Chaince Digital Holdings Inc.

Good morning and good evening, ladies and gentlemen. Thank you and welcome to Chin Data Group Holdings Limited fourth quarter and full year 2020 earnings conference call. We'll be holding our question and answer session after management's feedback remarks. Please note today's event is being recorded. I will now turn the call over to the first speaker today, Ms. Joy Zhang, Investor Relations Director of Chin Data Group. Please go ahead, ma'am.

Thank you. Hello, everyone. Welcome to Chin Data's 2020 fourth quarter and full year earnings conference call. I'm Joy, head of the investor relations of our group. With us today are Mr. Alex Ju, our CEO, Mr. Nick Wan, our CFO, and Ms. Zoe Zhuang, our finance vice president. On behalf of our CEO, Nick will take you through the quarterly review of our operation performance, and Zoe will present our financial results. Alex, Nick, and Zoe will be here to answer your questions afterwards. Now I'll quickly go over the safe hopper. Some of the statements that we make today regarding our business, operations, and financial performance may be considered forward-looking, and such statements involve a number of risks and uncertainty. that could cause actual results to differ materially. For more information, please refer to the risk factors discussing our most recent Form F1 filed with the SEC and in our Form 6K for the quarter ended December 30, 2020, which has been filed with the SEC. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in our earnings press release, which is distributed and available to the public through our investor relations website located at investor.ChainDataGroup.com. Without further ado, I'll now turn over the call to Nick. Nick, please.

Thank you, Joy. Hello, everyone. Now, let's first take a look at some highlights for fourth quarter and full year 2020. We delivered solid results once again in the period as we continue to increase capacity, grow revenue, and control cost effectively. For capacity, we increased our in-service data centers to 13 at the end of 2020 from 11 at the end of third quarter. Grew our total IT capacity in service to 291 megawatts. from 248 megawatts during comparable periods and maintain client commitment of such capacity at 87%, thus demonstrating our ability to capitalize on robust market demand. Throughout China, India, and Malaysia, we had a total of eight data centers under construction in Q4. for a total IT capacity of 198 megawatts, with 74% of its capacity already committed to coins. As we mentioned on the previous quarter, we measure our business scale in terms of IT megawatts because we believe we are in the business of converting electric power into computing power. By the end of 2020, our full year power consumption had increased to 1,071 million kilowatt hours from 720 million kilowatt hours during the first three quarters of 2020, demonstrating our continuous improvement in capacity utilization and business roles. Meanwhile, we achieved an annual average PUE of 1.22 in 2020. Once again, validating our power utilization efficiency and commitment towards becoming the greenest data center in China. Additionally, we have continued to place a high priority on advancing our in-house design and R&D capabilities as an effective means to enhance our data center operating efficiency. By the end of 2020, we extended our reservoir of approved and pending patents to 216 from 194 at the end of third quarter. Owing to our technology powers and effective cost management practice, we maintain our average construction cost for all inserted data centers at less than US dollar 3 million per megawatts during the quarter, which is well below industry average. Our financials are also reflecting the progress that we're making in operation. Our full year revenue is recorded at 1.83 billion RMB, exceeding the guidance range that we provided by 41.4 million RMB. For the fourth quarter of 2020, our adjusted net income reached a historical high, 58 million RMB, and has stayed positive for six consecutive quarters. Slide five. During the fourth quarter of 2020, we made significant inroads in our overseas expansion. In Malaysia, we added more than 40 megawatts of indication of interest capacity from an AI digital leader, which prompted us to start the construction of our N106 facility. In addition, we converted some of our previously announced IOI capacity into a contracted capacity with a leading international cloud service provider and added 16.35 megawatts. In India, we added 10 megawatts of newly constructed capacity by extending our collaboration with an existing client, which is another leading international cloud service provider. Our construction of BBY01 facility is making substantial progress despite the lingering epidemic impact in Mumbai. Back in China, we added 43 megawatts of new in-service capacity to our CN11A and CP01 facilities and an additional 13 megawatts of new capacity under construction through our CN13 facility. Furthermore, we received 19 megawatts of additional IOI capacity from an existing anchor tenant who is a leading international cloud service provider and a new customer B, a high-quality international cloud service provider. Next slide, asset overview. The asset overview table here demonstrates the solid progress we made in terms of a capacity expansion during the fourth quarter of 2020. We completed construction of two self-owned high bar scale data centers in China and put them in service. To satisfy rising market demand, we also broke ground on the construction of one new self-owned data center in China during the fourth quarter. In terms of capacity addition, the two newly delivered data centers in China, mainly CN11A and CEE01, added a total of 43 megawatts IT capacity to our larger RVC network, with the in-service capacity of CN11A being 100% contracted. For the data center, we broke ground for construction in China during the fourth quarter, namely CN-13. It is the facility for the aforementioned high-quality international cloud service provider, located close to our CE-01 Nantong Campus data center. Our CE-02 data center will support us in meeting the substantial demand from our existing customers in eastern China. While we expanded our capacity, we further improved our data center's utilization rate. The utilized IT capacity of our in-service data centers grew from 175 megawatts by the end of third quarter to 221 megawatts by the end of fourth quarter. As we put more data centers into service and improved their utilization rate in a methodical manner, we should be able to generate additional revenue accordingly. Next slide. Company strategy. In the fourth quarter, we continue to advance our corporate capability build-up in three core areas. Data center development and construction, integrated energy solutions, and equipment manufacturing. We have established three subgroups, industry, Chin Power and Chin Idea for the further development of our capabilities, and we aim to provide tech leaders and the industry with more valuable next generation computing infrastructure solutions. Next slide. Chin industry is committed to becoming the leading partner for our customers. in the development and construction of next-generation computing infrastructure. Leveraging our full-stack development and construction capabilities, as well as our domain expertise, we aim to make sure that the real demand of customers is being met. And to leverage our expertise to transform the current industry value chain, and provide digital leaders and users with infrastructure products of true universality, reliability, security, and economics. It is one of the most differentiated visibility for Chin Beta Group, and the numbers can show that. Chin Beta designed 453 megabytes for the group by 2020. and 64% of group's total stable construction expenditure were capped within the group due to industry. Those are the contributing factors of our much lower than industry average capex number, less than $3 million per megawatts. Next stage. Chin Power is committed to becoming the driving force for ushering China's data center industry into the zero-carbon emission era. Assuming such role, Chin Power is dedicated to simultaneously promoting the development of new digital infrastructure and large-scale consumption of renewable energy to accelerate energy revolution in the Internet sector so as to create a new scenario of digital economy. We recently released our 2030 carbon neutral roadmap for which we will give more details in the ESG session. In terms of the development of renewable energy, we have achieved a meaningful program in our 150 megawatt solar panel generation project as we received approval for development from the government. We expect this project to become the first self-generation, self-consumption renewable energy power plant among computing infrastructure developers and operators from China. We have also signed an agreement to develop alternative energy with an expected installed capacity of 1,300 megawatts in the 40-degree north latitude region. where there is the highest concentration of renewable energy resources in the world. This agreement will also help us to implement our 2030 carbon neutral plan. In 2020, we continue to increase our utilization of renewable energy across our data centers and achieve a 51% renewable energy usage ratio for our data center operations. In addition, we continue to focus our R&D investment on energy utilization to develop a highly reliable and scalable power capacity to ensure the uninterrupted availability of our data centers. Recently, we put our Lingqiu data center into operation, thus establishing the first precedence in China for equipping a data center campus with a 110 kilovoltage square cabin electrical substation. In addition, by raising the load rate of power transmission lines from 30% to 66.7%, the LeanTool project improved our data center's energy efficiency greatly. Next slide. Chain Idea is committed to promoting white labeling of key digital infrastructure equipment, facilitating product iteration for hyperscale data center campuses, building the world's leading hyperscale data center manufacturing platform for accessory equipment, specialty equipment, integrated assembly lines, and other high end equipment, and ultimately becoming a trusted provider of data center solutions. Chin Idea will leverage talented core digital infrastructure system to enhance industry value chain synergy to preserve the core technologies for the long-term development of the industry and to improve industry chain independence and stability. In the fourth quarter, Chin Idea unveiled the grand opening of its high-end equipment manufacturing campus. Next slide. ESG. Over the years, our balanced and sustainable approach to business development and operations has served as the foundation of our success. Under environmental and sustainability plans, we remain committed to optimizing our power utilization mix and extending our use of renewable energy across all of our data centers. We are a company of May 1st, the first physical economy company in China to announce a 100% renewable energy goal, and the first company in China's internet technology industry to release a 100% carbon neutral roadmap. In 2020, we ranked as one of the top internet technology companies in China in terms of the renewable energy solution performance. Looking back, We started to optimize and upgrade our computing system to improve our overall energy efficiency in the year 2015. Starting from 2016, we have taken source of energy as a key factor for site selection, while prioritizing clean energy utilization for our data centers in operation. We first set forth our long-term commitment to 100% renewable energy consumption and further optimized it in the year 2019. For the past year of 2020, we continued to build up our capability as we upgraded our renewable energy business unit into a new subgroup, Chain Power. Going forward, we are planning for investment in renewable energy, recycling of heat generated by data center, promoting carbon emissions in surrounding communities, and ultimately to have all of our hyperscale data center being operated using 100% integrated renewable energy solutions and to invest no less than 2 gigawatts in store capacity of renewable power by 2030. Financial overview. I will now turn over to Zoe, our VP of Finance. to go over our key financial results for the fourth quarter of 2020. Being mindful of time, I encourage our listeners to also refer to our earnings press release, which is posted online and includes our quarterly results along with other additional details. Please note that all numbers today are in RMB terms and that all comparisons are on a year-over-year basis. unless otherwise noted.