Q2 2020 GDS Holdings Ltd Earnings Call
Thank you for Scott.
Yes Holdings limited second quarter Twentytwenty Conference calls.
This time.
I listen only mode.
Management's prepared remarks, there will be crunch, and then on secession <unk>.
Today's conference call it was being recorded.
During the cold what's your host.
Okay, Okay, congratulations for the company.
Good luck.
<unk>.
Thank you.
Hello, everyone.
The two kids <unk> earnings conference call.
Holdings limited.
Companies results were issued Vietnamese wassa.
Today and are posted online.
Summary presentation, which will refer to during these conference calls can be building downloads.
So I had invested GDS. So this is dot com.
Leading today's call is Mr. William Wong.
So the chairman and CEO will provide an overview.
Jay woman.
Mr that humans G.S. CFO will then review the financial and operating results Ms. Jamie.
Let's see.
All the questions.
Well we continue please note today's discussion will contain forward looking statements made under the safe Harbor provisions of the U.S. Robin Securities Litigation Reform Act of 1995.
Looking statements involve inherent risks and uncertainties.
At such a couple <unk> the company's result, maybe materially different from the views expressed today.
Further information regarding these and other which since doesn't change. It's included in a company prospectus filed with the U.S. and see.
The company does not assume any obligation to update any thoughts looking statements, except as required under applicable law.
Please also note that Tds earnings press release, and this conference call include discussion, Oh, Auditude gaps and enjoy the nation as well as an older Kids non-GAAP financial measures.
She has caused a genius press release contains a reconciliation of the unaudited non-GAAP measures city UN audited most directly comparable GAAP measures.
Now to the coal.
Yes.
Chairman and CEO William Wong. Please go ahead William.
Thank you.
Hello, everyone. This is what im thinking for joining us on today's call.
I'm pleased to report that we had another very strong order.
We achieved.
Core organic cells.
With over 26 seldom square meter almost 60 megawatt of new customer commitments.
We step scoped out.
Our government.
Activities.
We now have 17 data centers under construction.
Our largest ever.
Area, you did I liked it increased by over 14000 square meter.
Nearly doubled the movie for the prior to the prior quarter.
We grew adjusted EBITDA by 48, so okay, yeah, yeah, and I want to EBITDA margin.
The 47% for the first a pie.
[noise] the operating environment in China in now almost back to normal.
And the despite.
It's good [laughter].
Getting caching between China, and the U.S., we see no anniversaried adverse impact on our business.
Turning to our cell sites, you, but on slide four.
In the first to hop off 2020.
[laughter] sales totaled over 48000 square meter.
Our original.
Oh original target for the full year, what 80000 square meter organic.
We all hear me I'm shocked for higher number.
I feel good.
I'm confident that we can deliver over 90000 square meter meter organic E F why 20.
We choose a big step up from last year.
Demand has really gone to a higher level.
This is not a temporary temporarily Brent.
It's a continuation almost.
How much stronger did you realize issue Chad.
He is already five events, if some area of the digital economy.
But there are many other areas, which are just getting stocking.
No technology, such as five cheap.
Hi, Brian Chin.
Key and the digital currency can meet demand most multiple here.
Chinese government policy is gift, giving us stronger push.
Leading Chinese companies and increasing their focus on the domestic about.
For all of these these reasons, we believe that demand well be sustained long into the future.
Now turning to slide fight.
Into Q2, it pretty well.
Okay.
Hi, Scott orders.
Each of which tire that highlights the kind of competitive advantage.
Well.
Turning to slide six.
[noise] earlier this year.
We are quite a large site in Shanghai, which we feel.
Was particularly well suited to Hyperscale development.
We have no obtained an older somebody leading she S.P. customer.
I was attracted by the location and the ability to expand on the same site.
Turning to slide seven.
For Q 19.
We signed a framework agreement with the government to set up a new data center campus in function.
Switching to Shanghai mock.
The CAD campus has a heads up develop given dependable.
Next fall area of wrong 65000 square meters.
Into Turkey.
We entered into I felt <unk> ml, you with a leading C.S.P. customer.
Hi, Rob So do you saw the square meter or nearly a half the entire campus.
6000 square meter is already committed and the balance all 24000 square meter well be commit to that over the next a two year.
By enabling hyperscale customers to land and expand the in this way, we get a high visibility into future years sales.
Turning to slide eight.
We established our first a beta center project project in lung saw near BG Inc. two to 19.
Within a short period of time.
We haven't gone from one would be the Samsung in long sought to any data centers in service or under construction.
For which we had obtained over 48000 square meters of commitment.
Several of our top 10 customers.
[noise], we executed a lot of land at Apollo expansion in long haul and I have more coming in our pipeline.
This will enable our customers to expand within our long thought Clos.
Turning to slide nine.
I want to talk to customers continued to grow with us.
Bolting tier one markets and the remote locations.
We feel about 730% of the incremental lipoma.
It's a great foundation for our business.
And at the same time, we see a lot of growth potential.
More than we in real life.
From the next wave Hyperscale customers.
The demand from some of them could it be almost as big as did talk too.
It's a strategic priority for us to expand the beef pop I'll walk franchise.
For our.
Our ecosystem and the diversifying our customer relationships.
We already have significant into relationship with almost all the hyper scale cloud and internet companies in China.
However, until recently, we were missing a field is give besides the desirable names.
And therefore very pleased to report that intently at Twoq certainty.
We are paid out of course, all the pump by dance.
And in the current quarter, we are paying but our first of all the from the PD.
Hi, This is one off the hyperscale other older shown on slide five.
On the enterprise side, we have recently signed up a number of notable.
Notables new customers.
Including councilor Starbucks Yum, China.
Frac rock and about your awarded leader in commercial Jones.
We will be well, we weathered these customers because the unique ability to set up height hybrid car.
Detection and access multi called <unk> resources.
Our capital.
We're also starting to see innovative industry called <unk> development.
For example, we are working together with that technology company and one of our major cloud customers to set up a dedicated clough for the auto insurance sector.
We believe that hybrid type recall, our powerful color Jim you could drive significant the enterprise growth.
[noise] 22 flights Kim.
Well the key.
The keys to achieve high itself is to have to rights kind of data center capacity in the right pace and the right time.
Over the past the five quarters, we haven't we have stepped up our construction program from any 78000 square meter to 130 Street solid square meter.
The same time, we pre committed our pre commitment and rates have remained over 60%.
This demonstrates how our business is demand driven.
In order to manage at this level of construction shorten lead times and the no lower cost.
We haven't made a significant progress in office outside pre fabrication and the modular construction.
We're also working closely with up with strategic customers I'm joined acumen and the supply chain management.
We believe.
That's our Union you you units Capex, it's the lowest in the market.
Turning to slide 11.
In order to maintain continues supply we have built up our pipeline is all CIT when markets.
On late we haven't nearly 350 southern square meter of highly market marketable capacity held for future development.
And we are still adding to it.
We believe that this is far more than any other color copying and that gives us a significant.
I didn't have advantage.
Following the governments new infrastructure policy.
We have not see any change in the allocation of resources in urban Beijing.
Shy is continuing with its quota system, which is a.
Calibrate to demand.
Citizen may open up to a small extend.
In the agile Tom areas more land and Pablo I will be allocated at four data centers, but the answer battery skew higher because up because the government is very selective and to maintain strong can choose.
We have to be we have to be creative in order to generate a new supply, particularly in the urban areas.
Tier one markets.
This is the sorry behind the page Beijing so team.
So to project, which we recently announced [noise].
The opportunity was brought to us by a private equity funds.
We will work, we've done and the with the already though project and the land owners.
During the development phase.
End of the then buy them all but off.
The deal looks a bit complicating, but we had total control.
This is a highly mockup marketable capacity for which we will update 100% pre commitment in the near future.
We are working on several other opportunities in urban Shanghai and this engine that will also give us highly marketable capacity.
Turning to slide 12.
We continue to ramp up the development program for our JV with GE I see.
We expect a bit to test for the first a project during the parents quota.
We have also one.
Our first an order for our remote sites from a second the customer.
This remote sites.
I totally different.
Up proposition from our core business.
Our customer set top and these remote site themselves.
And then look to also the beta center development and appreciate.
And it could be a high volume opportunities and we know we want to pursue its full four strategic reason.
But in terms of returns if not the best use our capital we think that asset light approach. If there is a way to do it and we are working on.
In innovative innovations to optimize our cost of capital.
Lastly on site.
Okay.
I would like to see a few words about that that's what about on what to make street assets fundamentally different from the other or you're in China.
As of today.
It has nearly has nearly 60.
To be connectivity.
Good nutrition Chester line for.
Our speakers disconnected. Please state your work done.
Excuse me for is interested in line for Mr. William has disconnected. The other presenter can please state your word. Meanwhile, I will connect them. Thank you.
[noise].
Okay.
I'm sorry, that's been lines as just the [laughter] I come back again.
Yeah Okay.
Sorry.
Oh look.
Pretty answers.
With respect.
Okay.
Okay.
[noise], okay, Okay sorry.
So that's a uh huh.
Turning to slide 50 50.
Lastly, I'm sites, a 50 I would like to see a few words about our.
About what makes Tds fundamental they different from other players in China.
As of today. She does have nearly 60 into connected data centers cost into the in strategic locations in all of a China major it caught economic financial and the lateral hoppers.
Well I mean this data centers.
We hold all the major public Clos, which.
[laughter], which are accessible over all the major telecom network.
The scale of our facilities.
Expansion capacity.
And the market possess together with software defined the connectivity and emoticon ecosystem add up to Paftwo, which is unique and far ahead of the Pat.
This is obviously.
Hasan did it interested.
In the data center opportunities in China.
But from a competitive.
Perspective.
Nothing has changed at four out for US our customers are looking for total solution provider to adjust for than all their needs in Indiana integrated away.
Exactly what we offer.
We have established our market position over many years and not clearly different differentiate differentiated by our value proposition.
Were confident that we will then we will continue to build on our competitive advantage.
And further extend our leadership.
With that I will hand over to debt for the financial and operating review.
[laughter].
Thank you Tim.
Oh you employed.
The problem.
From equipment sales.
On the effects of ethnic stages.
The Twoq 20, well service revenue grew by 8.3 person.
Underlying anyway.
I would point to sense.
An underlying adjusted EBITDA grew by 9.1 person who <unk>.
Oh underlying EBITDA margin was 47.8%.
Turning to slide 19.
Service revenue growth.
Given much like the dip.
Backlog.
That's a digital ever use lives during Q1 Q.
It was 29324 square meters.
Including organic moved and reporting Pals mm 336 square meters.
Well the Lassonde cool.
Good.
Organic moving into Q2.
10 to 11000 square meters.
Recovery into Q exceeded our expectation.
No the level of <unk>.
<unk>.
Thing over the next two quarters.
And it's off the square Lisa.
Down by 3% quarter over quarter.
But if we really the revenue.
<unk>.
Would be 10 11 12.
We closed 25 days before the <unk> and.
Yeah, that's off the square and he said was down by one cents.
We expect you end up the square meter.
Remain similar level, we're picking up.
Slide 20 and 21.
Who can be modern Fred.
Due to seasonally high power consumption.
You too he calls was 1.8 point.
When they walk you twin.
Nonetheless.
April, saying Oh itself in a wide margin.
Oh adjusted EBITDA margin.
As improved much more so than we expected during the first talk to the.
However, this was due to government concessions.
Would you corporate expenses.
The second <unk> yeah.
Government Commission professionals will be less.
And with the recovery, we think it's popping up corporate activities.
Taking all of this into account.
Adjusted EBITDA margin.
Remained around 47 cents.
Oh, yes.
Turning to slide 23.
One of <unk>.
Was around 3.9 billion RMB.
1.3 billion related books, its who'd hearing land to build.
Young 37 million.
Related to acquisitions.
Mostly the initial equity consideration.
Let me take 10 11 12.
When the 215 million.
From the joint venture to say consensus.
Up until you thought you were dequincy.
We spent 485 million or be cumulatively, well the joint venture that they.
Most of which will be recovered as and when we talk equity interests the public companies.
I see.
Into it.
Great organic topics.
To be more than doubled what we spent the personal to the here.
Picking the high level sales and construction.
We also anticipate spending around another 600 million or be on land bank.
1.3 billion.
This.
Most of which is to put consideration.
Beijing 10, 11 12.
Hi, consideration you on the closing of BTIG.
Turning to slide 24.
Oh construction program has been growing false.
Round off about project now being field.
Means lumber construction going on.
Well, then woken up construction sites box mobile.
A couple of location.
Experiencing some so like you know bakes in apparel supply.
The delivery schedule there okay.
Okay. Good bye bye a couple of months.
We have a lot of capacity scheduled with others into a 22.
<unk> the last few months.
Turning to slide 25.
When we announced the B they couldn't 11 12 acquisition last December.
You take the sensors wouldn't for this one was on the construction.
Your goal utilization rate was 50%.
As its day <unk> Street consensus when service.
The overall utilization rates has increased to 70 fives.
We take 10 11 12.
What do you know.
The revenue.
And around 15 million in Hawaii.
During the 25 days.
The acquisition closing in 220.
Looking forward, we have a number of potential M&A deals on our radar screen.
There's one quite bogs state.
With the goal taking over project under construction.
Very reasonable premium.
There's more competition.
M&A opportunities these days and multiples have gone up.
On the less I'm confident that we can continue doing highly accretive deals.
Looking at all financing position on slide 26.
Right.
$5 million Hillhouse, and if you see GDC <unk>.
Your next the private placement.
We built this capital raising was necessary, given where sales and construction I headed.
You'll see put in place for 300 million dollar revolving credit facility that holdco level.
To give us more flexibility in how we found out investments.
All told we completed 6.7 million RMB.
For the $940 million.
New debt financing the refinancing facilities.
In 220.
Well the onshore portion.
The weighted average tenant was eight years the weighted average cost was 6.1%.
So the current LPR reference rate.
This continues the trend extending the kind of Loring ward and calls.
Onshore.
Next on slide 27.
A contract backlog now stands at 140000 square meters.
We look to 72% about written new generation.
Oh, well every on the construction.
Going up from 51000 square meters.
2000 square meters.
Well quite forces.
Which reflects increased area under construction.
Thanks, Hi, <unk> right.
A longer construction period for Greenfield.
Our backlog area.
Now stands at 57000 square.
It's trending up.
We typically deliver.
20 to 25 cents.
<unk>.
So.
In each quarter.
Oh, the impute Eutwenty it was good said.
Good thing on slide 28.
They were confirming the pool your garden revenue and adjusted EBITDA.
However, like already indicated we are raising your guidance.
7.5 billion dependent but in RMB.
With that Oh, and part of my presentation, and we'd now like towards in the quarter question.
Exactly.
Secondly, ladies and gentlemen, we will now begin to question answer session. If your which are good question. Please press star one on your telephone keypad and we'd see named we announced.
To cancel your Rick Rick just respond.
Okay.
For the benefit all participants on today's call. Please limit your limit yourself to questions. Thank you.
We have the first question from the line, it's John Atkin. Please go ahead.
Thanks, very much I wanted to ask.
First about.
Slide slide it shows a lot of your Hyperscale orders. So slide five it would appear that a lot of the demand isn't north China and I wondered if.
If you would have any kind of caught adds about where you expect most of the bad.
In the market to a club is it a lot of it also how threed elsewhere, but it just happens to be that the wins that you got for kinda weighted towards the doors.
And then maybe related to that if the overall cases of bad.
Notably different now market demands, but not just your share.
I'll, just say six or 12 months ago. Thanks.
Hi, John stand here Oh.
Okay. The first question.
Yeah I think.
Third party market research is.
Yes, there are different indications that my outlets.
I think.
Anything in sang high.
Together.
Well count for around.
60% to see.
A market opportunity in tier one markets.
And if you look at the.
Web sites at the leading cow players in China, you'll see that they have.
Most of that.
But most of that cloud pool in both those.
Two places so a good thing it's a.
That's right given that you tried to be.
He positions across where the market or can you.
That they should.
Should be.
Such a significant part about new business.
So to happen Beijing market it probably the most constrain in China and out only move up.
So I'm trying to scale that we put up there has been.
Very instrumental enabling us.
When they lost business would significantly increase though.
Our market share in.
In Beijing.
We could when I took about phasing in saying hi.
Will include the surrounding areas.
Once again, if you look at the.
Well, but you'll see there are reasons declined around.
Aging answering high which include availability zones, which could be on the outskirts of those cities.
So patients like Latin fine couldn't time trying to relation to Beijing and Shanghai.
Then that say low latency the qualified being within say.
Recent.
Well taste like San Jose you apply life further away from Beijing.
Difference.
The reason from new people people second your question.
Yeah, I mean, I was just interested that the pace of demand or the volume of demand in the market is that.
Similar to what it was six or 12 months ago or or has that ticked up.
Our market demand for for data Center space.
Well, let me touch wants the unfortunately, they wouldn't have in Shanghai and say okay.
Little more difficult to coordinate.
Uh huh.
In general.
I cannot described the exactly number of democracy size right now because there is always change, but it is a chair gives me the Chinese good thing because of what do we can see see the channel compared with lots of 12 12 months ago is is obviously the in the next three off.
Five years the demand it is definitely accelerate.
So that's why I think it's very nature, where will we still catch up is Chad I compared with last year, we stepped up the new a normal it's a.
700 square meter per year by organic so this year.
Like we can get it definitely not not it looks like definitely we cannot deliver all over 90000 square meter new cells. That's.
Organic.
So it's a great.
Yeah, It's obviously right.
And then my last question just any update on Hong Kong.
Construction market demands and you know kind of what you're expecting there for that project.
Yeah, I think yeah. We had good we bought two piece of land in a lots of 12 month and we already started construction.
And you we hall.
Everything is on schedule right now and there the first data Santa we would pantry launch by the middle of D.A. Twentytwenty too.
And another one maybe even most all eight months later right is is it gives our current schedule.
Nike or did it remains very active income car market, especially from the mainland China from Iowa customer Oh.
Okay customer installed base. So I think there we're not to expect to any other new customer in Hong Kong, we definitely we'd get we will get today and anchor customer from our existing customer right now and if we are well and we are confident.
He gather the.
The most of the commitments before our plus a data center Oh officially launch.
Thank you very much.
[noise]. Thank you we have or next correcting that trend line <unk> from Morgan Stanley. Please go ahead.
Turning to of course and two questions here. The first one too so it's all pretty big upward revision tomo. So.
For your Capex, which have you been because all the cells upward revision.
'cause management did not bring more about ER was the biggest belt how come from.
Especially given the.
Thanks.
Chris Please pick.
The second question is is a clear management update.
Of Oh investment return profile I mean are places like a.
I'm fine I'm sure cultural, especially given the demand a surprise there.
Growing Vodafone and Oh, yeah.
But.
I'm also overall, Oh I see level.
Thank you.
Yes, I understand you know me increasing capex.
Ice might sit in terms of.
Nine and building acquisitions and.
Well organic rooms.
The London building.
Some extent that is.
Pulling forward Capex, because you know with paying pool.
Not site.
I'm seeing cases.
Who'd young tend to zone.
Yeah development.
Scheduled to take place either two or three years.
The cost of acquiring the insight.
One.
Thing also applies to some extent acquisitions example, Beijing the team.
We.
Without.
The older Apotex.
Jack to capital too.
Take a controlling interest in the line, but you know that would be.
2021, or even 2022.
Okay sounds when it comes into so that's why I didn't think you can look it up capex back.
In relation to current run rate and sales you can look at its peak.
Pre commission rate the projects that we're initiating which is no consistently in that 60 to 72 cents range and you can also look at the.
The pipeline that we build up now 350000 square meters.
Equals more than three years Mi business the.
Current run rate, so we're very happy to allocate capital for that purpose.
Your question about customer return profile.
But it.
This is Pete because that's what we target it's not selling price. It's the return on investment.
And.
What we've seen so far.
Done a lot of business in line.
Large awards in trying to.
The third on moves that you town sites it is.
Well to the level of return.
In the downtown or urban areas.
The development cost unit Capex is lower.
Well to be precise, let's say maybe around 10%, though.
No no you to the cost the real say more due to the efficiency of building Greenfield.
Building large scale on a single sites and sledding infrastructure cost it costs more capacity.
And that means selling price.
Yeah, It's also corresponding the lower.
But oh deals we've done so far.
<unk> project returns as well so sorry.
Thank you.
Thank you.
We have or next question from the line Toby.
Please go ahead.
Okay. Thank you Dan I think in your comments he said that a net installs should be similar.
In the third and fourth quarter, two what we just saw and.
Second quarter I think does around 14000 organic I'm, just curious why wouldn't actually even be higher particularly in the fourth quarter given the amount of capacity you have coming on line I guess could you just remind us.
How much capacity you have coming online during the third and fourth quarter I just to.
Help us there and then also thinking I'm William's comments. He mentioned that you guys got 30% of the incremental demand.
From your top two customers in the quarter I, just wonder if you could unpack it a little bit don't know how exactly understand what that meant and maybe just giving a sense of market share because I think one of the questions I always get from from investors, who might not be asked familiar with the Chinese market is what is the market share of somebody like G.D.S. and you know maybe of just third party down.
The centers et cetera, but anything on that could you help that's it. Thank you.
[noise] cool so net net in schools or.
Yeah, I do we were expecting this year to be a series of step ups and.
One factor behind that was.
Having you do tend to capacity.
Come in.
[laughter].
Yes, we need water.
Yes, according to the original development timelines.
What has what has happened is that.
Your first quarter was around.
Two or 3000 square meters.
Moving them, we had to know.
Budgets.
The second quarter I said, we're expecting 10 to 11014.
Now I'm, indicating that [laughter] excuse me around 14, or 15 should be the pace in the third and fourth quarter.
On the dog.
Yes, you can use to.
Predicted so.
Hopefully blago.
So look at the backlog entering service at the beginning of the courts.
Beginning of the third quarter.
It was 57000 slim.
And typically we delivered 20 to 25 cents that number in a particular quarter.
So 25% of that number would be around 14000.
Yeah that that's got the logic that.
You go back the second quarter.
It looks that metric that's it you'll see that we deliver.
Well, if you could sets the backlog parents others.
Yeah that was.
That was existing at the beginning for second quarter.
Hi, this is the.
[noise] timing or new data center coming into service is 49000 square meters.
New capacity scheduled to come into service during second half the year.
I didn't break it down by quarter, but I can tell you that significant majority of that.
It's going to be in the fourth quarter.
And normally.
We did see much movement in the same quarter as well they send that comes into service. So that's the rising too late.
Really drive.
Increases in schools this year, but it's a very good faith.
When we thought to look into next year.
No question about market share.
But rather than put them up in such a.
I believe it's a lot more profitable than what we see from that part is that.
Lets use with market research about.
Whether it actually maps the datacenter business or was it includes a lot of other.
Telecom value added services.
We think there's a lot of double counting because.
I'm carrying neutralize the reselling carrier data centers and some carriers are resetting carrier neutral data centers.
I'd also I think they said which comes with telecom carriers typically they would includes a lot of network revenue the connectivity read news the data centers and then numbers.
Yeah, we will endeavor in near future to publish the market research.
I think it will show.
But our market share.
On the carrier neutral side.
It is in isn't it.
Okay.
That's kind of a neutral side is in the <unk>.
As in the twin towers, maybe in the tier one markets, it's a little higher than that and as we indicated.
With the very largest hyperscale customers.
It's a it's a more like 30%.
Thank you.
Thank you we ever next question from flying a school.
Please go ahead.
Oh, thank for taking my question Weston could you talk a little bit about odd engagements that you're having a them up and you got the mostly do I'd add a especially by Don something the door, obviously by done the type of that business isn't that need.
Compute needs et cetera are quite sizeable compatible to your two biggest customer. So how do you see that Oh relationship progress over the next couple of here second and maybe related question as well I think William you mentioned that W have stepped up from that 70.
Okay sales already committed organic basis over the last couple of years do definitely 90 kit or the CR or what are the bar that you would also making some acquisition.
So if you think about some of these new customers in your rather flat growth from your existing customers as well if that 90 key number per yard the new normal.
You should we should actually think that could be higher than that number as well from an organic sales.
As you know with me is audio who can do.
Talking about maybe.
The full year nobody can be acquisitions me as we look into the next couple of here, even though the new customer and growth in your existing cousin base.
So a cool I deal with them I think I take your first question, how we engage the new customer.
Finally, we are working very hard onto a.
Ah, it's our key strategy I'd be no thing, so I pure how to diversifying our customer.
But in the last a couple of years, leading demands from the too Big a couple of big Big clock. So that's what we already catch up but what do we realized he is currently in the last a couple of years to new Internet Giants grows so fast and then we start to engage them.
And a at least a two two years ago, but unfortunately, we didn't get any opportunity [laughter] passive too yes.
I wish to keep a engage customer and yet no I think you our customer stop to set up the dam new quite chip do when he was a a baby company. The maybe have a different criteria to select the vendor, but now I think it there quite trademark posed to them.
A standard.
Oh, yes, giant [laughter] giant extended so I think there we have de <unk> ability, we have the opportunity a chance to.
To to gather this deal.
So far I think our customers to you folks all to get point dad datacenter.
Yes needs refinement in.
Children, Maki, plus remote but everybody know G.S.
Our core asset our coal.
Our focus is that she will mark so I think maybe and then a time does the first time, our customer deployed there somewhere in the children box, which we think it's how wall stress and our capability. So thats why why we cannot.
I I gather the deal yeah, and looking forward to I think yeah, those kind of get those customer will future. We believe we'll we'll grow very fast and they will be a wall, let's say next generation lumpy.
Skill contribute and the as I just mentioned that their number if you look at what what's the silver.
And then what's the server.
Total suffered the queues in.
In a in this year and the next couple of years the level of December Kumon, it's more opposed to two there isn't it start to close to their.
Traditional clough a oh here. So we are happy to see that that's means tds anchor customer infusion the anchor customer will be more diversified.
And there is our key strategy and it will continue out on that.
Did you see the first question what's in it.
Oh, Okay 90 saw them [laughter] yeah, yeah, Yeah, we are happy where we can a catch up that we've continued to catch up the accelerated extra racing up D market demand. So we don't want to put some big were a big numbers right now I see me.
90, or 90 or just yet obviously, we cannot cheap.
But I think it next year or in terms of 90, I think we are confident.
But.
Maybe we can do more but we are not just to pursue the number we are pursue the gate gross quantity. So we will see I see next year 1990, 90, 90, a a southern square meter I believe we can't continue right, but we don't want to put the big number right now for the next couple of.
Yes.
Okay.
One follow up on the or are you.
Being some of these customer.
You mentioned that they're building.
Data than does the first time do you feel that strategy for some of these cuts the mother to keep that existing data from the provider in a remote sites and kind of.
Embrace some of the newer lead us into providers like you well established in tier one bit isn't up or whatever let you in tier one cities or do you feel like they had also changing the strategy income so cooling demand from public cloud and kind of starting to move toward that on a deeper than that own compute and.
Other service that posted on their own be doesn't though.
I'd say, it's not topic I think I don't know, what's kind of day EPS application deploying the in a a direct.
It to our data center, but we do you see the 10 of these to use the call a very in a significant weight and they also had another purpose right I think I believe there, but it's different purpose to <unk> 0.7 dedicated a I T infrastructure by themselves I think any.
This is also the chair or in my view.
He did use the public comps do you still go under the also start to use cat Buda, there Oh, hi, because strategy right now.
So we are benefiting both.
[noise] Thompsons limited written mode I seem to be a remote.
Everybody know remote site, it's up one hour.
New product just.
Just what do we did a with G.S.G. I see it's not our core business, but if what are some strategic reason, we still keep to eat if we.
I will call business, but I.
I would like to say.
We are ready to do more and yeah, what do we <unk>, we can't tell us our custom will give us more business, we have more opportunity I missed part.
Understood. Thank you.
Thank you we have that express in it from the line you know how from Goldman Sachs. Please go ahead.
Hi, Thank you very much management for taking my question I have two and the first one that that could you help me understand because we're raising our guidance in terms of our oh or a floor area.
In terms of organic from 87 to 9000, but neither.
They were keeping our any revenue guidance unchanged. So is this because the on the acquisition kind of thing.
No.
[music].
Expecting me or.
I'm more concerned.
And then the second question is intended to.
Just wanted to understand.
A big cloud.
Data center.
Do you see and it gets spread between say.
Or Tencent College and.
Like more money, how many units intervention do they do they usually pick thank you.
It sounds you're on your first question, though.
You know there's a there's a.
Cycle from sales.
Well most of which is a pre commitment.
During the time that they just centers under construction.
In the biggest then it comes into service and then over the you know maybe 18 months lead and 24 months.
There's a move and so you know how sales is they.
Great lead indicator.
Oh.
Revenue grows in the future, but you wouldn't.
Revenue in the car good bye.
Yeah, when we give guidance.
Yeah, well, if we look cool at 12 months.
At any time.
Pretty much all revenue growth looking 12 months, who.
From contracts, which we would sign prior to parts of the beginning of the.
So I mean, it probably was yeah, you took out rate revenue guidance, giving revenue guidance school twentytwenty.
Yeah, maybe I'd be raising that on account of Oh on account of the higher.
So that's how it works.
I wouldn't like to US the question about.
Different strategies to be picked out.
Yeah, I think yeah.
That we had to <unk> as we used that top order, we already beauty I wore a powerful you know all the key market, which we have to you.
A very significant M&A advantage compared with other.
So I I think Dee Ann this is very important for our customers. So I think our customers that they have to criteria for them yourself.
Uh huh.
Continued.
Hi visibility on the resource in each region. Your platform you all coal core a location is a very important and a continued and of course to appreciate a skew is also very important Florida and a cost is also in this is a key criteria.
And the typically I think the a historically oh, there's a top customer do you use a lot of different data data center services provided in Ah, it's hardly but even recently at recent a couple of yes. The shrinking the name and the idea they have their very that in that.
The the narrow the a a vendor list.
After many years.
Ah Ah business relationship so I think Dee Ann typically.
The major.
Like a customer.
We'll have three Oh pool.
Substandard. So this is that parents.
Ah situation, what do we face.
And the ex U.S.
As we as we used to it we used to talk about it we signed a some signed a strategic vendor agreement with our two autopsy customer. So far so yes. We believe would you guys said genius is that major I mean a vendor.
Uh huh.
In terms of de a top.
Three key vendor right.
Yes.
Is that to your question.
Yes, thank you very much.
Thank you once again, if you wish to ask your question. Please press star one on your telephone keypad and between name to be down if you really can't live Rick could you just respond ski.
Benefits all participants on today's call. Please limit yourself to one question Patrick on thank you.
We have the next question from the line of Frank Walton from Raymond James. Please go ahead.
Great. Thank you very much can you comment on the trends and MMR per per square meter then declined a little bit more this this quarter than we'd we'd model what it just thoughts on the trends that after the rest of year.
And my second question can you give us an idea just for those of us not in the region as often about some of the current steps that the government's taken with regards to any future outbreak cobot 19, and how that how is that policy has evolved how do you think into going forward you know reactions to the virus.
Could impact your business, either ability to construct or or get get a labor employees a different locations and so forth. Just talk is little bit about you know what the current policies are and are they better or worse than they've they've been over the last six months or so thanks [noise].
Yeah, Hi, Frontend here.
Yes, I mean, it's off to lend itself to square meter <unk> second quarter.
It was done by 3%.
The way, we calculated as we take the.
It should see opening and closing are useless.
So the.
They are using 10 11 12 acquisition closed on.
During the third we have 25 days.
Revenue contribution.
But we include the whole to their use lies.
The court and number two we are.
Strip that out then you had this decline was just about 1% which is more more that's what to indicate.
<unk> loan.
A trend line.
Third quarter, we will have a cool courses contribution from.
As you can listen 12 and.
Yeah, I think because some some.
And as investors calculated I mean, when we announced the deal do you ever thought that that data centers.
Those predicts and.
Lower them out.
So there will be some thought you to protect and in the third quarter and.
And going forward.
I think the MSR would be around that.
Level rounds to around the neighborhood was.
Uh huh.
Adjustments and <unk>.
In the quarter.
Yeah, I talked earlier about.
The economics of the it sounds sites.
Yeah I saw there.
It is low capex is though that the returns.
Well, we're very.
Very sensible.
So you know there will be continuing the gradual decline.
Yeah and saw and from time to time, we will try to highlight.
Though internal investment, which is really what we target to sustain that I think we are we only be doing that.
When you talk about the.
Your operating burn it's interesting what happens when is it says the resurgence Uh huh ours, yeah, Fortunately I mean, Shanghai ops of 14 days.
[laughter] car T. I fear the everything is going to go back to the through the novel. So lets say here in terms of de a daily life or retail restaurant simmer area.
Yeah Entertainment everything go to the novel So no almost 95% I think yeah. It's go to novel.
Yeah.
From the supply chain point of view and then Oh, what can permission point of view everything.
It's go back so I think it's a come to the novel and Oh, we didn't see any.
The impact in the next few months a few quarters.
Okay, great. Thank you.
Thank you.
The next question comes from the line as James Shrunk from Yes. Please go ahead.
Good evening management I've got two questions. First question is don't supply. So we're hearing that for example, steel mills in China, which have very cheap axis electricity or being consolidated Edison. It. So just wanted to get your thoughts on how do you sense the risk potential capacity other supply how would you cook with the and other supply situation.
Sure Okay.
The next question. It's just in terms of Ah contracting renewed somebody's here what are you seeing to see in terms of pricing because 40, similar low addresses parts and thank you.
Oh, Okay, I I take the first question.
I think it daily salaries are actually if you look at it datacenter is actually is that it's a very very Oh I in my view is a high Barry a English.
Oh, Yeah ER in recently, we see a lot of the supply a lot of de a new pay a jump to them option, but in terms of our customer profile, okay, I'll customer neither would libel.
Vendor right. So I think you need that I loved the new payer it cannot be a catch up varies.
In the in a short term time, so I think you need to get a wee bit do we behind us it's not fabric impact us on other hand, GDS use 19 to date 90 years Buda hour Buda bid out for our value proposition and our position, it's not easy cheat a a two to two tree.
And you Didnt change our position so I think D.
In my view, we already there and yeah obviously.
ER, where in fact position.
And there are also makes a small very sophisticated.
So.
Well I change I was a a position in our customer but oh.
In terms of the competition is more concentrate the RV chip to pay you, even just free right. So and we're not changing any our position in my view.
[noise] that dream.
I know you question about.
Pricing on contract.
Renewals.
Let me let me also within yes.
Bigger picture way.
Do we did business with.
I'll talk to customers in 2014 2015 so.
It was those contracts come up for renewal.
And we'll start to see next second off this year and then.
Next few years.
More because of cloud in Los Angeles.
Business come up who.
When you think the contract when you schedule, which is on page.
42 about earnings presentation.
Exactly.
I was pretty techno 20 2021 22.
Somewhere around 50.
60% plus.
That area like to.
Now the large inset customers.
We've already had.
What number conversations.
I think a rule the outcome is gonna be.
Flat relative to.
The pricing.
Yeah the.
Existing contracts.
There may be some isolated cases, where it comes down.
And then maybe some where where it goes up.
Class.
I've commented before.
This is not actually reflection of the market 16, though.
For the first few contracts because.
Yeah, there's a new orders were put kind of downtown data centers close to CBD.
Where the current market price definitely higher than what it.
Well we call.
We set these market we have to.
We said it to where we're doing business.
With the customers and.
Yeah, Yeah relationship.
No. We haven't spent quite a lot because it does change from deal to deal in place the pace there has been todays agenda.
Hi, I'm trying to time, yeah, when we do these contract renewals.
We have to take.
So what is.
What is the price.
Agreeing.
With the customers.
Yeah, 'cause similar kind of data centers similar yeah areas. It it's a competing you piece of business today.
So yeah, I think a lot of rule.
Oh, Yeah, we need something on the table themselves are not expecting to marketplace.
But thank you very much.
Thank you.
Just one question I would like no.
Like the quote over to the company for any closing remarks.
Thank you all once again for joining US today. If you have two other questions. Please feel free to contacts Tds Investor relations sort of contact information on what size or the piece, some say group Investor Relations I.
Hi Fi for now.
Thank you this country <unk>. This conference call you may disconnect your right. Thank you.
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