Chaince Digital Holdings Inc.

Good morning and good evening, ladies and gentlemen. Thank you for joining and welcome to Chin Data Group Holdings Limited first quarter 2023 earnings conference call. We'll 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 the first speaker today, Mr. Don Chou from Investor Relations of Chin Data Group. Please go ahead, Don.

Thank you, operator. Hello, everyone, and welcome to ChainGator Group's 2023 first quarter earnings conference call. This is Don from the investor relations team of the company. With us today are Mr. Nick Wong, our CFO, and Ms. Zoe Zhang, our senior vice president of finance. 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-gap-to-gap 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, Don. Hello everyone. And thanks for joining the call. The first on behalf of our CEO, I would like to first address our attendees with the following opening remarks. We started the year of 2023 with another strong quarterly business and financial performance. During the first quarter of 2023, the company continued to advance with our highly demanding project delivery schedule. Demand from existing clients remained healthy and ramp up was as scheduled. As a result, we continue to grow our top and bottom line with adjusted EBITDA beating market consensus for 11 consecutive quarters. Notably on the demand side, we hold a very positive view AIGC-related developments, such as machine learning, large language models, and AI generally, should drive industry demand in the long term. Well, we have also noticed the recent effort of our existing clients in incorporating such new technology into their current product lines. In the first quarter, we have secured certain contracts for high density cabinet deployment. And we believe our unique supply model is capable of accommodating more of these AIGC related demand in the future. The key features of our business model are our energy abounding region layout and our in-house food stack capabilities. And we have accumulated actual practical practice experience in deploying high density cabinets in our existing campuses with various cooling technologies suited, tested, and applied in our data centers. In our overseas business, the delivery of phase two and three of the over 100 megawatts MY06 JOHO project remain the key focus, and we are devoting dedicated resources to ensure the timely delivery. We remain confident with the capacity expansion target in the year 2023, and the healthy momentum in our cornerstone hyperscale business continue to serve as solid fundamentals for our consideration on future business diversification. Now, let's start with some key highlights for the first quarter. On slide four, we added one new project or an additional 27 megawatts of new capacity in the first quarter, bringing our total capacity to 898 megawatts, and total number of data centers to 33. We put one hyperscale data center into service in Zhangjiakou City, bringing our total in-service capacity to 639 megawatts, an increase of 26 megawatts during the quarter. Demand and ramp-up remained healthy. We received an additional client commitment of 16 megawatts in the first quarter, bringing our total contracted and IOI capacity to 816 megawatts, leading to a client commitment rate of 91% of our total capacity. We added 12 megawatts of utilized capacity in the quarter, bringing our total utilized capacity to 537 megawatts, and maintain a solid utilization rate of 84%. We remain fully committed to the mission of efficiently converting electric power into computing power by sticking to the energy side layout, leveraging our in-house full stack capabilities in pursuit of CapEx and OpEx efficiency, and offering our clients quality and reliable data center solutions. Our supply side advantages gained widespread recognition and acclaim from a variety of prestigious awarding bodies. Some of our campuses in Shanxi Province, Hebei Province, as well as in Yangtze River Delta region have recently won global and national level awards for their unique performance in design and construction, energy efficiency, and operation management. Our top and bottom line momentum remains strong. Revenue in the first quarter was RMB 1,443.5 million, representing a 56.8% year-over-year growth. Adjusted EBITDA grew by 64.6% year-over-year to RMB 813.8 million and have been, for 11 consecutive quarters, beating market consensus. Adjusted EBITDA margin reached new high of 56.4%. Net income grew by 167.5% year-over-year to RMB 253 million, with a net margin of 17.5%. Finally, given the current business momentum, we reiterated our full-year revenue guidance range with very positive outlook. While raised our adjusted EBITDA guidance range by 3.6% at midpoint, the new guidance range is now between RMB 3.1 billion to RMB 3.22 billion. Now, let's go into details and first take a close look at project level delivery and construction on slide seven to nine. We adhere to our energy side strategy and are consistently working on a highly demanding schedule to ensure timely delivery of resources to our clients. Our current delivery plan remains on schedule. In the first quarter, we put one project into service in mainland China with a total capacity of 26 megawatts. This project is CN19, located in Zhangjiakou City, Hebei. supporting one of our key international clients. The project utilization rate reached 14% in the first quarter of its operations. In addition, we started construction of one new hyperscale project during the first quarter, CN22, with a design capacity of 28 megawatts. It's located in one of our campuses in Zhangjiakou City. It is scheduled for delivery starting from the second quarter of 2024 and is intended for one of the key international clients. The project is currently 28% contracted. With the buff changes during the quarter, as you can see on slide nine, we have brought our total capacity up by 27 megawatts, reaching 898 megawatts by the end of the first quarter. with the 639 megawatts in service and the 258 megawatts under construction. Of the under construction capacity by quarter end, we currently expect 188 megawatts to be delivered in 2023. And our teams in China and overseas are working diligently to ensure our supply readiness. Now, regarding demand on slide 10, We continue to see additional demand coming from our existing clients, supporting their existing and potentially new business initiatives in our northern and eastern China campuses. Our total client commitment increased by 16 megawatts in the first quarter. Specifically, for one of the key international clients, we received 8 megawatts contracted capacity for the new under construction product, CN22. and another six megawatts indication of interest on product CE01 and CE02. We have also secured a contracted capacity of around two megawatts for our existing Northern China project for anchor clients. And some of the capacity were intended for 20 kilowatt high density cabinet deployment. Meanwhile, contracted capacity increased by 78 megawatts in the quarter. including 69 megawatts of IOI conversion from MY06 Phase 1, MY06 Phase 2 in Johor, Malaysia, and MY03 in Kuala Lumpur, Malaysia, and aforementioned 8 megawatts contracted capacity for the new under-construction project. Generally speaking, we are pleased with the momentum of our existing client base There have been many exciting AI related advantages takes place in this industry. And there have been news on how one of our existing clients has already successfully integrated AI into its product, resulting in significant business growth. And we think our clients are among the potential leaders in this new AI era. As a data center company, the essence of what we need to care about really is whether our know-how are all the relevant solutions within the data center that help to host the servers for example energy sufficiency power distribution cooling technologies etc are ready for the new ai era and we believe chin data is well positioned for the aigc era in addition to the aforementioned the new contracted capacity we have actually accumulated practically experience in deploying high density cabinets from 20 kilowatts to up to 50 kilowatts per cabinet in our existing campuses. Our hyperscale model characterized with energy side layout that ensures power sufficiency and our in-house design and building system has enabled us to test and apply various cooling technologies suited for cabinets of different density, including immersion liquid cooling, cold plate liquid cooling, waterless cooling, and indirect evaporative cooling, et cetera, in our campuses in China and overseas. The commitment status of our asset portfolio continues to look healthy. On slide 12, for our existing 639 megawatts of in-service capacity, 95% was committed by clients in either contract or IOI by the end of the first quarter. This is relatively stable compared to 96% in the previous quarter and 95% in the same quarter last year. For our total capacity on slide 12, the commitment ratio was 91% at the end of the first quarter compared with the 92% in the previous quarter and 88% in the same quarter last year. On top of healthy demand and our differentiated client base, and as we have been emphasizing, our unique contract profile brings long-term business visibility. By the end of the first quarter, over 95% of our contracts or for 10-year contract terms or longer, leading to a weighted average remaining terms of current contracted capacity of 8.4 years. And we expect less than 6% of our existing contracted capacity to expire until the end of 2027. Now, coming to customer moving on slide 14. Our moving pace is healthy and in line with our schedule. We added 12 megawatts of utilized capacity in the first quarter, bringing our total utilized capacity to 537 megawatts, compared with 344 megawatts in the same quarter last year. This represents 56.1% year-over-year growth. Quarterly move-in was contributed by projects in our northern China campus, supporting the anchor client, one of the international clients, and the Chinese cloud client, as well by our overseas project in India, supporting the other international client. These quarterly dynamics lead to a quarter end utilization ratio of 84%, compared with 69% in the same quarter last year. Looking further at the mix of utilization ratio by project and geography on slide 15. By geography, overseas business made up a similar share compared to the previous quarter, at around 9 to 10% of total utilized capacity. By project, 16 out of the existing 25 in-service projects, or 64% of them, are now at 90% utilization or above, demonstrating that the majority of our projects have reached a mature stage with quite healthy demand. The performance of our hyperscale campuses in design and construction, energy efficiency, and operation management have gained wider recognition, winning global and national awards respectively. On slide 16, in April 2023, our Lingqiu campus in Shanxi Province was honored with the Data Center Design and Construction Award at the 2023 Data Cloud Global Awards. These awards are highly prestigious within the spheres of data centers, cloud computing, edge computing, and other critical IT infrastructure. And this is the second time we have received such a distinguished accolade. Mingqiu Campus is the largest single hyperscale data campus in the Asia-Pacific region. and maintains the annual power usage efficiency, or PoE, of 1.16. On slide 17, in March 2023, our Donghua Yuan campus in Zhangjiakou was selected for the 2022 National New Data Center and National Green Data Center list by Ministry of Industry and Information Technology. Donghua Yuan campus is operating at an annual PoE of 1.14. And it is the second consecutive year that we have made onto the list, demonstrating our unique performance in data center energy efficiency, operation management, and data security. On slide 18, in April 2023, our Nantone campus in Jiangsu Province was awarded the prestigious B-COST 2021 certification. which was the first Chinese enterprise to obtain the DECOS 2021 standardization certification. The DECOS standard is widely recognized in the data center industry in Southeast Asia and globally as an important indicator of operational management standardization. The company is currently utilizing its Kunpeng IDT operating and management system to manage its data center campus achieving real-time monitoring of its key data center assets, and enhanced maintenance efficiency. With that, I have concluded my part, and I will turn to Zoe, our Senior Vice President, for the details of our financial performance. Zoe, please.