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spk04: Good morning and good evening, ladies and gentlemen. Thank you for joining and welcome to Chain Data Group Votings Limited fourth quarter and full year 2022 earnings conference call. We will be hosting a question and answer session after management's prepared remarks. Please note that today's event is being recorded. I'll now turn the call over to first speaker today, Mr. Don Zhou from Investor Relations of Chain Data Group. Please go ahead, Don.
spk07: Thank you, operator. Thank you, everyone, for waiting. Welcome to Chain Data Group's fourth quarter and full year 2022 earnings conference call. This is Don from the investor relations team of the company. With us today are Mr. Hua Peng Wu, our CEO, Mr. Nick Huang, our CFO, Ms. Zhou Yuzhang, our senior vice president, planning, and Ms. Joy Zhang, our vice president, legal and investment. 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 will 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 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.chainedatagroup.com. We have also updated our quarterly presentation on the company's investor relations website, which you can refer to as an important supplementary material for today's call. Without further ado, I'll now turn over the call to Nick.
spk08: Nick, please go ahead. Thank you, John, and good evening, everyone. Now let's start with some key highlights of the fourth quarter and two-year 2022 performance. On slide four, we added one new project, an additional 50 megawatt new capacity in the fourth quarter, rating our total capacity to 821 megawatts and a total number of data centers to 32. We put two hyperscale data centers into service in Malaysia. bringing our total in-service capacity to 613 megawatts, an increase of 34 megawatts during the quarter. Demand and ramp-up remain strong and healthy. We received an additional client commitment of 100 megawatts in the fourth quarter, bringing our total contracted and IOI capacity to 800 megawatts, leading to a client commitment rate of our total capacity at 92%. We added 71 megawatts utilized capacity in quarter bringing our total utilized capacity to 525 megawatts and a solid utilization rate of 86%. We completed a 300 million senior nodes unsecured offering in February. The nodes due 2026 with a coupon rate of 10.5% successfully opened another new financing channel for the company under such macro environment with fragile sentiments. and will further support our project development in China and overseas. Top and bottom line momentum remain really strong. Revenue in the fourth quarter was RMB 1,390.3 million, which is a 77.8% year-over-year growth. Adjusted EBITDA was RMB 720.9 million, a 78.4% year-over-year growth, with a margin of 51.9%. For full year 2022, revenue was RMB $4,551.7 million, a 59.6% year-over-year growth, and 2.7% above our guidance upper range. Adjusted EBITDA was RMB $2,374.2 million, a 67.3% year-over-year growth, with a margin of 52.2% and 5.1% above guidance upper range. Looking into year 2023, we expect two-year revenue to be in the range of RMB $5,880 to $6,080 million, and adjusted EBITDA to be in the range of RMB $3,000 to $3,110 million, which are around another 30% increase from year 2022. We will go into details of this later. Let's take a close look at product delivery and construction on slide seven. We continue to work on a tight and challenging timetable to make sure that resources are delivered timely to support our clients. Our delivery is generally in line with the original schedule. We put two projects into service in the fourth quarter in Malaysia with a total capacity of 34 megawatts. One of them is MY03, located in Kuala Lumpur, supporting one of the key international clients for its regional development. The project is now 100% committed and ramping up at 25% utilization. MY06 Phase 1, whose details we have shared during our previous call, is supporting the anchor client's overseas business and is now 100% utilized. We put one new hyperscale project under construction in the fourth quarter, CN21, with a design capacity of 50 million, 50 megawatts, and located in our Shanxi campus. It's scheduled for delivery in Q3 2023, and intended for the anchor clients. The project has so far received 38 megawatts of IOI from the client. With the above changes in quarter, as you can see on slide eight, we have brought our total capacity up by 50 megawatts, reaching 871 megawatts by the end of the fourth quarter, with 613 megawatts in service and 257 megawatts under construction. For the year 2022, we have put a total of around 173 megawatts into service. Among the under construction capacity by quarter ends, we currently expect another 214 megawatts of them to be delivered in the year 2023, which is quite a challenging task, but our team in China and overseas are working very closely to ensure our supply readiness. Now, regarding demand profile on slide nine, we continue to strong China and overseas business momentum from our key clients. Our total client commitment increased by 100 megawatts in the fourth quarter, mainly contributed by four major projects in China and Malaysia, supporting two of our key existing clients. Specifically, we received 8 megawatts IOI for project MY03 in Malaysia, supporting the key international client, making the project now 100% committed. We received another 92 megawatts IOI on existing project CN20, CN21 and FY0653 in our Shanxi campus and in Johou campus to support the anchor client. Meanwhile 49 megawatts of IOI was converted into contract during the quarter including a 38 megawatts from CN20 in Shanxi campus and the 11 megawatts from CN19 in Hebei campus. For the year 2022 we have received a total of around 211 megawatts of client commitment, leading to a 35.9% year-over-year increase in total client commitment. As a natural result, commitment profile of our asset portfolio remained healthy. On slide 10, for our existing 613 megawatts of in-service capacity, 96% of them are committed by clients in either contract or IOI by the end of the fourth quarter. compared with 96% in the previous quarter and 87% in the same quarter last year. For our total capacity on slide 11, the commitment ratio is 92% by the end of the fourth quarter compared with 85% in the previous quarter and 87% in the same quarter last year. On top of healthy demand and our differentiated client base, and as we have been emphasizing relentlessly, our unique contract profile brings long-term business visibility. By the end of the fourth quarter, over 90% of our contracts are in 10 years term or longer, leading to a weighted average remaining term of current contracted capacity of 8.3 years. And furthermore, from now to the end of 2027, we only expect less than 7% of our existing contracted capacity to expire. Now, coming to customer move-in on slide 13, we continue to leverage on our unique delivery capacity to accommodate clients' rapid move-in, and we are seeing an increasing contribution from our overseas business. We added 71 megawatts of utilized capacity in the fourth quarter, bringing our total utilized capacity to 525 megawatts, compared with 304 megawatts in the same quarter last year. which is 72.5% year-over-year growth and 15.7% quarter-over-quarter increase. Quarterly move-in was contributed by projects in Northern and Eastern China campus, supporting the anchor client, the key international client, and the Chinese cloud client, as well as contributed by all our overseas projects in India and Malaysia, supporting the anchor client and international clients. On specific project level, CN14 and the CN18 reached over 90% utilization in only two quarters of operation. And Milestone MY06 Phase 1 is almost 100% utilized in the first quarter following its opening. Looking at the source of utilized capacity by region on slide 13, overseas business is starting to contribute more in the fourth quarter. accounting for 9% of total utilized capacity, compared with less than 5% in the previous quarters. Given such rapid ramp-up performance, our utilization rate improved further in the fourth quarter, climbing to 86%, compared with the 78% in the previous quarter and 69% in the same quarter last year. Meanwhile, based on our existing client commitment, we have 275 megawatts of client commitment unutilized by end of the post quarter, which is around 52% of our currently utilized capacity. Beyond current performance, the company has also been working on necessary financing to support our supply buildup. We have captured a key market window and completed our 300 million senior notes offering on February 23rd. We opened a new financing channel for the company on top of our project loan financing. and it will provide more financing flexibility covering the full life cycle, especially the early stage of the product development in China and overseas. Despite fragile market sentiment around micro outlook, we continue to attract significant investor interest during two days telegraphic roadshows and have received unprecedented strong support from high-quality international institutional investors, including global asset managers and pension funds. The note is due 2026 and bears a coupon rate of 10.5%. On the supply side, in our Lingqiu campus, the construction of our self-built 220 kilovoltage substation was completed on February 13th. This is a very straightforward snapshot of how the company has been leveraging its in-house power-related capability, its energy abounding region layout from day one. to ensure consistent key resources efficiency in greater Beijing region to accommodate future demand. The construction adopted modular technology and was completed in only six months, setting a new record for data center industry. The substation enables direct voltage transformation from 220 kilovoltage to 10 kilovoltage obtaining the first main rate related pattern in data center industry and saving up to 60% of space of a substation compared with traditional solution. Most importantly, the completion of the substation paved the way for the future capacity expansion of our Lingxiu campus in Shaanxi as it is capable of supporting the energy consumption of up to 360 IT megawatts. Regarding the company's involvement in the National East Data West Computation Plan on slide 16, starting from the very beginning, we have adopted an active attitude and stance in joining the development of Qingyang Cluster in Gansu Province, so as not to miss such historical opportunities. Action-wise, we have been moving forward our development plan prudently, making sure that we make well-timed capital expenditure decisions. Along with other key enterprises, we attended the opening ceremony for the cluster hosted by the Gansu Municipal Government on February 22nd and signed a strategic cooperation agreement with the local government. We have planned a campus of 150 megawatts there on a land of 300 acres and would prudently move forward with the relevant CapEx expenditure along with development phase of the entire cluster. Currently, we don't expect any material relevant CapEx in Qingyang in the year 2023. So before I conclude my part, I would like to leave several key takeaways for the market. On the demand side, we still feel good about the momentum coming from our existing client base. The number that we presented on client commitment and utilization dynamics are very, very good reference. We believe this has something to do with the data-intensive nature of our client's business, in particular, the anchor clients. If we further take into consideration our unique contract profile, you should feel good about the long-term business visibility as well. These all together will serve as a comfortable buffer for the company on further client diversification. On the supply side, we are always ready in our key campuses We are leveraging on our operation history in these regions, which are right in the East Data West computing cluster, and a unique role that we played in contributing to local economy and our in-house capability on power infrastructure to ensure that resource can be locked in advance to support future demand. Geographically, we currently highly value the Southeast Asian market, and we are on the right track on geographic diversification. Looking at the pipe chart on slide 18, overseas utilized capacity makes up 9% of company total capacity by the quarter. And in the longer term, and if we look at contracted capacity or total capacity, overseas can contribute to around 20%. On top of that, and if we take into consideration pricing difference, such computation can be more. At this time, at this point of time, the company is allocating dedicated resources to project MY06 in Johor in order to make it a flagship product and a good opening in the local market. This actually reminds us how the company has started its business in the Hebei campus in the early days around Beijing. And we are working very hard now to win us a ticket for more opportunities in the Southeast Asian market in the future. With this, I have concluded my part, and I will turn to Zoe for details in our financial performance. Zoe, please.
spk05: Thank you, Nick. Now, let me walk you through our quarterly financial performance. Generally speaking, we have maintained a very healthy financial momentum in the past quarter of last year, 2022. Our revenue growth in the fourth quarter We remain very strong and supported by faster ramp-up from both our China and overseas business. On slide 23, revenue in the fourth quarter decreased by 77.8% year-over-year, or 15.6% quarter-over-quarter, to reach RMB 1,390.3 million. which is in line with the 72.5% year-over-year and the 15.7% quarter-over-quarter increase in utilizer capacity. Look at the table on the right-hand side. Overseas contributed to 9% of total utilizer capacity in the fourth quarter, compared with less than 5% in the past. Revenue in the full year 2022 increased by 59.6% year-over-year to RMB 4,551.7 million, beating the guidance upper range by 2.7%. Looking further down on slide 24, total cost of revenue in the fourth quarter increased by 88.5% to RMB 820.5 million from RMB 435.2 million in the same period of 2021, mainly driven by the increase in utility costs and the depreciation and amortization expenses. Selling and marketing expenses remained at normal level in the fourth quarter of last year, slightly decreased by 1.7% year-over-year to RMB 18.4 million primarily due to less share-based compensation expenses. On a four-year basis, selling and marketing expenses decreased by 20.5%, primarily due to less share-based compensation and less marketing activities. General and administrative expenses in the fourth quarter of 2022 saw a spike of 134.5% year-over-year, to RMB $214.5 million. A one-off long-lived asset impairment cost of around RMB $83.5 million has been a major contributor to such a change. The management conducted a revisit on strategy and related assets and decided not to continue with the Chin Idea business, which is the leftover group's manufacturing business life. Therefore, the related assets were assessed to be subject to a one-off impairment. And to point out, this asset has no relation with our core IVC business, thus no impact on our future expectations of our business growth, and no further impairment of this kind is expected in the future. On a full year basis, G&A expense increased by 52.9%, primarily due to the higher share-based compensation expense, increasing personnel costs as the company grew its business, and the one-off long-lived asset impairment in the fourth quarter of last year. Research and development expense increased by 85.1% in the fourth quarter and 10.8% in the year 2022. primarily due to more resources invested in research and development activities. With this, operating income in the fourth quarter of 2022 increased by 39.7% year-over-year to RMB 309.4 million, with a margin of 22.2%, compared with 28.3% in the same period of 2021, and 26.4% in the third quarter of 2022. Net income in the fourth quarter of 2022 was RMB 116.5 million, a year-over-year 1.6% increase, and a negative 51.7% quarter-over-quarter decrease. mainly due to the one-off impairment costs. For a further breakdown of core costs and expense items on slide 25, a clear sign of the economic scale on our Hyperscale business model can be witnessed over the last 10 quarters. Despite the faster increase in utility costs than that of the revenue, the stability in other key costs and expenses items, including maintenance, as G&A and Extra has ensured a stable margin performance. Utility costs in the fourth quarter remained at a similar level to the previous quarter, making up 31.1% of total revenue, compared with 32.8% in the previous quarter and 28.5% in the same quarter of 2021. Maintenance and other costs and adjusted G&A expenses were all well maintained within their reasonable range. Maintenance and other costs were 8.6% of total revenue in the fourth quarter compared with 9.9% in the previous quarter and 9.9% in the same quarter of the year 2021, a clear sign of economy of scale. Adjusted SG&A expense was 8.3% of revenue in the fourth quarter compared with 7.7% in the previous quarter and 11% in the same quarter of 2021. With this, on slide 26, our profitability remains healthy Adjusted EBITDA in the fourth quarter of 2022 increased by 78.4% year-over-year to RMB 720.9 million from RMB 404.2 million in the same period of 2021. Adjusted EBITDA margin was 51.9% in the quarter, slightly higher than the previous quarter. For the full year 2022, adjusted EBITDA increased by 67.3% year-over-year to RMB 2,374.2 million, which is 5.1% above our guidance upper range. Adjusted EBITDA margin in the year 2022 improved to 52.2%. from 49.7% in the year 2021. Adjusted net income increased by 65.2% year over year in the fourth quarter to RMB 236.2 million at a margin of 7%. Adjusted net income in full year of 2022 increased by 99% to RMB 949.9 million with margin improving to 20.9% compared with 16.7% in the previous quarter. Details in the gap to non-gap reconciliation on EBITDA and net income would be available in our 6K filing or the appendix in our IRPPT. Now, let's take a look at our cash and debt position and our capex on slide 27. We continue to work in our business expansion to meet the increasing demand from our customers by investing more capital into our under construction data centers. CapEx in the fourth quarter was RMB 1,354.7 million and the CapEx in the full year of 2022 added up to RMB 4,912.8 million compared with RMB $3,766.9 million in the year 2021. Given the strong demand and the tight and challenging delivery timetable as discussed previously, we expect capex in 2023 to be in the level of around RMB 5 billion. On operating cash flow, cash collection is gradually recovering compared with the previous quarter. leading to RMB 389.4 million operating cash flow in the fourth quarter compared to RMB negative 173.8 million in the third quarter. Cash collection has been slower in the second half of year 2022 due to COVID-19 epidemics in November and December in Beijing. and our client started to upgrade its internal billing system as well. We have collected the majority of the receivables in the first quarter of 2023 and expect cash collection gradually back to normal. On financing, we added RMB 74.9 million project financing in the fourth quarter, ending up in a total debt position by the end of the quarter at RMB $8,371.5 million. So far, we do have major loan or debt facilities to mature in 2023 or 2024, only minor ones based on some of our project loan payback amortization schedule. With this, on slide 28 and 29, we ended up with a total cash position of RMB $4,371.5 64.2 million in the fourth quarter, compared with RMB 4,987.9 in the previous quarter, and NASDAQ position of RMB 4,270.6 million. On leverage and the coverage ratios remain in a reasonable range. On slide 29, with the momentum in adjusted EBITDA and our proper and prudent drawdown of the debt facilities, Our net debt to the last 12 months adjusted EBITDA ratio stood at 1.8 compared with 1.6 in the previous quarter. Total debt to last 12 months adjusted EBITDA was 3.5 compared to 4.1 in the previous quarter and 3.9 in the same quarter in 2021. Such also leads to the healthy coverage profile. with last 12 months adjusted EBITDA to interest ratio at 7.9 compared with 8 in the previous quarter. And the last 12 months funds from operation remaining at around 20% of total debt. Capital structure is healthy with total debt to capital ratio at 43.5% compared with 44.1% in the previous quarter. the healthy momentum on EBITDA growth based on the rapid ramp-up of our clients continue to support a strong return profile of the company. With an 86% IT capacity utilization ratio by the end of the fourth quarter, we are seeing a pre-tax ROIC of 17.6% compared with 16.5% in the previous quarter and 15.1% in the same quarter last year. Finally, on guidance delivery in 2022 and our outlook into 2023, strong revenue and adjusted EBITDA performance in full year 2022 resulting 2.7% and 5.1% upbeat of our previous guidance upper range respectively. and this has seen the third year of guidance upbeat for the company. Given the current business momentum, the company set its 2023 revenue and adjusted EBITDA guidance in the range of RMB 5,880 to RMB 680 million and RMB 3,000 to RMB 3,110 million respectively, representing 31.4% and 28.7% year-over-year increase at midpoint. This forecast reflects with the company's current and the preliminary views on the market and operational conditions, which are subject to change. Now, I will turn to Group CEO Mr. Wu Huapeng for the concluding remarks. Huapeng, please.
spk09: Hello, everyone. I would like to thank everyone for attending our 22-year 4-季度的業績會. The past two years have been extraordinary. The company has overcome all kinds of difficulties and maintained a good development system. In connection with 10-季度超市場預期的收入及利潤表現, we have completed another industry-leading industry year. In China, we have continued to deepen the energy and vehicle layout under the existing central and western points, by maintaining efficient large-scale development and exchange capabilities, and supporting our core customer groups to maintain a healthy development system. At the new East-South Western node, we have always maintained an active attitude of participation, and have joined the historical opportunity, and at the same time, we have maintained cautiousness in the flow of investment. In the Southeast Asian market, we have achieved long-term progress in the past year. India and Malaysia's large-scale projects are attacking and operating steadily. We are full of confidence in the development of Southeast Asia. We will continue to make good use of the current overseas key projects, and further open up the future of the Southeast Asian market. Looking forward to the future, based on the unique advantages of our current customer group, we will continue to maintain confidence in the plan of adding 120 to 150 trillion yuan every year in the next two years. At the same time, we will continue to maintain confidence and its long-term planning drive to maintain high confidence. And our customer base is at the forefront of this technology. We believe that the combination of these two aspects will bring additional surprise to the company at the end of the balloon for the long term. In the future, we will continue to stabilize our industrial vehicle layout, continue to provide the stability and efficiency of advanced supply and demand, and better support customer and industry future development. Thank you.
spk03: Translation for Hua Peng's words. Hello, everyone. Thank you again for joining the call. It's been a remarkable year 2022 for the company. We dealt with problems, have them solved, and finished the fiscal year 2022 with another guidance update and ten three-quarters of consensus update. In China, leveraging our energy-abundant region layout under East Data West computing cluster, and our unique hyperscale development and delivery capacity, we remain a trusted partner in supporting the healthy momentum of our depreciated client base. In the Qingyang cluster of East Data West computing, we've been active in joining the initiative, so as not to miss such historical opportunities. Well, at the same time, we move forward with our development plan programmatically to make sure that we make well-timed capital expenditure decisions. We are advancing our Southeast Asian market development at a firm pace with our key projects in Malaysia and India put into operation and ramping up steadily. We are confident in our Southeast Asian market and we're working on high-quality delivery of the existing key projects in the region to win us more opportunities in the future. Looking ahead, considering our unique client base and their momentum, we remain confident that an additional 120 to 150 megawatts of capacity can be achieved in the next two years. We are also confident that the newly emerging AI technology, such as chat-DPT catch-up, will drive the long-term demand of computing power, and we believe that our existing clients are among the pioneers of this trend, and we expect such to bring us upside in demand as well. As of today, we will continue to do what we should do to keep strengthening our energy site layout to ensure the supply side efficiency and sufficiency so as to safeguard the growth of the industry and our clients in the future. Thank you.
spk05: So this concludes our prepared remarks for today. Operator, we are now ready to take questions.
spk04: Thank you. We will now begin the question and answer session. To ask a question, Please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. 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. Once again, press star 1 for questions. Our first question comes from the line of Yang Liu from Morgan Stanley. Please ask your question, Yang.
spk01: Thank you very much for the opportunity to ask a question. First of all, congratulations on the company's strong performance. My question is about the next two years. Just now, Mr. Wu also mentioned that there will be a new contract of 120 to 150 trillion yuan every year. Can you ask the company to tell us about these 102 to 150 from two dimensions? One is, which ones are from our largest customers, and which ones may be some other new customers. Especially, I am also curious to see that in the fourth quarter, our company in Malaysia also has new orders from major international manufacturers. My question is regarding the breakdown of the 120-250% megawatt new booking in the next two years or per year in the next two years. Could management break down in terms of customer and also location for the new booking? Thank you.
spk08: Thank you, Liu Yang. I think our CEO, Hua Peng, is going to address your question in Chinese and Joey is going to translate in English. Thank you.
spk09: Thank you for your question. Regarding the separation of our goal,
spk03: We think in terms of the client, the current key anchor client will take up 80% and the new client will take up about 20%. Location-wise, China will take up about 70% and overseas, outside China, will take up about 30%.
spk01: I just translate the follow-up. I just want to make sure that the existing customer for the 80% from existing customers, real existing customer before the end of 2022, and not only referring to the anchoring customer. Thank you.
spk00: Hello.
spk04: Our next question comes from the line of Ming Ran Lee from CICC. Please ask your question.
spk02: Let me translate myself, please. And for our customers, if they have relevant application scenarios to drive more demand for us, could you give us more color about it? Thank you.
spk08: Yeah, thank you. I think I'm going to answer this question. I'm going to make some additional points. Please.
spk09: Okay, I'll talk about three points. First, in the long term, we believe that AI-related new technologies, including the application of new technologies that are very hot in the economy, and the increase in the number of new technologies in the future, will have a long-term positive impact on the data center. Second, what the company has been doing for a long time is relying on our unique super-large-scale energy strategy deployment model in the supply chain to support the ongoing development of the country's largest solar-powered fuel industry. Third, Then we will continue to support the layout of our energy vehicles and the development of the energy sector to ensure that the potential of key resources can be obtained, in order to better support the innovation needs of future customers, and continue to promote the mission of efficient power generation and conversion. There is one more key point. In the long-term development process of Qinhuai, we are working on the innovation needs of high-intensity AI, which is based on GPUs. It has been a long-term experience. We have a lot of technical innovation on this side. We have also served in a very high-tech way. We also know the layout of our customer's previous algorithm side. This is also beneficial for us to be able to catch more customers at this opportunity and be able to form stronger advantages.
spk03: Okay, so a translation from Hawthorne's words. In the long term, I believe that AI technology, including the chat GPT and its application and technology, would definitely bring up the computing power demand in the long term. And it will also turn into a long-term positive demand and positive opportunity for the data center industry. With our unique hybrid scale model from the supply side as well as the deployment on the energy side, we have been supporting the biggest computing power in China for the past few years. And we will keep the momentum up with our deployment and development capability on the energy side. We will continue to ensure to secure the critical resources strategically and to provide solid support for the future client demand. promoting our mission in effectively converting electricity power into computing power. Also, for TIN data, in our long-term development, we believe that the high-density racks, high-density computing centers with the GPU, with the AI computing power facilities, it will create a lot of demand. And we are the only one with a long-term experience in deploying such facilities. And we have been making related technology innovation, and we have the longest experience in serving the relevant clients in deploying their AI computing powers. So for us, we believe that the AI technologies development will bring us definitely a very positive effect in gaining more client demand and catching the opportunity.
spk08: Yeah, this is Nick. I would like to make three additional points on this very hot topic these days. Although it's pretty hard to quantify exactly how much incremental the demand on data and the IDC capacity according to our business. But we believe that if you read one of the recent reports, that there's a new concept of Moore's Law, essentially. It basically means that the future data and computing power could double its size in 18 months, essentially. So if you use this trend, you can see the future long-term potential is going to be huge for our IDC business. The other point I want to make, the second point is actually our current forecast annual incremental capacity between 120 and 150 megawatts is only our baseline case. It doesn't consider the potential explosive growth in this new technology demand, essentially, driven by this chat GPT stuff. So there could be some upper side of opportunity based on that. We are still watching it closely on this trend and see whether it can drive up our customers' business. And in turn, we can benefit from it. And third point we want to mention is that if you look at our client base, one of them is Microsoft. They are basically the leading forces in this CHAP GPT stuff overseas. our domestic and our key clients, you know, one of our key clients for our domestic business, we believe they should be the leading force as well on this trend. So in any case, once this trend become quantifiable and can be pretty much, you know, I would say become some certainty, we're definitely going to be one of the first ones to benefit a lot from it. Thank you.
spk02: Thank you very much.
spk04: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone. Our next question comes from the line of Edison Li from Jefferies. Please ask a question, Edison. Hi.
spk06: Thank you for giving me the opportunity to ask a question. Actually, I have three questions. The first question is, can you tell us about the situation of this company that has been open for 23 years? The second is, actually, your income in the last two or three years is still relatively low. Can you tell us some of the main explanations behind this? The third is, can you tell us about your efforts in the DC region? uh so i have three questions number one is that i want to ask about the capex guidance in 2023 and number two is i think that the revenue and ebitda guidance for 2023 is a little bit low so i would like to know the assumptions behind this guidance And number three is I want to get a little bit more details about the asset impairment that they booked in the fourth quarter. Thank you.
spk08: Thank you, Edison. I think I'm going to refer you at first and the third question to our finance senior VP, Zoe, to give you an answer. I'm going to address your second question on the guidance.
spk05: Okay. So thank you, Edison. Our first question regarding the CapEx expenditure of this year, we forecast it will be around RMB 5 billion, and this is based on our current business plan and also the project plan as we disclosed. So this is based on our current project delivery schedule and also the historical cost level. So for the third question you mentioned is for the details of those one-off long-lived asset impairment. This is mainly for Chin Idea, which was previously the next business for the manufacturing part of the company. And this is mainly for this plant factory's decoration and equipment investment. And so far we've decided for this manufacturing part of the key equipment of this MEP investment. We will more cooperate with our external strategic vendors, so we will not operate these factories anymore. So there is a one-time long-lived asset impairment. The impairment amount is around RMB $84 million. And this is a very thorough and a one-time cleanup. And we don't expect any further impairment or similar cases in the future. And hope this helps you. Impairment finished, yeah.
spk08: All right. Thank you, Doi. I think one thing I disagree is actually around 30% of the revenue, the growth on the revenue side, EBITDA side is low. If you compare the previous past several years, the growth rate is probably going to be a little bit lower, but still much higher than the industry average. And also, I think I just mentioned that we anticipate that this is our base case forecast, essentially. So basically, I don't even call it a forecast. It's probably just more like a natural result. of all the other current contract and their execution and the construction And once they got delivered, they're going to ramp up in a pretty much on average nine months, you know, ramping up time. So we put all this very conservative and based assumption into the model, and what you will get is actually the 30% increase on the top line. And slightly, you know, slightly lower EBITDA growth rate, I think, but I still call it around 30%, is simply because we are actively seeking diversification strategies. this year, especially starting from the second half of this year. And that basically means that post-COVID time, we're going to hire more people and more staff on the business development side, on the R&D side, essentially to support a company's growth in both China and overseas market over the long run. Having said that, you're going to see a slight increase of our corporate G&A, R&D, and sales marketing. And you spend it, you know, this year, they're going to bring the long-term. This incremental resource dedication is going to bring a long-term benefit to companies, you know, sustainable, the business in the future. So in other words, what do you see? 30% growth rate on the top line and bottom line are pretty much a secure number based on the existing contract and the visible top lines. There is some upper side potential on top of it. Thank you.
spk06: Thank you. Thank you, Nick. Can I have a very quick follow-up? I wonder if the EBITDA margin of the non-China projects is putting some pressure on the overall EBITDA margin?
spk08: Actually, on this, the overseas EBITDA margin, we don't disclose separately about overseas EBITDA margin. But overall, one thing you can tell is actually with the overseas expansion, with additional business, you know, and bring the long-term potential, it brings out directly the geographical and the customer diversification. That's point number one. Number two, in terms of per unit of financial return, if you measure it against the regional benchmark of here's performance, we believe that our EBITDA margin, profit margin, return on assets, definitely going to be among the best. That's the second point. On third point, regardless of the a little bit different margin profile between the overseas and China market, we're very confident that on a corporate level, our EBITDA margin can maintain well above 50% moving forward into the future. And also the other important factor you've got to consider is actually the competitive model or competitive confidence model for the company in overseas market are slightly different from what we have in China. In overseas market, we basically pass through all the power to the client because simply because of the more functional, you know, functional Asian nature. of the power costs in overseas markets. So, without this power stuff, you know, you have a more certainty of our EGITO margin overseas. On the other side, that's probably a little bit lower EGITO margin than this. Thank you.
spk06: Okay. Thank you.
spk04: All right. Thank you very much for all your questions. We have reached the end of the question and answer session. And with that, we conclude our conference for today. Thank you for participating. You may all disconnect.
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