Chaince Digital Holdings Inc.

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.

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.

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.