Q1 2020 Earnings Call
Earnings Conference call I.
At this time, all participants are in listen only mode.
After managements prepared remarks, there will be a question and answer session.
Today's conference call is being recorded altered the coal, which your host Mr. Chen head off Investor Relations for the company. Please go ahead Laura.
Thank you Hello, everyone. Welcome to once you 20 earnings conference call of tedious Cody limited. The company's results were issued continues why services earlier today and our posted online.
Somebody presentation, which we refer to during these conference calls can be viewed as downloaded from Ohio website investors GDS services Dot com.
During today's call is Mr., William GDS founder Chairman C. O would provide an overview business strategy and performing.
Mr., Dan Human GDS, CFO, who will then review the financial and operating results lips Jamie.
Oh COO is also available to all the questions.
Before we continue please note today's discussion will contain forward looking statements made under the safe Harbor provisions of the U.S. Robyn Securities Litigation Reform Act of 1995 forward looking statements involve inherent risks and uncertainties.
As such the company's results maybe maturity difference from the views expressed today.
And then information regarding these and other since doesn't fit it's included in <unk>. The company perspective, a spoiled with the U.S. FCC. The company that's not a huge 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 Oh, I'm audited GAAP financial information I feel that UN audited non-GAAP financial measures.
He did press release contains a reconciliation of the unaudited non-GAAP measures. So the UN audited most directly comparable GAAP measures.
I'll now turn the call over to tedious founder Chairman and CEO Mr. William Wong. Please go ahead with him.
Thank you Laura.
Hello, everyone during the winter.
Hey, Hong Kong was damaged Jamie well use celebrating his first Andy I'm relieved from government accordingly.
And he will join us on todays call.
I'm pleased to report that the out performance in the first quarter. Although this year was highly busy Lynn.
Despite the challenging operating environment.
We grew adjusted EBITDA by alone almost by almost 50%, yeah, well, yeah, and achieve our highest ever modeling and just to over 46%.
So this momentum will still come into the and then B and.
Even stronger now.
One coupon tea, we achieved record level.
So.
With all attempting to solve in square meter all 46 megawatt of net add it.
In order to keep pace with sellers.
We scale scope I wonder if I'm remembering the program.
We ended the quarter with although once all the one.
Got it can solve those square meter or 260 megawatt.
Oh the capacity under construction.
Which wasn't nearly 70% pretty committed.
We also added.
100 solvent square meter opt in the medical capacity so our pipeline.
[noise] last but not leap, we maintained our radcom doubled zero.
Zero infection.
And a zero sum its incident.
We have been no. We haven't we have been throw a lot of.
Moving to see if not why Q.
Trade was.
And then maybe Sean can.
Even with all three on a same time at the same time.
But our business have not beating pack.
We have kept our focus.
And the damage treated our execution I believe.
The other <unk> for our industry is better than ever.
[noise] color if I wasn't main growth driver.
Oh every piece of demand from all tied to customers and all types of new technology.
You May have seen report said already bought up has to span I know that I'm B 200 billion on theory U.S. dollar studied billing.
Infrastructure in the next few years.
Other cloud service providers are also reporting accelerated answering to adopt.
Probably in China is forecasted to grow ex over city San cater for the next five years.
We actually maybe that's before that the pilot at least three times expansion of cloud data center capacity.
Thanks, Ben she will be balanced between children, Maki and the lower tier markets.
Oh this is the opportunity, which we are talking to our customers Bob.
Yeah, [laughter] acumen is consistent.
They have a high visibility in the in their business and that they are planning multiple years okay.
As cloud service providers growth.
He said something new.
And then the baby soon.
Each of which is.
Since then to Iraq and already.
We focused on hosting Diaz sees all around.
Can be roll off and the debt.
Hosting the expansion capacity in the same location.
The Onramps also enable us to drive into price does is it.
Increasingly enterprise.
[laughter] enterprises recognize the multi cloud ecosystem ecosystem as a key advantage.
We have had a lot of success with this strategy.
As a result, we are well positioned for follow.
Oh <unk> order.
To illustrate this point.
Our number one customer is now present a present.
I wanted to aid us in send US an hour number two customer is now for them they get even the ones.
David This is what we mean when we say that's we are the home off the call in China.
In one can compete with all came to treat all this oh 10 megawatt each so sometime this has happened.
We have them many more.
[laughter] like this in our sales pipeline.
At the beginning of the year, we sent to our itself.
So we set ourselves.
So I was talking about 80000 square meter all getting a net.
I will step up from what we did last year.
To pure turnkey is going well.
By the Middle office, Yeah, I'm confident that and we will be more than half way towards our.
Turning to slide six.
I would lead us into the Medicaid parity is entirely demand trauma.
We can't see the evidence in our consistently high pre commitment rate.
It is stops will join the resource planning with our customers.
They share with.
Yes specific requirements.
We then go out to salt is to secure the risk.
Right the Kingdom, NAND beauty and Apollo.
Our objective is to keep our customers.
Food.
Ken.
Two new spaces.
Boasting tier one markets and the lower tier markets.
In order to do this we haven't even more our resource strategy in a number number of different ways.
If you lose interest Tracy the slide seven.
First we have increased our ownership of coffee.
As these people gives us more options.
First would be animaux certainty.
Across our whole portfolio, we are on track well our ratio of 60% owned.
This 40% lease it leaves.
[noise] secondly, we have significantly increases the amount of capacity, we are holding for future development.
This is very strategic.
Because it gives us the freight sensibility to respond to a higher level upcoming.
I was six years in pipeline, it's enough to double our total capacity.
And the certainly we have expanded it I want Maki present.
Particularly live without even in those innovative after lights approach to beat you see projects in lower tier markets.
This expands our addressable market.
He has his I watched returns.
The deepens, our strategic customer relationships.
It is still obviously.
But we we see high volume gross potential with this product.
Turning to slide nine.
It once your 20, we hosted a position about site in the Pucheng district of Shanghai.
It is an example of how we saw the solving the problem of resource.
The site can support over 77 to solid square meter next fall.
Next we'll hear me a windfall in domestic.
Such a large amount of capacity on a single sites with being a tier one maki is unique.
It is very active managers for hyperscale customers as they have to enable them to land and expand the in the same location.
In the kind of quarter would have begun to [laughter] come rushing to.
Two existing duties, which accounts for a lot of 70% of the development.
As a lot of customer demand for this project.
[noise] a couple of years ago, we started working with US could lead you could come from a whole foods is soon see the Senate and one of them remote campus.
As of today.
We have completed a six due to sue problem for them.
These pockets are consolidated consolidated.
There's a there's a photo on slide slide 10, and then maybe to a how [laughter] held a penny cells to our joint venture PAMA Gee I see in a very near future.
There's a photo on slide 11.
We had to be pitching pitching to other.
Other customers and the just recently we were selected by a second the major customers for their remote projects.
We hope to ponder with GE I see again, using the asset light model I.
I will cover the most needed to expand the in low cheered Maki you think sync with their expansion in tier one markets.
We are uniquely well positioned [laughter] addresses both opportunity.
With that I will hand over to there for the financial and.
Operating review.
Thank you would have starting on slide 14, where we strip out the contribution from equipment sales and the effect of FX changes.
It won't be twin she how service revenue grew by 6.3%.
Underlying adjusted anyway grew by 8.5%.
The underlying adjusted EBITDA grew by 10.5% quarter over quarter.
Oh underlying adjusted.
EBITDA margin was 47.4% the highest level we've seen.
We won't do 20, Minn Kota smooth FX translation loss.
We target zero FX exposure, however, as we move cash into and out of China is unavoidable that we will recognize some FX gains and losses.
Turning to slide 15.
Service revenue growth is driven mainly by delivery of the committed backlog.
Moving during one Q 27800 square meters.
Line without expectations under difficult circumstances.
Oh, and I saw per square meter was down by 2.4% quarter over quarter.
Most of this decline is mathematical because move in was backend loaded.
In addition, there was a temporary reduction in some power terrorists the reduced revenue.
If you did I Miss all per square meter length of utility cost the decrease was less than 1% quarter over quarter.
We recognize revenue as capacity is utilized in accordance with the terms of customer agreements.
When we build customers collect cash with about a 70 day time lag on average.
Slide 16 shows up cash collection over the past three is is almost exactly equal to the revenue recognized.
So far we've not experienced any payment or defer or problems in the current situation.
We have a very high quality customer base apart from the cloud and large insulet names, which you know the rest about customer base is predominantly financial institutions and multinational corporations.
Slide 17, and 18 show the quarterly margin trends, a few things stand out.
As a result of the reduction in some power tariffs, which I just mentioned utility cost it was more than one percentage point lower than normal.
Yes, you know he was also down due to combination of working at home operating leverage another government concessions.
Some of these cost saving continued into April and May.
Accordingly, we expect the underlying adjusted EBITDA margin to be in the 46% to 47% bracket in Twoq 20.
Turning to slide 19.
It won't be 20 Capex was elevated.
Mainly due to the payments for the prepared the sites, which will in highlights is.
Oh got in Capex was just over 1 billion.
I was at the pools and the cost to complete the entire 110000 square meters of area under construction.
7.4 billion RMB.
Activity on our construction sites is now back to normal.
There are no supply chain issues to report.
We've made minor revisions to the data centers delivery schedule, which is shown on slide 20.
On Slide 22, we show a cumulative unit development cost for self developed area in service.
We define development costs.
Gross pp any including assets held on to finance leases.
As you can see now unit cost is now just over 78000, RMB or level tells newest dollars per square meter.
This is for a data center portfolio, which is almost entirely too and redundancy.
Over the past three years, we've increased the overall average power density.
The two kilowatts per square meter.
The unit cost per megawatt is therefore around 5.6 million U.S. dollars.
Which we believe is exceptionally low by any benchmark.
We've achieved this as a result at the scale of our construction activities.
Yes, it's about the in house team to standardize design improved management of the supply chain and by working in close partnership with a major customers.
We also shows the annualized yield progression.
For 2019, we achieved a return old 15%.
Area in service was an average utilization rate was 69%.
If we segregate out to stabilize data centers.
Total slide 21.
Let's turn was in the high teens with an average utilization rates of over 90%.
There are many moving parts to these calculations.
But it all comes together and the returns, which you can see compare favorably without global peers.
Turning to slide 23.
Two pending acquisitions.
The Beijing knowing.
We'll be installed customers have entered into new contracts with us and we are managing the data center until the final Cps and satisfied.
The Beijing 10, 11 12.
We expect to close by the end of the current quarter.
When we announced a deal last December two data centers with others and one was under construction.
The overall utilization rate was 50%.
As of today, all three data centers are in service and the utilization rate has increased to over 70%.
No M&A pipeline is strong.
We are pursuing projects the development stage I'm projects, which were already ramping up.
Data centers in China are attracting a lot of interest, particularly from financial buyers.
This opens up new possibilities, including working with partners.
We have many advantages in the M&A sphere, and I'm confident that we'll be able to conclude some more highly accretive deals.
Looking at our financing position on slide 24.
We ended one Q 20 with cash was 3.6 billion RMB.
So now the process of refinancing several of our recent property acquisitions in Shanghai and Hong Kong.
Pro forma for this refinancing our parents bounces back up over 5 billion RMB.
I mentioned earlier the cost to complete a current area under construction is 7.4 billion RMB.
Assuming 40% of this is point us with equity we will allocate 3 billion about cash to capitalize these projects.
Well the debt side, we have also renminbi denominated project finance in place or process for most of the remaining funds.
We pioneered they just send to project financing in China and banks like the business.
We have an excellent track record is the birth the banking market is highly supportive.
Nonetheless.
It does give ourselves more flexibility over the timing of project finance, we're putting in place a large revolving credit facility that holdco level.
A policy is to maintain a fully funded business plan. However.
As evident from our results Oh, Bruce is going to higher levels.
Opportunity in front of us is expanding.
From a strategic perspective is important for us to be in a position to respond to demand and keep up customers fulfilled.
Therefore, we are always looking at ways of strengthening our capital base.
We are well positioned in toes access to cut capital, but some public and private sources.
Continue to evaluate all about options.
Finishing on slide 25.
No contract backlog now stands at 123000 square meters.
Equivalent to 75 cents without revenue generating area.
75000 square meters relates data centers, which are still under construction.
Delivery of these contracts will commence over the next six quarters as and when the data centers come into service.
47000 square meters relates to data centers, which are already in service.
In two few 20, we're expecting additional Aries lies to over 10000 square meters.
Based on the first six weeks with two Q will well on track to meet this target.
It is the gradual recovery.
Which is being well we expect to accelerate later in the.
Today, we are confirming the full year guidance for revenue adjusted EBITDA and Capex, which we gave on our last earnings call several weeks ago.
With that I'll end, the full talks about presentation and we'd like I don't like to open the call two questions operator.
Ladies and gentlemen.
We'll now begin the question and answer session.
If you wish to ask the question. Please press star one on your telephone anyway.
If you wish to cancel your request please stressed the founder has.
For the benefit of all participants on today's call. Please limit yourself to questions.
Your first question comes from the lineup Jonathan Atkin.
<unk> RBC capital markets. Please ask your question.
Thank you. So I had a question about customer demand and that and then a question about kind of a resource procurement and development and with respect to customer demand I just wondered if you can call that.
With respect to the overall market in China.
Any different trends that you're seeing.
That's a tier one.
Bad versus more remote locations.
And then my question about development is just whether you have seen any changes with respect to challenges are about to be source procurements, the permitting environment for municipal projects or edge of telling projects. Thank you.
<unk>.
Yeah, George I'll go pursue.
A question about.
Demand in tier one markets and debone due in no two markets.
The first for I think as we made clear.
Overall demand picture has strengthened and.
Yeah. This is the result of a number of factors.
Uh huh.
The Mone is present in both tier one markets and in though to lock is and it grows is saying the ratio for different customers is differs.
Overall average for the hyper scale large instead customers is roughly 50 50.
Starting a business is being focused on tier one markets.
Last year through our partnership with the G. I see we found a way of opening up you know the the opportunity to work with our customers and low two markets I think that is proving to be very strategic in terms of in wholesale customer relationships.
As well as potentially being a very.
Material opportunity in its own right, Yeah, I think a job.
So a bottleneck for a composition with our major customer.
Thank you see the number to be sure us in the next three to five years.
It's a very big number or did the ever we haven't seen.
And that it's reasonable we think it because the call their business plan. There yeah visibility is it's very high so I think here over the time I think the China beta sandbox is very exciting.
In a in a three or five yes view is very exciting.
[noise], which was about <unk>.
Solid results point of view I think the GDS already took the actually now street.
Two or three years ago, because we stocks are seeking so not a large in land that capacity and the power capacity big because we we believe this is if I will fits for our customer a future.
Matt So we had a person movirtu folks on the edge of top they are.
Okay, and Utah took if that's how well resource. So in then we can say we had a person will work and then we got a lot of do we secured a lot of 11 bad and a power and it's not it's not for US is not an issue for us for to fulfill our CFO.
To fulfill their next three or five years.
Okay.
But in the age of let's say did a in a net over in top still challenging for everybody right in terms of the a the power all caught US a policy is still not a very clear right now although a lot of D.A. people talk I bought at the new infrastructure policy.
Well, if if the new.
Obviously were released a mall a a power so far we didn't see that but a a willing to see that right. If that's the case, if you're willing to do that can do more but Ah we wait we.
And I didn't I know, we aren't quite as certainly we all read lockup a lot of get added how they saw switch our customer like.
Great and then maybe just squeeze in the final question I'm on slide 39.
Uh huh.
The contract renewals schedule and if you could maybe just remind us and at what point do you start having those discussions around renewing contracts that expire.
2020, 2021, and so forth how far in advance.
Are you having that dialogue.
Yeah, John the I'm, just looking to slide slide to 38 must compete a contract renewals shows.
18000 square meters.
Capacity for 6.3% about two glare committees comes off for a new this year, we drill down into the composition of that.
The there is no concentration on the largest contracts that come up for renewal a single digit percentages or is that 18000, there are a few which pertain to clouds and internet customers.
Those are actually for I'll first generation Datacenters, meaning Beijing, one shenzen one concern one song.
Those were the first deals, which we did back in 2015 2016.
Or maybe 2017 is that they may have mentioned on previous earnings for the time. These were unprecedentedly large pools large deals and now you look at its 1000 square meters. It's a it's a multi less equity options on the you know.
Quarterly quarterly growth.
We believe that those customers will stay put.
These are the equivalent of edge datacenters and they put on ramps and some of these data centers.
I do think that going anywhere.
Nice negotiations I think we can say at least will be flat.
As I've also mentioned the pool, yeah, we have to look at this in the totality of our relationship with these customers what we're doing with them elsewhere.
What returns were getting with them across the entire relationship I didn't see we can just isolate out one particular data center and ER and treated as if it's a competing standalone commercial negotiations.
Yeah.
Thank you very much.
Your next question comes from the line of you from Morgan Stanley. Please ask your question.
Uh Huh Suncoke <unk>.
Management to share your thoughts on the poverty coverage policy.
By Chinese financial regulator.
GDS plan on that you, especially given as a property ownership is increasing faster.
My second question is could you please update us on the customer movie pay seeing second quarter, you mentioned that there's no silver supply.
Sure anymore.
No meaningful recovery of movies, so far or what is the current average amount from a customer or from a a definite delivery to mature.
Thank you.
Yes.
Yeah, I was referring to.
Part of project announced by the National relevant to full commission and the trying to Securities Regulatory Commission too.
You know to promote the creation of the market for publicly traded Reits in China backed by.
Profitable infrastructure.
Well point of view, yes, it's interesting you know we have a.
Growing portfolio was stabilized data centers.
The pricing proportion of them Oh owns fully wholly owned properties.
And yeah, we should always consider whether it's beneficial for us to recycle capital out to such.
Properties.
Whilst maintaining management operation control for the long term.
The the creation of a publicly traded reap market might give us one option to do that but yeah. There are many details still to be filled in terms of how this pilot scheme is going to work. Meanwhile, we're already doing isn't the way we have mini wheats throughout punch.
It would you I see and.
Largest financial institutions in China.
I have approached us about.
The same kind of the structure.
And yeah, we can poverty achieved the same result to suit privately negotiated deals.
10 years ago, when we thought into the data center business, we took the decision to structure.
Each project, where possible with a separate acid code for each data center.
And then how a separate entity have the customer contracts and the operations. So we will always had in mind that this would give us the flexibility to go to package.
I said sole sets of assets in future. If it gave us a better financing options. So we've always had this in mind.
As I say I think the read scheme as it comes into fruition may just give us well one more option.
Second question about customer move in pace. So it was just under 8000 square meters in the first quarter.
And.
Right now the halfway through the second quarter.
I think we're looking at about 10 to 11000 square meters.
In the second quarter.
It's already halfway to that.
So it's going.
Smoothly.
And the third quarter and the fourth quarter, even in our original plan, we're expecting a step up and to some degree it ties back to the completion date offenses, new data centers coming into service and we put a.
Uh huh.
A page in the in the presentation showing you how much capacity comes into service in each quarter.
We remain due this year than in the first off next year.
You don't get the backlog.
Do you see this you ended the first quarter.
We had about 47000 square meters a backdrop, a a have a battle commitments.
Which relate to Datacenters radio service.
Typically we see that backlog.
B B delivered at a rate of about 20% to 25%.
Borders so yes, we hit 10 to 11000 square meters.
The second quarter.
It will represent 20% to 25%.
The backlog at the end of the first quarter.
And you know the.
Many quarters.
If you.
Just for M&A and look purely organic business, you'll see that that kinda ratio holds holds consistently true.
I think if you use that methodology would lead you to.
Full cost higher level of moving in the third and fourth quarter.
Thank you.
Your next question comes from the line of Colby.
So from Cowen. Please ask your question.
Great. Thank you nice job on the name.
I guess on your prepared remarks, you mentioned that a second major partner.
You guys have recently.
Partner with the second major partner excuse me for remote site I'm curious was any of that reflected in the bookings are leasing that the 22000 square meters.
But you guys reporting I'm, just curious if that might dancing because obviously, we spent a lot of focus on explicitly in terms of what they may be doing.
And then secondly.
You mentioned that you do cobot 19 that the government had a change something around power, the which impacted both revenue.
And cost was there anything can be more explicit and actually talk about what the impact was both revenue and.
Then the offsetting impact.
Let me get to that NOI. Thank you.
Sure coping Oh good first.
Look about the remote site business here, we have you know one.
Major customer that we've been working with initially on a consolidated basis and then in the second is ration or through our partnership with GE I see.
And now we have a activity as you know three different sites.
Yeah. We've competed for projects and one site, which of the consolidated projects.
And yeah, we had a commitments do seven projects.
Through the joint venture that's now increased to 12 projects.
And with that customer we're talking about it very significant increase in the volume of projects over the next couple of years.
And then separate from that.
Second major customer.
Let's now give us a purchase order for their remote projects.
First one is gonna be a trial, we have to go through these.
Social negotiation.
And the design phase, but potentially the volume from that second customer could be as high as the from from first customer.
It's not by dogs.
By dogs is one of the yeah.
Few very large they sense use in China, which is not yet our customer we are we all web demand that they happen in tier one markets and we're trying.
Very hard to fulfill that seem to establish a relationship with them that so.
Hi, Hi proceed in June I didn't answer that for took about town.
Yeah, I think yeah, yeah, we are would pay folks on the Iowa, we caught a.
The three major coffee or ER, so dear as Dan mentioned that the next three or five years or it's a very big number in tons up the both in the balancing the chip a mock inevitable. We tried to get it is both market share as much.
As possible so I think it it's not including the by Dan and I, because quite as kind of D.S. doing that yeah deployed there so but you never know area. It's a like it we hope we can do the deal or like it remote area like a JV with a g. I see.
But so far we too are walking all.
Couple of project, which here the idea is that killed them block so.
This is that if it is our number of carrying the number our focus has not including any at Midas Asia again [noise].
So called me I'm trying.
Not to mix up the numbers.
For the joint venture projects. So you know 20-F and it earns presentations on.
Keeping them quite separate when you hear us talk about headlines.
[noise] 22000 said he said that that's all our core business a PD excludes.
The joint ventures, the joint ventures as disclosed on page 11, those numbers are not.
Included aggregates is without a cool KBR isn't anywhere.
Yes, my comment about power because of the.
[noise] pandemic situation.
The government China has had a number of schemes to provide some support to economic activity.
And we benefited benefited in three principal ways puts rule there was a reduction in some power tariffs in some places most of which we passed on to customers.
They did result in a slightly lower revenue in the MSR, but also resulted in a snow in the cost of revenue.
And then secondly, or thirdly, there was a reduction in rent.
Payable to Hell on wheels, which was state owned enterprises.
And also the reduction in the contributions that we know we make too to what they call the social fund.
Well if you look at all.
The margin improvements and I think he's not to Lucas the metric that we cool.
Underlying the online.
Adjusted EBITDA, because you know that strips out the effective.
Exchanges.
Margin went from 45.6%.
In the fourth quarter its 19.
To 47.4% <unk> first quarter of 2020.
So that's almost two percentage point increase.
Let's say half of it was due to the government concessions.
The other half is due to some cost reduction from looking at home some operating leverage but frankly, there was also some cost increases as we change the operation diseases out data centers. So yeah. I think you can say the off the margin improvement was to do to concessions and off is due to yeah.
More taxes on the.
Our control so those concessions, but continued in April and May continue in May.
Uh huh.
We expect margins in the second quarter to come out a pretty similar level to first quarter.
And just one quick follow up on that so you said April may. It's a thought then if that goes away in June or that May continue just don't know.
The Ashley's government policy is to continue but accum combi. So.
Maybe recall yeah Hello.
Our guidance for 2020, the midpoint of revenue in the mid point old adjusted EBITDA implied about 46.3% adjusted EBITDA margin for the full year.
So I didn't hear that that's still hold so it's hard to normalize right because we'd have to normalize the government. Yeah. These concessions from the government would have to normalize for cost savings, but also for costs. Yeah. Yeah. So additional costs and also for the fact that we lost the revenue right. So it's hard to normalize, but I think 46.
Yeah, the same Clos since most definitely still.
Achievable for.
For this year for the full year.
Thank you.
Once again, if you wish to ask a question. Please press star one on your telephone and wait for him to be announced for the benefit of all parties.
On today's call <unk> limit yourself to two question.
Your next question comes from the line of Gokul Hariharan from JP Morgan. Please ask your question.
Oh hi.
Thanks.
And.
And a continued good execution.
On just the portal following up on.
No what good project the.
Five seems to be ramping up quite quickly.
About 40000 meter already but potentially more coming.
Tomorrow could be.
Understanding about how the economic <unk>.
Venue start collecting the money.
We are what would be typically.
That is that something given the area increasing quite a bit.
Probably 10% of equity.
How can we think about earnings contribution not every deadlines abuse and that's kind of business given.
It seems like this is exciting quite rapidly in the last thing.
And yet to close to 50 case, what meta that's my first question.
The second question Dan.
Check can you talk a little bit about how should we think about the.
I thought trend through the rest of the Ya.
Nucor's steamboat would want to some of these Paula.
Cities It could end up more me and what do you could you also maybe shed some light on Fox to profitability as well as.
The fourth and it's going to news like Oh pretty quickly.
Okay.
First only no today says I want to make something too which is this is a completely different products from what we develop into more markets is not just a different locations are different.
Product.
Typically it's a much lower redundancy.
And.
Deploy some technologies like eyeballs has direct cars and so because it's much more cost orientated and.
Less Oh, hi been busy orientation, so for the metrics, which I hope you become familiar with trial data centers in tier one markets. They don't apply they would you be data competing six separate set of metrics to understand the unit cost and revenue per square meter and the margin insulin but yeah.
As it off balance sheet I I Didnt is worth going that we shouldn't oh over complicate yeah. We do have a 10% equity involvement is literally only.
One or two or 3 million U.S. dollars per data centers, so relatively speaking immaterial.
Our approach was to maximize management fees, there's little sensitive I'd like to tell you.
What we can make but you can imagine it's a commercially sensitive.
It approximates to let's say mid single digits percentage of revenue of the data center as clear management fee Cross it.
Yeah once the biggest when it come into service just like in tier one markets. The customer has they move in period, which is factored into the return calculations and the and the pricing.
So the revenue ramps up.
You can see from the projects we did in.
In Jain things is that be lunches before the Ashley the project trend toward quite quickly. So as they ramp up we will be earning that that's a management fee and that kind of the revenue share profit and that will come into our income statement just thought about service revenue well when it.
Starts to appear.
I will pull it out but for now it's not there and yeah I've said it went to.
Overcomplicate I do think we should talk in terms of in Iraq. It would be off the scale, even compared with what I showed in terms of the ER and Hawaii yields.
Okay, because here, we have such a small.
Equity investment.
But it doesn't really make pulled that meaningful to talk about return on equity when essentially so it's a management as a matter so much broader.
And I saw I.
I think the.
And I saw in the second quarter.
We'll be.
Quite similar to what it what is most in the first quarter.
And.
I don't expect any.
Any is.
Much more decline.
The remainder of year, there will be some distortion depending on when.
Acquisitions close that can also be amount of timing, but also how these acquisitions actually have low.
And I saw but okay got it basis I expect the MSR quite similar to where it was in the first quarter in the past profitability I always protests that you know we have within our portfolio.
Large set of stabilized data centers.
We don't segregate them out there part of that part of the platform but.
They are highly profitable highly cash generative more highly leveraged and so.
If you don't want to consolidated basis.
Now 20, yes, yeah, we disclose.
The net.
Profit or loss so happens.
Onshore in China, and the net profit or loss offshore in China, what you'll see is that the.
Position in China is almost breakeven.
So it's the finance costs, which are booked at holdco level from holdco level financing and the stock based compensation, which is also a book to hold two level.
Which is which is lost but.
For the business in China, the datacenter business, it's already almost breakeven so.
So I think we go forward one year, even on a consolidated basis, it will be close to breakeven.
Okay. Thank them.
Your next question comes from White House <unk> from Goldman Sachs. Please ask your question.
Hi, Thank you management.
Taking my question Ive two questions for me.
In terms of.
So the price.
<unk> <unk>.
Average price.
And also in terms of.
Our government.
Since you call that 19.
Kind of discounted to God and second question that I noticed that.
Acquisition in terms of man.
So wondering if we have any pre committed.
Besides what is the rationale.
That's the land.
So I noticed.
Right.
No.
Average so how do we present.
Again.
Thank you.
Okay.
The first question about.
Utility costs.
Yes, there are literally hundreds of how towers.
So we were talking about as an effective.
<unk> tariff rates.
Are you.
Tariffs and structured with.
A fixed component, which is like a commitment charge because there's a very large amounts of generating capacity, which is being reserve for use with tencent.
Yeah, we have to pay that commitment charge, whether or not we using it that's why I take us into comes into service, it's part of the fixed costs.
They sensor and may lead to that they tend to be lossmaking into it may be it reaches 15, 20% or Ohio.
Utilization the government concessions will actually mainly to reduce those fixed pella commitment charges. So that's that's where we've got the benefits.
I said like my prepared remarks, it was just since in certain places yeah, our effective power tariffs the input tariff frankly also the output tariffs because we pass it through is about.
RMB 4.65 to 4.7.
Okay.
We've got the lowest rate, which is a applicable to large scale industrial users.
So the second question was about a two Joe we didn't see.
Oh, so questions true trunking, you want hockey also surface.
I think touching is a mainly driven by a one off our major customer. So this is a a we bought land that we get we prepared to get into all the in the second half year arching itself I achievable.
Yes to your second question was about the site we've caught in the two janke district to Shanghai as we've been.
Saying for many quarters I mean.
This is a very familiar now and it's very challenging to obtain the right kind of real estate and power capacity in the urban areas. Nonetheless is absolutely clear that'd be no doubt customers still requires a the edge of town capacity is a good.
Substitute label them to scale up but they still require the downtown data centers, which are connected to the edge of town site. So we have to work very hard to generate new projects in the other there isn't we've had two.
Try a number of different approaches.
Including buying buildings do acquisitions and saw.
And it faces the pooja sites.
This is an unusually large.
Industrial complex in a very good location, because it's close to where the submarine cable landing stations are in in Shanghai.
And yeah, we were able to have an agreement.
The landlord.
So we would proceed with the acquisitions the property.
If and when wives and when we obtained or the the power capacity approved from the government than last year, you did approve attain that perhaps the approval from the Shanghai municipal governments and it pertains to to this site. So there's this project. So that's why we that's why we went.
Ahead.
When Coleman said.
Yes, hyperscale customers value.
A great deal.
The ability to expand on the same site to put in an all around and then have visibly yeah expand capacity on the same site. So having a side. This is large is this really has very unique.
Marketing marketing angles, and Ah, Yes, we would regard it as a kind of crown Jewel project.
Yeah.
Let me clarify I think D.A. in terms of good tend to I think the.
Ah, yes in the whole portfolio.
Looks like a us moving a little bit lower than our other.
Major.
Dataset, but what we can see is set to tend to attend those data sanity and movie will catch up in a second hockey.
Huh.
Hi, Thank you very much and maybe just a quick follow up.
Youre.
Right.
5 billion this year I'm, just wondering how much upside.
It's like purchase.
The reps I guess.
Oh site construction.
Yes season cabins guidance was 70.5 billion RMB with you round numbers two.
2.5 billion.
It's too.
Acquisitions of data centers as well as well so.
Property and inland.
Yeah.
Premier principally it consists old.
The payment for the Pucheng site.
And the payment for the Beijing nine acquisition, when it closes and the payment for the.
Asian, 10, 11, 12 acquisition when it closes so that is that accounts for most of that.
2.5 billion number.
The organic capex is around the piping in RMB. So it's running at about one to one off but in a fortune.
Uh huh.
Your next question comes from the line of Frank who then from Raymond James.
Please ask your question.
Great. Thank you wanted to touch on on some new logos, what do you see what are you seeing from in particular, where are you seeing from your customer base of non domestic Chinese companies, how was the sell through going to them and currently during the crisis and then.
Secondly, what are you seeing from new logos.
In the quarter and quarter to date, how is that tracking thanks.
Yeah actually in a first quarter, we win a we won a very very Didnt no no no.
One is a.
The largest the coffee [laughter] pressure in the world right not luck, none of that [laughter], So and that is a another very remarkable I mean that logo is a one up there are very critical we quota.
Foreign currency, Terence House, which is a one of the branch empty a central bank.
That.
That means.
Centromin key give GDS a newborn.
In terms of the except to China unit pay.
Or other career in house and as a.
So we will do a lot of didn't new rule.
A a meaningful new logo and being a big wave. So I think it. It is they also contribute our new all other booking a six different waking up first quarter with it we think its Chad will maintain because as I mentioned.
No no that allow them retail customer heights recognized.
The value of our data center, a multicore access and datacenter Apple and a high quality of the appreciate so that we will attract more high quality retail customer more in a more in an exit a couple of quarters.
I wish I believe.
Okay, great. Thank you very much.
[noise] due to the limited time off the call. Unlike did turn now to turn the call back over to the company for closing remarks.
Thank you everyone.
As it ever join US today, if you had better question. Please feel free to contact Tds Investor Relations through the company information I'll, let side and it gets I'll take <unk> Investor Relations.
Hi.
This concludes todays conference call you may now disconnect your lines. Thank you.
[music].