Data Center Capacity By Tenure At 31/03/23 Held For Future Total Developed & Sqm Area In Service Area Under Construction Development Developable Capacity Lease 305,014 39,253 20,662 364,929 Own 137,030 154,165 304,049 595,244 B-O-T 68,910 3,440 - 72,350 3 rd Party 7,563 - - 7,563 Tota

  43. Slide 43: Stabilized Vs. Ramping-Up Data Centers

    Stabilized Vs. Ramping-Up Data Centers Breakdown Of Area In Service At 1Q23 Stabilized Data Centers Ramping-Up Data Centers SH1 Area In Service (Sqm) 6,432 Commitment Rate Utilization Rate Area In Service Area In Service (Sqm) Commitment Rate Utilization Rate !"#!$ !%#&$ SH2 7,712 !!#!$ !'#'$ SH6 7,

  44. Slide 44: Customer Franchise Development

    Customer Franchise Development Total Area Committed By Segment (Sqm) (1Q23) Hyperscale Customer Additions (1) 2011 – 2016 FSI & Large Enterprises (2) 81,416 2017 12.8% 2018 Large Internet 835 (3) 161,323 Customers 2019 25.5% +8.0% Y/Y 390,873 61.7% 2020 2021 Cloud Service Providers 2022 Notes: . 1.

  45. Slide 45: Top 5 Customers

    Top 5 Customers By Total Area Committed (1)(2) By Revenue (1) % Of Total Area Number of Data End User End User % Of 1Q23 Total Net Revenue Committed As At 1Q23 Centers (3) Customer 1 37.6% 47 Customer 1 27.1% Customer 2 14.5% 17 Customer 2 17.9% Customer 3 6.4% 8 Customer 3 4.6% Customer 4 4.8% 7 Cu

  46. Slide 46: Forthcoming Contract Renewals

    Forthcoming Contract Renewals Contract Renewal Schedule Period Sqm % of Total Area Committed Between 01/04/23 and 31/12/23 65,279 10.3% FY24 74,152 11.7% FY25 68,900 10.9% FY26 60,140 9.5% FY27 67,584 10.7% Thereafter 297,555 47.0% Total Area Committed At 31/03/23 633,611 100% © GDS 2016 45

  47. Slide 47: Principal Shareholders

    Principal Shareholders At 31/03/23 Pro Forma Ordinary Shares (1) Equivalent ADS Equivalent ADS % of Total ADS Change (3) William Huang (2) 77,935,840 9,741,980 9,741,980 5.2% Directors & Officers (4) 6,057,356 757,169 757,169 0.4% STT GDC 477,288,484 59,661,060 59,661,060 31.6% Ping An 0 0 +4,213,48

  48. Slide 48: Working Capital Management

    Working Capital Management Accounts Receivable Turnover Days (# Of Days) (1) Days Payable Outstanding (DPO) (2) # of Days 1Q22 2Q22 3Q22 4Q22 1Q23 101 102 97 95 81 DPO – Opex 83 83 82 84 97 DPO – Capex 271 191 237 164 145 Total DPO 197 154 172 132 124 Total DPO (Excl. 141 116 137 116 119 Acquisition

  49. Slide 49: Historical Financial Results

    Historical Financial Results Condensed Consolidated Statements Of Operations Amounts in thousands Three Months Ended Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Dec 31, 2022 Mar 31, 2023 (1) RMB RMB RMB RMB RMB USD Net Revenue Service revenue 2,243,535 2,302,729 2,367,593 2,404,034 2,408,449 350,697 Equi

  50. Slide 50: Historical Financial Results

    Historical Financial Results Condensed Consolidated Balance Sheets A m o u n t in th o u san d s. A s o f Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Dec 31, 2022 Mar 31, 2023 RMB RMB RMB RMB RMB U S D (1) Cash 11 , 3 2 0 , 9 11 9,159,176 9,092,404 8,608,131 10,241,314 1,491,251 A cco u n ts re ce iva b

  51. Slide 51: Historical Financial Results

    Historical Financial Results Condensed Consolidated Statements Of Cash Flows Amounts in thousands Three Months Ended Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Dec 31, 2022 Mar 31, 2023 RMB RMB RMB RMB RMB USD (1) Net cash provided by (used in) operating activities (244,730) 1,619,166 575,728 907,903 (1

  52. Slide 52: Reconciliation From Gross Profit To Adjusted Gross Profit

    Reconciliation From Gross Profit To Adjusted Gross Profit Adjusted Gross Profit Amounts in thousands Three Months Ended Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Dec 31, 2022 Mar 31, 2023 RMB RMB RMB RMB RMB USD (1) Gross profit 486,417 468,601 492,805 488,034 491,687 71,595 Depreciation and amortizati

  53. Slide 53: Reconciliation From Net Loss To Adjusted EBITDA

    Reconciliation From Net Loss To Adjusted EBITDA Adjusted EBITDA Amounts in thousands Three Months Ended Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Dec 31, 2022 Mar 31, 2023 RMB RMB RMB RMB RMB USD (1) Net loss (373,253) (375,307) (339,663) (177,895) (474,612) (69,109) Net interest expenses 453,481 470,8

  54. Slide 54: Definition Of KPIs

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

  55. Slide 55: Analyst Coverage

    Analyst Coverage Broker Analyst Contact BofA Paul Dewberry paul.dewberry@baml.com BOCI Michael Meng michael.meng@bocigroup.com CICC Hongjie Li hongjie.li@cicc.com.cn Citi Andre Lin andre.lin@citi.com Citic Securities Junyun Chen chenjunyun@citics.com CMB International Securities Marley Ngan marleyng

GDS Holdings — Q1 2023 Earnings Presentation on 6ix