GDS Holdings Limited

Hello, ladies and gentlemen. Thank you for standing by for GDS Holdings Limited third quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded. I will now 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 third quarter 2024 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 investorsgdsservices.com. Leading today's call is Mr. William Wong. GDS founder, chairman, and CEO will provide an overview of a business strategy and performance. Mr. Dan Newman, GDS CFO, will then review the financial and operating results. 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 Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and certainties. As such, the company's results may be materially different from reviews expressed today. Further information regarding these and other risks and certainties is included in a company's prospectus as filed with the U.S. SEC. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please also note that GDS earnings press release and this conference call include discussions of unaudited gap financial information, as well as unaudited non-gap financial measures. GDS press release contains a reconciliation of the unaudited non-gap measures to the unaudited most directly comparable gap measures. I'll now turn the call over to GDS founder, chairman, and CEO. William, please go ahead, William.

Okay, thank you. Hello, everyone. This is William. Thank you for joining us on today's call. In 3Q24, we achieved a revenue growth of 18% and adjusted EBITDA growth of 15% year-on-year. This growth rate is quite remarkable in current market conditions. It reflects the progress we have made in turning around our China business, plus the uplift from the successful execution of our international strategy. From the beginning of this year, the moving rate has clearly stepped up. In 3Q24, gross additional area utilized was over 25,000 square meters. It is the highest level we have ever achieved. It is all organic. and all interior markets. The main reason for this improvement is AI demand. About half of the moving is coming from the recent new orders and half from orders which have been in the backlog for longer time. For the full year of 2024, we expect net additional area utilized of around 60,000 square meters, which is similar to our peak year of 2020. Looking forward, we have better visibility on the deployment plans of our customers, which gives us a high level of confidence. Therefore, we expect this level of moving to be sustained. The first wave of AI demand is for machine learning. For this use case, customers can deploy in remote area where land and power are available. The second wave of AI demand is for inferencing. For this use case, customers must deploy in the tier one markets. This has been confirmed with our customers in multiple communications. So far, the volume of AI new orders in tier one markets is quite small. Customers are typically looking for moving ready capacity. This fits with our current sales strategy, which is target order, which match our inventory. In the coming year, we expect AI deployments in tier one markets to increase in scale. This will help bring the market back into balance. Some of the new demand will be for hyperscale campuses. We are uniquely well positioned for this. We have large blocks of land and power at diverse sites around Beijing, Shanghai, and Shenzhen, Guangzhou. This kind of resource is scarce. In order to capture the AI wave in tier one markets, We will carefully consider sales opportunities, which require us to initiate new deployment. This is a more expansionary business plan with higher investment and higher growth. It goes hand in hand with the execution of our China REITs strategy. We made a decision to establish our international business as a standalone entity. We believe that this approach will maximize value for our shareholders. The vision for GDSI is to become a leading international data center platform. We pioneered the creation of new markets to fulfill AI demands. As of 3Q24, we have 431 megawatts of total customer commitments. The sales pipeline is very strong. During the third quarter, we signed a contract with a new customer, which is a leading global tech company, for capacity at our campus in Bhutan. 34 megawatts is committed and the 38 megawatts is reserved. This is the first data center of its kind in Asia, designed for the most advanced AI technology. The ramp-up is very fast. We already delivered the first phase in the past few days. It's an incredible achievement by our management and the perfect illustration of how we are able to create new markets. During the current quarter, we officially entered into another new market, Thailand. We are the first data center, hyperscale, we are the first data center operator to undertake the first hyperscale project in Thailand. We received strong support from the Thailand government. We think this is the next big opportunity in Southeast Asia. In the past few months, all the global tech leaders have announced large investment plans in Thailand. We have acquired the land for a data center campus in Chamburi Province near Bangkok, which is the focus area for hyperscale deployment. We plan to develop around 120 megawatts of total IT power capacity on our first land site. We expect to serve the domestic demand for Thailand's fast-growing digital economy. We are very confident to make Thailand another success story. I will now pass on to Dan for the financial and operating review.