Chaince Digital Holdings Inc.

Good morning and good evening, ladies and gentlemen. Thank you and welcome to the Chin Data Group Holdings Limited Second Quarter 2022 Earnings Conference Call. We will be hosting our question and answer session after management's prepared remarks. Please note that today's conference is being recorded. I would now like to turn over to the first speaker for today, Mr. Dan Zhou from Investor Relations of Chin Data Group. Please go ahead, John.

Thank you, Alfredo. Hello, everyone. Welcome to Trignator Group's 2022 Second Quarter and Half-Year Earnings Conference Call. This is Don from the Investor Relations Team of the company. With us today are Mr. Ha Feng Wu, our CEO, Mr. Nick Wong, our CFO, Ms. Zoe Zhang, our Finance VP, and Ms. Joy Zhang, our General Counsel. During this call, Nick will take you through the quarterly review of our operation performance, and Zoe will present our financial results. Management team will be here to answer your questions afterwards. Now I'll quickly go over the safe harbor. 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 findings with the SEC. During this call, we'll 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.chainedatagroup.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'll now turn over the call to Nick. Nick, please go ahead.

Thank you, Dong. Hello, everyone, and thank you for joining the call. During the second quarter, our business continued to grow in a healthy manner. Let's take a look at some key highlights first, and we will share more lights on details afterwards. On slide four, by end of the second quarter, Our total capacity expanded to 776 megawatts, an increase of 72 megawatts during the quarter, thanks to the inclusion of two new under construction projects. We now have a total of 30 data centers in our asset portfolio. We put one project into service, bringing our total in-service capacity to 511 megawatts, which is an increase of 13 megawatts. We continue to see healthy demand from our clients as our total contracted and the indication of interest capacity increased by 32 megawatts during the quarter to 619 megawatts, leading to still a healthy commitment rate for our total capacity at 84%. Ramp-up remained strongly on track as another 57 megawatts was put into utilization in quarter. bringing our total utilized capacity to 401 megawatts and a solid utilization rate of 78%. Our capacity buildup effort is constant as we now have a total of about 361 approved and pending patents by end of the quarter, compared with 256 in the same quarter last year. Meanwhile, recently in July, the company released a new waterless cooling technology jointly with our partner. And we will go into details of that later. Financially, our top and bottom line remains strong and healthy. We believe we have delivered upbeat revenue and adjusted EBITDA results for eight straight quarters since IPO. Revenue was RMB $1,000. 38.1 million for the quarter, which is 51.2% year-over-year growth. Adjusted EBITDA was RMB 544.3 million, a 60.8% year-over-year growth, with a margin of 52.4%. GAAP net income was RMB 199.6 million for the quarter, which is the 206.3% year-over-year growth. with a historical high margin of 19.2%. Our 500 million USD syndication loan was officially closed in later June, bringing the company necessary financing for further extension. Meanwhile, credit agencies have also reconfirmed our ratings, with Fitch reaffirming our BBB minus rating investment rate with a stable outlook. And Moody's reaffirmed our rating as BA2 with a stable outlook. Now, let's go to the details of quarterly performance. I would like to bring your attention first to our client commitment dynamics in the first quarter, in the second quarter. During the second quarter, we received an additional 32 megawatts commitment from our client, including both new contract as well as new indication of interest. From our perspective, our general client base, in particular our anchor client's business, remains very healthy. A total of 45 megawatts of IOI capacity on project CN09, CN11C, and CN14 for the anchor client was fully converted into contracted capacity in the quarter. Well, another 30 megawatts capacity was also contracted in a quarter on product CN18 to support the anchor client. With these, the aforementioned four projects for the anchor clients are now 100% contracted. In addition to our anchor clients, we have also received a three megawatts indication of interest on project CE01 in Yangtze River Delta region. to support one of our key international clients. With these changes, the commitment status of our asset portfolio continue to look very healthy. On slide eight, we have a 95% contracted and IOI ratio for our in-service capacity, a similar level compared to that of the previous quarter. On slide nine, for our total capacity, the contracted and IOI ratio by quarter end was 84%, compared with 88% in the previous quarter. The inclusion of the two new under construction projects, which are currently under discussion with potential clients on demand details, brought some dilution to the figure, but essentially the commitment status for our total asset portfolio is generally healthy. For your further reference, By end of the second quarter, over 90% of our contracts are 10 years contract. Well, the weighted average remaining terms of our contracted megawatts is around eight years, or to be specific, 8.26 years. Now, let's look at our delivery schedule starting from slide 10. We have put one project in service in the quarter. which is a 13 megawatt hyperscale leased project that supports the business of the Chinese cloud service provider Clive in their campus in Tianjin. We also added two new under construction projects into our asset portfolio with a total capacity of 73 megawatts. These two hyperscale projects are located in our Hebei and Shanxi campus respectively, each with a capacity of 26 megawatts and 47 megawatts. and are scheduled for delivery in 2023. These projects are expected to support our existing client, and the demand details are currently under discussion. Looking at our delivery schedule on slide 11, we now have a total end of construction capacity of 265 megawatts by end of the second quarter, among which 93 megawatts are expected to be delivered in year 2022. and another 172 megawatts to be delivered in year 2023. Our India project, which is BBY01, was slightly delayed into the third quarter this year, while we expect other projects to stay in line with their original schedule. You can refer to the slides 12 and 13 for the design profile of some of our selected end-of-construction projects. Coming to customer move-in on slide 14. Thanks to our client's excellent and resilient business performance, we are able to keep a steady and healthy ramp-up pace. We added 57 megawatts of utilized capacity in the second quarter, bringing our total utilized capacity to 401 megawatts, compared with 251 megawatts in the same quarter last year, which is a 59.6% year-over-year growth and 16.6% quarter-over-quarter increase. Additional move-in was mostly contributed by project in our Northern China Shanxi and Hefei campus, supporting the anchor client, as well as in client campus in Tianjin, supporting one of the Chinese cloud service provider clients, and in our Malaysia campus, supporting one of the key international clients. With this steady ramp-up, Our utilization ratio by end of the second quarter remained very healthy, standing at 78% compared with 69% in the previous quarter, and an average of 71% since the listing of the company. With the quarterly dynamics mentioned above, now let's take a general look at our capacity geographically. By the end of the second quarter, Our APAC emerging market capacity deployment now accounts for around 15% of our total capacity. Well, 89% of these capacity in APAC emerging market is committed by clients. For the current end of construction capacity, 36 of them rest in APAC emerging market and more than half of them reside in greater Beijing area. Again, showcasing our advanced layout in and committed commitment to the APEC emerging market, as well as our further effort in strengthening our foothold in our key existing campus in China under the East Data West Computation Policy. We will also like to share some other key recent development of the company. As set forth by the management team previously, the company will formulate further game plan around East Data West Computation Policy. to further strengthen our foothold in our existing campus in key HUB regions of the policy, while at the same time, through leveraging our differentiated advantage in technology and with the effort of building a business partnership ecosystem to gain access to more business opportunity in new key HUB regions under the policy. The game plan is gradually working. In terms of further strengthening our foothold in existing campus, on slide 19, the company recently entered into agreement with local government in Datong, Shanxi Province on August 19th to further expand our existing capacity in the Datong campus. According to such, the company will build up a total of over 500 megawatts capacity in our existing Datong campus going forward. which is around two times our existing capacity in the region. Once completed, the campus is expected to become the single largest IDC campus in the entire Asia. On July 27th, on slide 20, the company entered into strategic cooperation with Taiji Computer Co. Limited, one of the leading player in e-environment, smart city, and industrial internet in China. We have established a cooperation relationship with Taiji back in the year 2017 when the company was working on its Beijing project CN02. We believe such strategic cooperation has brought more vitality to the company's existing business ecosystem. And together with the partner, we seek to better utilize the differentiated advantage of each party to expand service to more potential industry customers under the new national policy. The company also remains very committed to innovation, research, and development to drive growth of a high-quality business. On slide 21, we have recently come up with more technical alternatives for data center industry to better accommodate their energy performance to diversify natural conditions in different regions, so as to achieve improved resource consumption of data center. On July 29, the company and its technical partner, Vertiv Technology, jointly released a new waterless cooling technology, X-Cooling. The solution, with the integration of control and sensing technology, makes cooling system capable of automatically adjusting itself to variables such as outdoors environment, workload, various operation modes, so as to run with optimized energy and water efficiency performance. Under the testing in the company's data center in Hebei province, the solution yielded a PUE performance of less than 1.1. and the wue or water utilization efficiency performance of zero indicating a potential save of 1.2 million tons of water per year for a 100 megawatts data center in a real world scenario such solution has offered favorable evidence for massive application of the solution going forward on financing The company's $500 million syndication loan was officially closed in late June, which is offering more resource for our capacity expansion going forward. At the same time, Fitch and Moody's have all reaffirmed their existing credit rating for the company, with Fitch reaffirming its investment grade BBB minus with stable outlook, and Moody's reaffirming its BA2 with stable outlook. We believe this reaffirmation of our credit rating has kept all options for the company should we decide on future financing activities, therefore safeguarding our business development. With these, I have concluded my part of business update, and I will now turn over to Zoe for details in our financial performance. Zoe, please.