GDS Holdings Limited

Hello, ladies and gentlemen. Thank you for standing by for GDS Holdings Limited's first quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there'll be a question and answer session. Today's conference call is being recorded. I'd now like to turn the call over to your host, Ms. Laura Chen, Head of Investor Relations for the company. Please go ahead, Laura.

Thank you. Hello, everyone. Welcome to the first quarter 2022 earnings conference call of GDS Holdings Limited. The company's results were issued via Newswire Services earlier today and are posted online. A summary presentation, which we will refer to during this conference call, can be viewed and downloaded from our IR website at investorsgds2services.com. Leading today's call is Mr. William Huang, GDS founder, chairman, and CEO, who will provide an overview of our business strategy and performance. Mr. Dan Newman, GDS CFO, will then review the financial and operating results. Ms. Jamie Koo, our COO, is also available to answer questions. Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Mitigation Reform Act of 1995. Forward-looking statements involved inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in a company's perspective as filed with U.S. SEC. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please note that GDS earnings press release and this conference call includes discussions of unaudited debt financial information as well as unaudited non-debt financial measures. GDS press release contains a reconciliation of the unaudited non-debt measures to the unaudited, most directly comparable debt measures. I'll now turn the call over to GDS founder, chairman, and CEO, William. Please go ahead, William.

Thank you. Hello, everyone. This is William. Thank you for joining us on today's call. We are operating in a difficult environment. Everyone is having to deal with unprecedented challenges, including the recent COVID lockdown in China. GDS business is resilient and defensive. We generate recurring revenues, underpinned by long-term contracts with high-quality customers. Despite the challenges, I'm pleased to report a solid set of results for the first quarter. We grew revenues by 32% and adjusted EBITDA by 29% year-on-year. We continue to win new businesses. with 18,000 square meters of net additional customer commitments. We strengthened our funding position by raising U.S. dollar $620 million from a convertible bond issued to strategic investors and completed a further U.S. dollar $530 million of project financing. In the near term, we must deal with the challenges to the best of our ability. However, at the same time, we remain focused on strengthening our strategic position for the medium and the longer term through further developing our customer franchise, adding to our resource pipeline, consolidating the market as opportunities arise, and accelerating our regional expansion. With scarce resources already secured, great customer relationships, and a proven track record, we have locked in enormous growth potential which will materialize in the future. It is just a matter of time. So turning to the slide four, starting from the late February, met city lockdowns happened in many areas of China because of the COVID outbreak. We have a total of 82 data centers in service, out of which 58 have gone through lockdown situations, and over 30 are still locked down today. During these lockdowns, around 880 people were isolated inside our data centers. including 660 GDS employees and 220 from our customers. We need to keep our data centers in continuous operation while keeping the people inside safe and healthy. We never fail to deliver. All of our data centers are running as usual without interruption, and all the people inside are taken care of. We really appreciate every effort from our data center employees. It is also highly appreciated and recognized by our customers. Turning to slide five, the first quarter of the year is always a slower season because of the Chinese New Year. On top of this, lockdowns also impact the moving rates. Nonetheless, we still achieved over 12,000 square meters of net additional area utilized for the quarter. And our utilization rates increased to 67%. As shown on slide six and seven, we have always maintained a high commitment rate for our area in service and area under construction. We have a very large backlog, totaling 243,000 square meters, which is equivalent to 73% of our area utilized. It provided us with high visibility to future growth. Our backlog is solid. Our data centers are concentrated in tier one market where supply is increasingly scarce. Our customers need this resource. we will continue to deliver the backlog. As I said, it is just a matter of time. Turning to slide eight, we have scaled down our capacity delivery this year to align with the current slower environment. In the first quarter of 2022, we brought 4,500 square meters of capacity into service. and initiated one new data center under construction, SH18 Phase 1, which is 68% backed by an anchor customer commitment. Turning to the slides 9 and 10, while delivery is slower for some customers, there are still other customers out there with substantial new requirements. In 1Q22, We booked 18,000 square meters of new commitments, including three hyperscale orders. Two came from the existing cloud and the larger internet customers. And then the remaining one came from a new financial institution customer. Turning to slide 11. Continuing the trend which we highlighted last quarter, financial institution and the larger enterprises accounting for around 45% of new bookings in 1Q. We are still confident of achieving our full-year sales target of around 90,000 square meters next year. From what we see in the pipeline, there could be large contributions from Hong Kong and Southeast Asia than we thought before. Turning to slide 12. I have been in Singapore for the past few months, along with our COO, Jimmy. We have made substantial progress in our regionalization plan. According to Cushman and Wakefield, Singapore is a top five data center market globally, and it was one of the fastest growing. We know from our whole market customers how much latent demand there is for Singapore. Currently, Singapore government has elected to pursue a moratorium on data center constructions. While it may soon allow some new development, the numbers clearly indicate that access demand will have to go elsewhere. We are one of the first movers to establish high-scale green data center projects in close proximity to Singapore. To our understanding, there are no significant legal constraints on the flow of data cross-border between Singapore, Malaysia, and Indonesia. Our sites are therefore well-placed to serve both as regional hub and the domestic market. Furthermore, we are the only player to have established projects both in Johor, Malaysia, to the north of Singapore, and Badan, Indonesia, to the south of Singapore. The first phase of our 54 megawatt projects at Nusa Jaya Tech Park, Johor, is now under construction. To complement this site, we recently signed a partnership with YTL Power to co-develop 168 megawatts of capacity across an individual design of a facility. At the visionary YTL Green Data Center Park, Johor, approximately 30 kilometers from Singapore, this data center will be powered by the on-site solar generator. generation. We have completed the land purchase in Nansha Digital Park by 10, and the construction of the first phase of our 28-megawatt project will start in the next couple of months. According to the Cushman Wakefield, Hong Kong is top 10 data center market globally. which offers excellent network connectivity and availability of all major cloud services. In the first quarter, we signed a built-to-suit lease for HK3. Together with our existing projects, HK1, HK2, and HK4, this will give us a continuous supply of high-quality data center capacity over the next five years. All concentrated in the framework favored West Kowloon area. This is an extraordinary achievement considering how difficult it is to solve for real easy in Hong Kong. In Macau, we are launching the first ever carry neutral data center project to meet new internet and the digitalization requirements. Across Southeast Asia, Hong Kong and Macau, We now have visibility for over 300 megawatts of capacity. Our customers are very excited about this unique strategic presence. We expect to announce several anchor orders over the course of this year. Leveraging the strength of our franchise in mainland China, we believe that Within a short period of time, we will create significant additional value for our shareholders through regional expansion. Now, I will hand over to Dan for the financial and operating review. Thank you.