Chaince Digital Holdings Inc.

Good morning and good evening, ladies and gentlemen. Thank you for joining and welcome to Chain Data Group Holding Limited Second Quarter 2023 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 the first speaker today, Mr. Don Zhou from Investor Relations of Chain Data Group. Please go ahead, Don.

Thank you, Amber. Hello, everyone, and welcome to Chengya Group's 2023 second quarter earnings conference call. This is Don from the investor relations team of the company. With us today are Mr. Nick Wong of CFO and Ms. Zoe Zhuang of Senior Vice President Finance. And 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.chingdatagroup.com. We have also updated our quarterly presentation on the company's investor relations website, which you can refer to as the 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. Concurrently with the ongoing progress of privatization of the company, the management and the entire team continue to work diligently on our business, delivering another strong quarterly performance in the second quarter of this year. As a quick summary for our quarterly performance, we adhered to our demanding schedule and delivery was on time. Demand from our existing clients remained satisfying, with demand in Southeast Asia market being a key driver during the second quarter. RenPub was usual as always, with overall and single project level utilization ratio in good shape. And we continue to build our partnership and invested in research and development to prepare ourselves for the further AIGC era. and patiently waiting for any signals of recovery of the market. To start with some key highlights for the second quarter. On slide four, two new projects were put under construction in the second quarter. Total capacity increased by 47 megawatts to 945 megawatts, and total number of data centers was 35. Two hyperscale data centers were put into service in our Datong campuses in Shanxi and Johor campuses in Malaysia, bringing our total in-service capacity to 730 megawatts, an increase of 91 megawatts during the quarter. Total client demand increased by 34 megawatts in the second quarter, bringing our total contracted and IOI capacity to 850 megawatts. with total client commitment rate remaining at a healthy level of 90%. Ramp up was strong as we added 48 megawatts of utilized capacity in quarter, bringing our total utilized capacity to 585 megawatts with a solid utilization rate of 80%. Financials remain under healthy momentum and in high quality Revenue in the second quarter was RMB 1,553.8 million, representing 49.7% year-over-year growth. Adjusted EBITDA grew by 49.9% year-over-year to RMB 816.1 million, with adjusted EBITDA margin remained well above 50%, at 52.5% in the second quarter. Net income grew by 9.8% year-over-year, to RMB 219.2 million with a net margin of 14.1%. With the current business momentum, we reiterated our full year guidance range with revenue in the range of RMB 5.8 to 6.08 billion and adjusted EBITDA in the range of RMB 3.1 to 3.22 billion. Let's go into details and first take a closer look at project delivery and construction on slide seven to nine. We continue to work on the highly demanding schedules to ensure timely delivery, especially for our Malaysia business. In the second quarter, we put two projects into service with a total capacity of 91 megawatts, CN20 A 49 megawatts hyperscale project in our Datong campus, Shanxi Province, was delivered as originally scheduled. The project supports the anchor clients and is currently 100% committed by the client. MY06 Phase II in Johor, Malaysia, was also delivered as scheduled. The 42 megawatts project supports the anchor client as well. and was already running at the 76 percent utilization ratio in the first quarter since operation. Two new under construction projects was added. Our flagship MY06 project saw further capacity expansion in the second quarter with the inclusion of MY06 Phase 4, a 12 megawatts new hyperscale project. It is scheduled for delivery starting from the first quarter of 2024. and was 100% committed. CN23, the other new end of construction project, is located in one of Zhangjiakou campuses in Hebei. The 26 megawatts hyperscale project is intended for one of our key international clients and is scheduled for delivery starting from the first quarter of 2025. The project is currently 49% contracted. Furthermore, Thanks to the healthy momentum of our clients in Southeast Asia market, our existing MY06 phase three project was further expanded by 10 megawatts in the second quarter, now reaching 53 megawatts. The project is currently 100% committed. With the above changes during the quarter, as you can see on slide nine, we have brought our total capacity up by 47 megawatts. reaching 945 megawatts by the end of the second quarter, with 730 megawatts in service and 214 megawatts under construction. Of the under construction capacity by quarter end, we currently expect another 15 megawatts to be delivered in 2023, and our teams in China and overseas are working diligently to ensure our supply readiness. Regarding demand on slide 10, we continue to receive additional demand on existing and new projects with overseas business contributed meaningfully. We received a total amount of 34 megawatts new demand in the second quarter, among which 22 megawatts of additional demand were received from our anchor client following the expansion of the MY06 project. and another 12 megawatts new demand received from one of the key international clients on a business under construction project in Zhangjiakou. Meanwhile, contractor capacity increased by 60 megawatts in a quarter, including 16 megawatts of IOI conversion from CE02, CN12, and CN23, supporting one of the key international clients, and 45 megawatts IOI conversion and newly contracted capacity on product MY06 Phase III for the anchor client. In general, we are optimistic about opportunities in the Southeast Asia market. The additional demand that we received during the quarter further strengthened our review, and the company has been devoting dedicated internal resources to ensuring timely product delivery while securing necessary resource for future development in advance. Regarding the market in China, we are patiently watching the involvement of the market condition, waiting for further signals of recovery to emerge, while we continue to build our partner ecosystem to lay the foundation for future opportunities. We believe our healthy business and financial profile, as well as our continued effort in research and development will be the key fundamentals for the company to win more opportunities as the market gradually recover and to compete in the AIGC era. With the dynamics of demand in the quarter, the commitment status of our asset portfolio continues to look healthy. On slide 12, for our existing 730 megawatts of in-service capacity, 95% was committed by clients in either contract or IOI by the end of the second quarter. The same proportion as in the previous quarter and in the same quarter of last year. For our total capacity on slide 13, the commitment ratio was 90% at the end of the second quarter compared with 91% in the previous quarter and 84% in the same quarter last year. The visibility of our business remains there As by the end of the second quarter, over 95% of our contracts were for 10 years term or longer, leading to a weighted average remaining term of the current contract capacity of 8.6 years. And we expect less than 4% of our existing contract capacity to expire by the end of 2027. Now, coming to customer move-in on slide 14. Our ramp-up remains healthy and in line with our schedule, with overseas projects as the key driver. We added 48 megawatts of utilized capacity in the second quarter, bringing our total utilized capacity to 585 megawatts compared with 401 megawatts in the same quarter last year. This represents 45.9% year-over-year growth. Quarterly move-in was contributed by projects in our Northern China campus, supporting the Anchor client and the Chinese Cloud client, as well by our overseas project in India and Malaysia, supporting the Anchor client and one of the key international clients. MY06 Phase II is 76% utilized in the first quarter following its opening, indicating a strong overseas demand. These quarterly dynamics lead to a quarter-end utilization ratio of 80%, compared with 78% in the same quarter last year. On a quarter-over-quarter basis, utilization ratio is 4% lower, mainly due to the inclusion of the 49 megawatts new in-service project that was just starting to ramp up. Looking at the utilization ratio at single project level, 16 out of the existing 27 in-service projects, or 59% of them, are over 90% utilized. Geographically, with the fast ramp-up of our JOHO projects, overseas business now contributed to 14% of total utilized capacity during and by the quarter end. On some other aspects of business development, on slide 16, We released our 2022 ESG report on July 24th, 2023. We continue to run our business in an energy efficient way with a total power consumption of 3.032 billion kilowatt hour in the year 2022. We managed to keep the annual PUE for our Chinese business at 1.21, remarkably lower than industry average. We reinforced our safe ESG strategy that was set forth in the year 2021, while committing ourselves to the mission of efficiently converting electricity into high-quality computational power in a stable, eco-friendly, and high-quality manner, thereby increasing operational stability and enhancing partner confidence and building a more sustainable brand. More information can be referred to in our EFG report. On slide 17, as the first mover in executing energy-abundant lower-tier region layout strategy, our years of operation in Huali County, Zhangjiakou City of Hebei Province, is gaining more recognition. Hebei Huailai, Hebei Qinghuai, excuse me, is subsidiary of Chin Data. has earned a place on a national list of specialized and innovative little giant enterprises. This accolade is bestowed upon companies that focus on niche markets, demonstrate strong innovation, maintain a significant market share, master core technologies, and attain remarkable levels of quality and efficiency. We are the first data center enterprise in Hebei to earn this esteemed recognition. Our four campuses layout in Huali County is now well established, with our IT capacity surpassing 300 megawatts and a server deployment scale constituting 80% of the total in Huali County. Furthermore, in this region, as we mentioned previously, We continue to build our partner ecosystem to lay the foundation for future opportunities. On slide 18, on July 28th, we entered into a 10-year strategic cooperation agreements with Zhangjiakou Construction Investment Group. This local SOE boosts a wealth of experience and capabilities in asset management, capital operation, resource development, and industrial investments. Through the partnership, both parties would engage in deep cooperation in land and water resource development, energy development, data center collaboration and operation, and integrated products of source grid load storage, and further explore other collaborative opportunities in the big data industry chain. This partnership signifies the continued commitment of Qindata in Huai Lai to further strengthen and optimize the local digital economy. With that, I've concluded my part, and I will turn to Zoe for the details of our financial performance. Zoe, please.