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spk13: Good morning and good evening, ladies and gentlemen. Thank you and welcome to Chain Data Group Holdings Limited's third quarter 2021 earnings conference call. We will be hosting our question and answer session after management's prepared remarks. Please note today's event is being recorded. And I'd like to turn the call over to our first speaker today, Mr. Don Cho from Investor Relations of Chain Data Group. Please go ahead, Don.
spk02: Thank you, operator. Hello, everyone. Welcome to Chain Data's 2021 Third Quarter Earnings Conference Call. This is Don from the Investor Relations Team of the company. With us today are Mr. Alex Chiu, our founder and CEO, Mr. Nick Wong, our CFO, and Ms. Zoe Zhang, our Finance Vice President. Alex will be delivering an opening remark at the beginning 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 will quickly go over and say a couple. 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 uncertainties. that could cause actual results to differ materially. For more information, please refer to the risk factors discussed in our filings 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.chingdatagroup.com. We have also updated our quarterly presentation on the company's investor relations website, which you can refer to as a supplementary material for today's call. Without further ado, I will now turn over the call to Alex Chiu, our founder and CEO.
spk07: Welcome everyone to our business meeting this quarter. We are very happy to see that the company has made four full-time business commitments after IPO. and provided us with an excellent answer sheet for the ability to build. By relying on the ability of Qingshu to create core technology and self-development, we have achieved significant progress in the establishment of basic infrastructure and white-boxization. By relying on our efforts to build pre-assembled data centers, research and production, as well as mass export of industrial chain, we have achieved significant breakthroughs, which has made the solution of super-large-scale infrastructure and low-cost solutions cross-border delivery a reality. So you can follow your own time. Yes, in time, you know, quite a lot. The. But it's just, you know, when you're cooking, it's just, you know, when you're in the dark, we're showing up. So you sound like you can see the system here. You have to get your time to get your time to help you. You can tell us your food, food, food, food, food, food, food, food, food, food, food, food, food, food, food, food, food. I believe that as long as we continue to adhere to the strategy of ability construction and focus on the long-term determination of the difficult but correct development path, Xinhua Data will be able to achieve its goals in the future. This is Nick. Thank you, Alex, for opening remark. I will first translate Alex's remarks into English. Four quarters have passed since the IPO of the company.
spk01: With our relentless efforts, we are pleased to see the solid results in capacity build up for the company through Chin Idea, Chin Industry, and Chin Power. With Chin Idea's in-house R&D on critical technologies, we have achieved significant progress in the pursuit of white box model solution for computing infrastructure. With Chin Industries' breakthrough in self-developed precast container data center modules and a further integrated supply chain, cost-efficient cross-border delivery of total solutions for hyperscale data center infrastructure was made possible. With the rapid realization of the new industrial scenario by Chin Power, we have been effectively supporting the sustainable development of our anchor clients and consumption of green energy in scale. With these core capabilities as cornerstones, Qin Data has overcome the obstacles on technologies, cross-border human resources, and logistic arrangement brought by the pandemic situation. Our performance was outstanding as we keep on promoting industry upgrade with our industrial pilot projects, propelling business growth with research and development efforts and enhancing our comprehensive financial performance with our full-stack hyperscale model. It is in Chin Data's firm belief that as long as we keep our original base, adhere to our capacity build-up strategy, stay focused on tackling difficulties, and remain committed to the long-term value developments, we will achieve further with the hyperscale greenfield model. and to effectively support our key clients along their rapid expansion and zero carbon transformation in Asia Pacific emerging market. Now, on behavioral company, let's take a look at the key highlights for the third quarter of 2021 on page four of the slide. Our business is maintaining its healthy momentum. Total IT capacity in service by end of the quarter was 370 megawatts, a nine megawatts increase compared to the previous quarter, as we were swiftly responding to our client's customized and new demand, such as high density development, deployment. Total IT capacity by quarter end was 588 megawatts. Steady ramp up continued, with utilized capacity increased by 17 megawatts over the quarter. to 268 megawatts. Utilization ratio remained stable at 72%. Financial growth momentum continued with very healthy profitability. Quarterly revenue increased by 59% year over year to RMB 740.8 million. Gap-based net income was RMB 78.4 million. and stayed positive for three straight quarters with a 10.6% net margin, which we believe is among the best performers in the industry. Adjusted EBITDA was RMB 368.4 million, indicating a year-over-year increase of 61.6%, with the margin remaining in the high 40s at 49.7%. Meanwhile, such solid fundamentals and prospects for business were again recognized by the rating agencies, such as Fitch, reaffirmed its BBB-investment rating for the company in late October, despite the evolving headlines in the macro environment. Our capacity built up and sustainable development, our total number of approved and pending patents increased by 12%, over the quarter to 268. Energy efficiency of our data centers remain outstanding with our year-to-date average PUE by end of third quarter at 1.21 compared to 1.22 in full year 2020. Our year-to-date total power consumption was 1,215 million kilowatt hours. On slide five, with great pleasure, we would like to share with the market the exciting progress we are making in client diversification and overseas business development. On client diversification, our constant effort is yielding solid results. In China, breakthrough was achieved as the company recently won the bidding and received a confirmed demand of 27 megawatts capacity from a leading Chinese cloud computing service provider. On overseas development, our hyperscale greenfield development model in the Asia-Pacific emerging market is advancing. In Malaysia, the company has signed contract with land owner and launched a new greenfield project seeded in Johor state. The new project expected to be a built to suit hyperscale data center and implemented with the newly innovated high efficiency cooling technology. has received an MOU capacity of over 80 megawatts and is to be delivered to our anchor client in several phases starting from 2022. Importantly, our consistent buildup in research and development of core technology will effectively support the export of our integrated prefabricated data center modules for this project. We have also initiated our expansion plan in Thailand market. Currently, the company is close to finalizing a business acquisition in Bangkok. The project, upon completion of technical upgrade, will be hosting a five megawatts IT capacity and capable of supporting key clients' business development in Southeast Asia. For our existing business, on page six, we are maintaining the healthy momentum. We added around nine megawatts in service capacity in quarter, as we were swiftly responding to the updated and new demand of clients in several data centers, such as for their high density deployment. Utilized capacity increased by 17% in quarter, contributed by the steady ramp up in product CN06, CN08, CN09, CN11-A and CN11-B in northern China. Meanwhile, we added 16 megawatts of contracted capacity as a result of the indication by interest capacity conversion of the existing project such as CN12 and CN13. As an overview of our asset on page seven and eight, by end of quarter, we are having a total of 588 megawatts of IT capacity, among which 15 data centers or 370 megawatts is in service and nine data centers or 218 megawatts is under construction. According to the timeline as shown in the table, all the 218 megawatts under construction capacity shall be put in service in 2022. Unclined commitment remains high. Total indication of interest and contracted capacity add up to 493 megawatts, indicating a contracted and indication of interest ratio of 84%. For the in-service capacity, contracted ratio is 88%. Our utilization is healthy. By the end of the third quarter, total utilized capacity is 268 megawatts, indicating a utilization ratio of 72%. Now, let's dive into our capability building, which was briefly touched upon in our opening remark. Our capability build-up through the establishment of Qing Power, Qing Idea, and Qing Industry has made solid progress so far. Qing Power, aiming to be the leader driving China's IDC industry into a zero-carbon era, has been effectively supporting the sustainable development of our anchor clients and consumption of green energy in scale under the rapid realization of the new industrial scenario. Today, we have established a green power consumption ecosystem consisting of four major initiatives, including direct green power trading, innovative regional green power consumption mechanism, development of renewable energy power stations and development of integrated power generation grade load storage products. In September, China launched its first nationwide green power transaction with a total of 259 participating domestic Chinese entities and a total transaction volume of 7.935 billion kilowatt hour. Among the first movers nationwide, And as the largest buyer of green power in the digital infrastructure industry, we completed transaction of 100 million kilowatt hours, contributing to 1.26% of the entire nation's inaugural gross transaction value. Through regional green power consumption mechanism, we have consumed in total 440 million kilowatt hour of green power in the past four years. For the development of renewable energy power station, we have signed today 1.05 gigawatts of wind and solar energy development agreement, which is expected to providing 1.2 billion kilowatts green power annually upon completion. Chin idea, together with Chin industry, by leveraging on our patent and technology reserve, has made significant breakthrough in white box model solution for computing infrastructure, self-developed prefabricated data center modules, and export of integrated supply chain so far. We believe that such prefabrication of productized equipment, productized engineering, and productized buildings for data center is improving the coordination and efficiency of our development and construction. which will therefore create a more stable supply chain system that will effectively safeguard our hyperscale greenfield project development and delivery in Asia-Pacific emerging markets, even with concurrent delivery of multiple projects. Such will further contribute to the establishment of hyperscale computing infrastructure clusters in the region and support the regional business of our clients. Now, let's turn to some other recent development of the company on slide 12. Our solid fundamentals and business prospects are reaffirmed by renowned credit agencies despite recent evolving headlines of the macro environment, as Fitch is maintaining their investment-grade BBB-issuers rating with a stable outlook on the company, according to their late October news release. As quoted, Qingdata Group Holding Limited credit profile will remain solid, supported by the strategic location of its data centers, use of renewable energy, and adequate rating headrooms, despite the acute power shortage and potential electricity tariff hikes in China. Meanwhile, during the third quarter, we continued our active exploration of ESG development improved our alignment with international standards, and garnered additional public endorsement for our efforts. In September 2021, the company formally became a corporate member of the United Nations Global Compact, which is the world's largest corporate sustainability initiative with more than 13,000 supportive institutional and corporate members from more than 170 countries. As the first APAC Digital Infrastructure Corporate member of such organization, the company will collaborate with fellow constituents to help build United Nations SDGs and promote a shared global vision. Also in September 2021, the company joined the RE100 Initiative, which is a global renewable energy initiative jointly launched by the Climate Group. and Carbon Disclosure Projects Global Environmental Information Research Center to accelerate and scale the effort of reaching the zero carbon energy consumption goal. The RE100 has drawn hundreds of influential business around the world into the commitment of utilizing 100% renewable energy. At the same time, we further extended our green development goals by announcing the 2040 100% plan Under the plan, all of the company's next-generation hyperscale data centers around the globe will be powered 100% with renewable energy solutions by 2040, thus facilitating China's low-carbon development effort and helping fulfill the goal of reaching peak emissions by 2030 and carbon neutrality by 2060 in China. With all our long-term commitment to ESG, Qingdata Group is garnering additional public endorsement. The company won the highest accolade in the best ESG initiative category in a prestigious 17 global career awards that took place on 21st October, thus becoming the first computing infrastructure company in Asia Pacific region to receive such honor. As a top hyperscale computing infrastructure enterprise, the company is widely acknowledged for its leadership among APAC, especially emerging market APAC companies in exploring, participating, and the scaling up carbon neutrality initiative, as well as managing ESG initiative. On policy update on slide 13, several central government papers were issued in the past few months offering further insights on the past and objectives of national carbon neutrality. State Council published working guidance for carbon dioxide peaking and carbon neutrality in full and faithful implementation of the new development philosophy and noticed by the State Council of the action plan for carbon dioxide peaking before 2030 in September and October respectively. which further emphasized the expectation for improved geographical layout, energy consumption monitoring and management, and energy efficiency, et cetera, of the data center industry. These key focuses have been elaborated on in the data center policies issued by Ministry of Industry and Information Technology, or MIIT, and National Development and Reform Committee, or NDRC, earlier this year. On a power issue, following NDRC's publishment of the notice on further deepening the market-oriented reform for the non-grade price of coal-fired power generation in October that stipulated a wider range of variation for ungrade price, a number of provinces have seen ungrade price increase by 20%. The power shortage issue, thanks to the serious action taken, has been mitigated. according to National Energy Bureau's press release in early November. For the company, the impact of power issue on our recent operation has been very limited, next to zero, and we believe our layout for deployment in energy-abound regions have been a key contributor. With that, I conclude our operational overview. I will now turn over the call to Zoe to go through our financial details for the third quarter. Zoe, please.
spk14: Thank you, Nick. Now, turning to slide 15, we increased our utilized capacity and grew revenue. In quarter three, total revenue grew by 7.9% quarter-over-quarter of 68.5% year-over-year to RMB 740.8 million. utilized capacity increased to 268 MW by QN, compared with 175 MW in the same quarter last year, indicating a 53.3% year-over-year growth. For our cost and expense structure, our prudent cost control efforts enabled us to keep our core expenses and cost percentage within stable range, while continuing to grow our adjusted EBITDA and adjusted net income. Looking into the details, cost and expense items on slide 16, utility costs made up around 27 of revenue in the last two quarters, with a historical range of 25 to 28%. Maintenance and other costs took around 10 to 12%. and adjusted SG&A took around 12 to 14%. Take a closer look at our strong and stable profitability on slide 17. Adjusted EBITDA in the third quarter increased 61.6 year-over-year, or 8.8% quarter-over-quarter, to RMB 368.4 million, with a margin of 49.7%. Adjusted net income increased 132.2% year-over-year to RMB 112 million. Adjusted net margin for the quarter was 15.1%. Details in the gap to non-gap reconciliation on EBITDA and net income would be available in our 6-K filing or the appendix in our IRPPT. Now, let's take a look at our Cash and Debt position and our CapEx on slide 18. CapEx in the third quarter was RMB 1.4 billion compared with RMB 526.2 million in the second quarter and RMB 654.5 million in the first quarter. We incurred great capex in the third quarter as we continue to work in our business expansion to meet increased demand from our customers by investing more capital into our under-construction data centers, especially CN11, CN13, CN15, BBY01, and extras. This capital expenditure spending today ensured the capital company's future ability to serve our customers and shows our confidence in future business growth. On a 12-month basis, last 12-month capex by end of the third quarter was RMB 3.57 billion. Our cash position, which includes cash and cash equivalent and the restricted cash, was RMB 6.1 billion by end of the quarter, with our total debt standing at RMB 5.5 billion Looking closer at the change behind the cash position on slide 19, we continued to generate a profit matching cash from operation of RMB $288.8 million, adding additional RMB $327.5 million project financing, offsized by RMB $1.6 billion investing cash outflow consisting of the aforementioned CAPEX, and RMB 149.5 million in short-term investment cash outflows. Again, we grew with high quality, indicated by our healthy cash flow from operation and leverage. As you can see on slide 20, by end of third quarter, our total debt to capital ratio was 35.4% compared with 44.9% in the same quarter last year. Our total debt to last 12 months adjusted EBITDA ratio was 4.4 compared to 4.6 in the previous quarter and 5.4 in the same quarter last year. Our last 12 months adjusted EBITDA to last 12 months interest ratio by end of third quarter was 5.6 compared with 5.3 by end of second quarter and 3.5 by end of the same quarter last year. Finally, let's take a look at the guidance. We reiterated our 2021 full-year guidance, and both our first nine-month revenue and adjusted EBITDA are now at 73.8% of our full-year guidance midpoint. This forecast reflects our current and preliminary views on the market and operational conditions. This concludes our prepared remarks for today. Operator, we are now ready to take questions.
spk13: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you withdraw your request, please press the pound or hash key. When asking questions, please state your question in Chinese first, then repeat your question in English for the convenience of everyone in the call. Please ask one question at a time. So once again, let's start one for questions. Our first question comes from the line of Yang Liu from Morgan Stanley. Please go ahead.
spk08: Thank you for the opportunity to ask questions. First of all, congratulations to the company for its excellent performance. I mainly want to ask about the progress of the new client. Can the management floor provide more color to the client's body? For example, the location of his demand, and whether the company also thinks that in the future it will be able to get more orders from this client in the long term. Let me translate my question in English. I'm very interested in this new major customer acquisition. Could management elaborate more or provide more color on this customer in terms of scale, the location, and about the future outlook, whether you expect to get the order from this customer on a recurring basis? Thank you.
spk07: Let me answer this question, not Alice. For the 27-billion-watt new target customers that we previously revealed, this time the customers are the top two cloud computing companies in China. At the delivery level, we will be at two different points in the north of China, delivering 13-billion-watt IT capacity to customers at different stages. The project will be carried out according to the customer standards, The translation for Alex's words. For the 27 IT macOS project that we disclosed,
spk10: We won the bidding in November, and the client is a top two Chinese leading cloud computing service provider. The project is to be delivered in several phases in two locations in northern China, each with around 13 megawatts of IT capacity. As for the delivery, we will provide customized delivery as specified by the clients. Generally speaking, as we establish a more diversified client base going forward, we will adhere to our hyperscale Greenfield development model while at the same time capable of delivering projects based on customized specifications from the client. Thank you.
spk13: Thank you. Our next question comes from Tina Ho from Goldman Sachs. Please go ahead.
spk15: Thank you very much for your time. Congratulations on achieving a brilliant performance. My question is about the trend of contract prices. When we calculate 3Q, the average monthly rent should be 1.9% higher than 2Q. So I would like to ask, We are one of our biggest customers. Currently, some of the new contracts are on sale. Is there any sign of a return on this price? And then the other is our new cloud computing customer. What is the price of this contract compared to the previous one? And then this kind of fee mode. Let me translate my question. So thank you very much, management, for the time, and congratulations on a very solid result. So my question is around the pricing, recent contract pricing, because by our calculation, your actually monthly service revenue per megawatt, monthly service revenue per megawatt actually increased by 1.9%. in third quarter versus second quarter. So just wondering from these newly in-service contracts, is there a trend of pricing recovering? And then also interested in your new cloud service customer, what is the contract pricing for this new customer versus your anchor customer? And also the contract structure, is it different or similar to your anchor customer? Thanks.
spk01: Hi Tina, thank you for your question. This is Nick. I will help answering these questions. I think our current contract with our major customers, especially on the pricing side, remain very stable and has been consistent, very consistently stable in the past and will be in such a stable state moving forward. But we did notice that some downward trend of pricing in the industry this year, somewhere in China, As of now, we think that our unique hyperscale greenfield or full-stack model outside Tier 1 city has created a very comfortable buffer for us with the competitive advantage in terms of economy of scale, operating efficiency, and a lower cost structure as we have in those energy-abundant regions outside Tier 1 city. All these factors contribute to allow us to achieve a very stable financial structure in terms of our contract pricing, as well as our margin, as well as our capex spending. In terms of your question about our pricing for the new customers and maybe our anchor customers, we're not in a position to disclose the detail under the confidentiality agreement for us with our key clients. But on your question related to the new corporation or business model with new client, we will say that this is a newly customized model with this leading the cloud computing companies. And this is also in our total capability and the capacity, the planning, and that all can be handled in-house. Thank you.
spk13: Thank you. The next question comes from James Lang from UBS. Please ask your question.
spk06: Hello, Mr. Wang. Thank you for your time today. I'm James, an analyst at RENG. My first question is about overseas business. I also see that overseas business has made a lot of progress in this quarter. So I'd like to know the future direction of overseas business. And we see that some competitors of the company have also entered the Southeast Asian market. So I want to know what the competition situation is like. Management, so I've got one question. The question is around the overseas business. We saw one of your peers also entering the Southeast Asian market recently. So I just wanted to know your future growth direction in the region as well as the level of competition that you are seeing now and how it compares to the domestic Chinese markets. Thank you.
spk07: Thank you for the question. My name is Alice. I will answer this question. This quarter, the company has made great progress in overseas business development. We have started to build a large-scale, 100-watt-megaWatt area in Ropo, Malaysia. At the same time, we have already acquired a client with an impression of 80 megawatts plus MOU. These needs will begin to be delivered to Mauding customers in 2022. In Thailand, we are also about to complete the 5-megawatt-level project acquisition to support the right development of key customers in the Southeast Asian region. At the same time, we are also continuing to develop other areas in Southeast Asia, especially the development opportunities in Vietnam and Indonesia. The important thing is that we have made a major breakthrough in the construction of pre-installed data centers and industrial chain base exports in the direction of computing-based white-coreization. This is actually effective in supporting our overseas delivery of low-cost and efficient delivery. For the Asia-Pacific region, we expect the overall demand to be healthy. As our special model continues to be promoted and Thank you for your question. In this quarter, we did make big progress
spk10: in our overseas business. In Malaysia, the company has launched a new greenfield project seated in Johor state. This new project is expected to be able to suit hyperscale data center, and it has received an MOU capacity of over 80 megawatts, 80 IT megawatts, to be delivered to our anchor customer in several phases starting from next year. We're also finalizing a strategic acquisition in Thailand, Bangkok. The project, upon completion of the technical upgrade, will be hosting five IT megawatts and capable of supporting key clients' business development in the region. Furthermore, we're also actively exploring opportunities in other countries within Southeast Asia. such as Vietnam and Indonesia. Importantly, our constant progress and breakthrough in technology, R&D, as well as wide box model solutions, self-developed precast container data center modules, and the further integrated supply chain will effectively support the cost efficient and cross-border delivery of our total solution for hyperscale data center infrastructure. For the market prospect in Asia Pacific market, we think the overall demand is healthy. As we further advance our unique model, we're receiving higher and wider recognition. We expect the demand for hyperscale Greenfield full stack model will be even greater than the overall demand. And we believe that we can achieve further in Asia Pacific emerging market. And we do hope there are more uh peers or friends to come together in this region to develop and explore the region's market as well great next question comes from marco lynn from city please ask a question
spk11: Congratulations on the great result. Could you quantify the impact of power crunch in this quarter and longer term? And would it be a driver for IDC to move towards remote sites? Thank you.
spk01: Thank you, Mr. Lin. I think, first of all, for the impact of the power-related issue, both power shortage and power price, as we have just discussed, impact was very limited. almost next to zero in reality, especially in Q3. And we expect very, very, very, very limited impact in the near future. This is actually primarily due to our energy side geographic deployment strategy as we started from day one. Going forward, I think our energy side geographic deployment will continue to be our cornerstone strategy and also going to create a competitive advantage for us. And we believe that our long-term commitment to renewable energy development in this site and the related capacity build-up will continue to contribute to the stable and secure power supply, as well as to serve as an adequate hedge, I would say, against the power-terrific inflation, if any. Also, when you use the term remote, it's actually always on a relatively sense. One year ago, I remember some industry peers even thought that the places like Hebei, Zhangjiakou, or Datongshanxi as a remote area, but they are not too remote, away from tier one city like Beijing. In fact, for Zhangjiakou, it is only like 100 kilometers away, away from downtown Beijing, you know. So generally, you know, QIN data's, I think, hyperscale, you know, all of QIN data's majority hyperscale data center clusters are located and deployed in those energy-abundant locations. And these locations happen to be outside Tier 1 cities or, in your term, in a little bit remote area. For example, Zhangjiatou, Datong, and Malaysia, the whole state. We will stick to these regions because they are energy-abundant, not only in the traditional energy-abundance sense, but also in a renewable-abundance sense.
spk13: they're not not too far away from tier one city at all thank you thank you next question comes from hong jie lee from cicc please ask a question is
spk12: My first question is, could you elaborate more on your initiative on the green energy and how should we outlook on additional capacity and impact on the margin? Thank you.
spk01: I think the chin data, what chin data's understanding of this IDC industry is always how to find the most efficient way to convert renewable electric power to computing power. That's why, firstly, the development of renewable energy is by all means a long-term strategy that we will commit ourselves to. Secondly, in terms of how it will be invested and operated, the company will judge case by case, will make the judgment case by case based on several critical factors. But remember, we are in the bigger context of carbon neutrality as China's national strategy. So our final objective as one of the IDC industry or the computing infrastructure participant is trying to strike an optimum balance among adequate renewable power supply, power price, invested capital required, and obviously with the ultimate goal to achieve the best investment value for return for investors, for customers, you know, et cetera. And we are not, during the process, we will not exclude any opportunity or potential to involve external investors parties, on a corporation, on both the investment side and operation side in the renewable energy, along this renewable energy strategy and execution. Thank you.
spk13: Thank you. Our next question comes from Albert Hong from JPMorgan. Please ask your question.
spk05: Hello, Mr. Wang. Thank you for your question. I also congratulate you on your good timing. Thank you. Your peers have intercepted some slowdown in moving rates in the second half and turn more conservative from the next year outlook, especially for hyperscales. I know whether ChainData also sees similar concerns about 2022 hyperscale demand. As ChainData has high customer concentration rates, how would you mitigate the risk of potential slowdown in moving rates? Thank you.
spk07: Thank you for the question. Let me answer it. Actually, I have already answered this question immediately. One is the diversification of the customer itself, including the development of product evidence and market area. At the same time, we have seen some progress in the diversification of customer expansion and market area. I think the answer to this question is, actually, you can see through the reports of the previous four seasons that our customers are relatively special. Of course, this is based on our future diversification, and we hope to continue to maintain it. In addition, the same industry and情怀数据 that you just mentioned, the understanding of the customer needs of the super-large data center is completely different.
spk10: Translations for . Thank you for your question. I think Nick has just addressed a similar topic. In general, our recent progress in client diversification and geographic diversification, as well as the diversification in the product line and market segments of our anchor client itself, should all be marginally creating a better risk hygiene profile for the company going forward. Then, on the concept of hyperscale data center and the demand for such hyperscale data center, we're not sure if other market players, as you mentioned, share the same definition as us. A different definition may lead to different product and solution offerings. Our anchor clients, like Tindata, as its business partner, very early at this business stage, when we are just a startup company. Our hyperscale model, or to be exact, the hyperscale greenfield full-stack model, has accompanied our client all the way along, and we grew together. So now, we still grow together. We believe we have done a good job for them so far. For the next year, we can refer to our pipeline or the general introduction for our disclosed information. Thank you.
spk13: Thank you. The next question comes from Yalin Zhuang from DBS Bank. Please ask your question.
spk03: 我的问题也是关于电力短缺,就是管理层是否可以分享一下在三季度内地市场出现的电力短缺,还有电价上涨的情况对目前市场竞争格局以及未来客户需求的一些影响,因为看到其他的竞争对手在三季度出现一定程度的moving slowdown这个现象,然后我自己翻译一下, thanks for the opportunity and congratulations on the strong third quarter results. My question is, what is the current competition landscape and demand outlook in China, given the recent power shortage and tariff hike in the third quarter, as we saw a slow move-in rate for other competitors in China? Thank you.
spk01: Thank you. This is Nick. I'm actually going to answer these questions. I think I want to reiterate Chin Data's way of doing business. We believe that IDC's nature is to try and find the most efficient way of converting electric power to computing power. Therefore, power has always been integrated and one of the most important strategies for the company from day one. So as you can, as it's proved recently in the marketplace on power related issue, and also you can see on numerous policy papers issued by the government authority like MIT and DRC and the State Council in the past few months in a very intensive way, elaborating actually on a vision for the IDC industry and the carbon neutrality target for the entire country. as well as the fact that the Chinese IDC industry made up around 2%, 2% of the total energy consumption nationwide last year. You can understand why the power and energy is so important for the IDC industry. Therefore, a strategy on a power for a particular IDC company is becoming very, very important. Therefore, that can explain why the company from day one, we believe into this, we execute along this power-related strategy, and we have very close to energy-side geographical deployment to be fully in line with this belief and strategy. You know, for the company going forward, our energy-side geographical deployment will continue, I emphasize, will continue to be our cornerstone. And we believe our long-term commitment to renewable energy development and related capacity buildup will contribute to a very stable and secure power supply. as well as to serve as an adequate hedge, so to speak, against power-tariff inflation, if any, in the future. Thank you.
spk13: Thank you. Our next question comes from Kai Fang Jia from Citix. Please ask your question.
spk09: Great. Thank you very much, Mr. Guan. Congratulations to the company for achieving a very outstanding technical performance. I would like to ask about the issue of direct movement of demand. Let me translate my question. So I have a question about the demand from ByteDance. We see some news say that ByteDance will release its own public cloud in December. So just wondering if we can get new orders from this, and also can we give some color about the demand from ByteDance in China and overseas? Thank you.
spk01: Thank you. This is Nick again. I'm trying to answer these questions. Again, if you look back at our history, as Alex, I think, mentioned, our collaboration with our anchor client, ByteDance in particular, in the past, has been very successful. We're just becoming the ecosystem partner and will remain so. And because of our high-quality delivery and operations, we deliver to customers and make them happy. The progress we made in the overseas market recently is very exciting, and we were confident that with our constant in-house capability buildup and further deployment in the overseas market, we'll be fully capable of supporting the development of our clients, both within China and overseas. As far as for your question about their upcoming, the new public cloud product launch, I'm not in a position to make any comments on behalf of a customer, but all we see, based on our data interaction with our key clients, on the ongoing business as well on the forthcoming business. And I think that these kind of the 2B and the 2C business development signaling a very positive momentum. And I think, you know, there's a very high chance you will be the beneficiary out of this. Thank you.
spk13: Thank you. Our next question comes from Edison Lee from Jefferies. Please go ahead.
spk04: Hello, Mr. Wang. Thank you for asking this question. My question is about your new client in China, the 27th McAvoy project. Can you tell us if this project is actually a power outage? And what is the difference between the internal power outage rate and your current project? So my question is mainly on the new client, new cloud client in China. So for these two particular projects, can you tell us further the terms of the contract includes power and also whether there is any difference in IRR with the existing projects. And as you said earlier, it seems that the business model or the requirements of this client is somewhat different from your existing clients. So maybe you can elaborate on actually what the differences are and whether there are any implications for the investment value of these projects. Thank you.
spk01: I think to answer your questions, I think at the moment, because this was one of the most recent, I think, development, you know, post Q3. And we are at a very close stage of signing the final contract with our customers, new customers. So at the moment, we're not in a position to disclose any further detail. But what I can tell you is actually, You know, if you remember back in the first half of this year, we signed a framework agreement with this particular new customer. And at that time, we said that the reason for the signing was because our credentials on energy side deployments, you know, and all our operating efficiencies and our very lower than average cost advantage we have. And obviously, this is all accomplished recently, I think, exactly due to these reasons. So in a matter of the cooperation model, as said, it's customer customization models. The project is going to be located in one of our northern places. We're currently operating our hyperscale project, and one is in other northern China locations. For other details, please look at the further public disclosure by the company. Thank you.
spk13: Thank you. Our next question comes from Yang Liu from Morgan Stanley. Please ask your question.
spk08: Thanks for the opportunity to ask another question. 我先用中文问一下,然后翻译吧。 那就是想问一下公司的这个债务融资的计划,因为我们看到最近债券市场还是波动,就离岸的债券市场还是波动很大的。 那公司之前做这个评级也是为了refinance或者再融资,所以想问一下现在的这个进展和计划吧。 The question is about the debt financing. We noticed that in the offshore bond market volatility. And I would like to hear the management comment on what is the status and what will be the next step in the debt financing. Thank you.
spk14: Thank you, Liu Yang. Actually, first of all, we have sufficient financing liquidity and a very healthy leverage profile. As we can see, by the end of this quarter, the company has RMB 6.1 billion cash and cash equivalents at hand. And in contrast to our debt balance, which is around RMB 5.5 billion, together with some short-term investments, we have a negative net debt, which is net cash position of RMB 782 million. Also, we have cash flow from operations, which is around RMB 288 this quarter. So, besides this, on the slide we just reviewed, that by the end of this quarter, the company total debt to total capital ratio is only 35.4%, which are very low compared with the industry level, and they leave us more room for debt or debt-like financing. With regard to the financing progress, The rating agencies have reaffirmed the rating this quarter with a BBB minus investment grade. And this allows us with more financing options in both public and private market. On daily operations, it is very regular and consistent practice that we have bank loans at project level, both domestic and for overseas projects, along with the development of projects. And at the same time, We are also looking into private financing options recently. Thank you.
spk13: Thank you. Our next question comes from Tina Ho from Goldman Sachs. Please ask a question.
spk15: Thank you for asking the second question. This question is about the management. We are now in a state of cash. The cash on the account is very sufficient. I would like to ask our team members mainly in China, because we saw that they made an acquisition in Thailand. So we would like to ask, in the domestic market, what is the company's view on the acquisition? Because we see that there may be different companies in the same industry that are now accelerating their acquisition projects, but there may be other companies that are slowing down and have not made any acquisitions. So we would like to ask the company's view on this aspect. So my second question, thanks very much for the opportunity again, is regarding the M&A, our company's view on M&A, because as management just mentioned, you have actually very abundant cash and net cash position on your balance sheet. So wondering what's your view specifically in the Chinese M&A market. As we saw, some of our peers are accelerating their M&As while others are actually limiting and not doing any M&As at this stage. So what's Chin Data's view on potential M&As? Thanks.
spk01: Our view on the potential, this is Nick. Thank you, Tina, for the questions. Our view on the merger acquisition, we think that's also one of the company's strategies. in a very supplementary way. Our principal strategy is still going to be the full stack hyperscale Greenfield development plus operation model, but we're looking at some interesting opportunity in merger acquisition, both in China and overseas at the same time, essentially. But we stick to a very stringent, sometimes too stringent principle on the potential merger acquisition opportunities. And we actually stick to several criterias. We hope, but even say we acquire a certain asset, we hope that we can provide our unique in-house capability, which can allow us to add value to this targeted asset once we take over. But at the time of making this merger acquisition, we are looking for synergies with the company in geography, client base, and resource of the potential target of assets. And we look for, obviously, the reasonable valuation. And I want to emphasize that both the future business plan and the valuation multiple for these kind of potential targeted assets or company, both in China and overseas, must be reasonable in the eyes of chain data. that's actually very important for us to pull the trigger. We will not do the merger acquisition simply for the sake of merger acquisition itself. And also, given the more and more emphasized on the operating efficiency and most importantly on the renewable power and power on the supply side. On the demand side, it's more and more I think that the demand is going to be driven by the big computing and the tech and internet clients. And we think that given the current competitive landscape, ever-increasing competitive landscape around tier-one cities in China, there will be some consolidation, you know, the window open up for China data, even if we stick to a very stringent, you know, the Merge Acquisition Principles. Thank you.
spk13: All right. Thank you. Our next question comes from Edison Li from Jefferies. Please ask your question.
spk04: So my question is about CapEx. I just want to get an idea as to whether the CapEx guidance this year of 5 to 6 billion has changed and what's the outlook for next year? Thank you. So far, we incurred RMB around 1.4 billion.
spk14: for capex for this quarter. And on a 12-month basis, last 12-month capex by end of this quarter was around RMB 3.6 billion. This is generally in line with our full-year capex expenditure forecast. For the next year, you can see that the majority of the under-construction assets are to be delivered gradually. And besides this, today we also announced three new project orders or pipelines. And we expect next year's CAPEX investment will be somewhat higher than this year to support this solid business opportunities and the region expansions and the project delivery. Thank you.
spk13: All right. Thank you. There are no further questions at this time. I'll turn the call back to the management team for their closing remarks.
spk01: And thank you for the investment community and all the analysts and for the public to pay your attention to Chin Data. I want to emphasize once more, that's probably going to be the regular remark I made every quarterly earnings call, that our belief in IDC is a little bit unique and different from most of the peers. We believe the industry's nature is how to find the most efficient way to convert electric power and in the future going to be a renewable electric power to computing power. And we just treat ourselves more like an infrastructure service provider than simply an IDC, a hosting service provider. So therefore, we're going to stick to this strategy, you know, and we'll make a perfect execution along the way. Thank you.
spk13: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect your lines.
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