Q1 2021 GDS Holdings Ltd Earnings Call

Yeah.

[music].

Hello, Ladies and gentlemen, thank you for standing by for GDS Holdings Ltd. That's the first quarter 2021 earnings conference call. At this time all participants are in a listen only mode. After management's prepared remarks, there will be a question and answer session. The base conference call is being recorded.

I'll now turn the call over to your host Ms. Laura Chen head of Investor Relations for the company. Please go ahead Laura.

Thank you.

So everyone will come through once you plenty of 1 earnings conference call of GDS Holdings Ltd.

Company's results were issued via Newswire services earlier today and are posted online.

Summary presentation, which we will refer to during this conference call can be viewed and downloaded from the IR website at investors GDS services com.

Leading today's call is Mr. William Huang GDS, founder Chairman and CEO, who will provide an overview of all day.

On the strategy and performance.

It's the best Human GDS CFO will then review the financial and operating results.

Jamie Cool our C. O O is also available to answer the question.

Before we continue please note that today's discussion will contain forward looking statements made on the safe Harbor provision of the U S. Private Securities Litigation Reform Act of 1995.

Forward looking statements involve inherent risks on the certain place.

Such the company's results maybe materially different from the views expressed today.

Other information regarding these and other risks on the circumstance is included in the company's prospectus as for.

Files 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 note the GDS earnings press release on this conference call kind of include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures.

<unk> press release contains a reconciliation of the unaudited non-GAAP measures for the.

Unaudited most directly comparable GAAP measures.

I'll now turn the call over to the GDS founder Chairman and CEO. William Please go ahead with them.

Okay.

Hello, everyone.

Joining me on today's call.

Please go to the part of another solid the status of the.

The result.

On a performer year to date is in line with our expectation.

We remain on track to deliver our full year sales targets and financial guidance.

Our sales why don't you from tier 1 was over 23000 square meter.

Organic all Chilean market.

We haven't maintained the.

The thing sales surround range since the beginning of lots of year.

We are confident of maintaining a throw off.

The <unk>.

But the 1.

Despite the the noise about the the growth of the cloud market in China, New regulations, and the increasing competition.

We are not slowing down.

The reason why we can maintain sales commitment of momentum is because of.

Our positioning.

In particular, our increasingly diversified the customer relationships and our market presents which of mirroring the footprint of the clock.

The strength of.

The strength of all of our positioning is clearly illustrated by the hour.

Sales achieved much in the past few months.

It won't kill the kind of tier 1 with 1 sixth of Hyperscale orders for.

These orders where the new markets.

Hong Kong with Covid and the anchor the order for 45% of all the Hong Kong 1 datacenter.

Somebody who is a leading cloud service provider from China.

In addition to commitments for Hong Kong 1.

Which we all of which will enter service in kind of kitchen sink to this customer has index indicated strong interest in anchoring our Hong Kong true data center, which will enter service 1 year later in 'twenty 'twenty.

For the attendees Street.

Income King we called the Waco.

Of course.

The order for 50% of our Chongqing, 1 data center.

This came from the large cloud customer in the financial services industry.

In the current quarter. We went the first of all time high the scale all of the in Beijing from a new cloud service provider, which is the focus on serving governments and the O F. The OE customers.

The 3 notable.

All of the tight highlights our ability to keep our weenie asking men shifts the shifts between market and the customers.

A couple of quarters ago, we made the importance of breakthrough with 2 new hyperscale Internet for customers.

I'm pleased to report that we have now 1 of the follow on order from 1 of them.

The leading e-commerce platform per year.

For capacity in 1 of our Shanghai of data centers.

We also won the bid for a poll on all of the from the other.

The other 1 of our leading content platform for capacity in the.

In their second of.

Tier 1 market.

Our sales and the result of strategies is driven the backside architecture of the cloud.

As shown.

Slide 6 called.

Car platforms deploy multiple availability zone in each region.

Each AZ is independent.

But all of the Asus in the same region.

Interconnected connected with minimal latency.

This architecture.

For real time and of high redundant.

Ah patients.

Hyperscale customers looks to land in the expense, which means they stepped up of new <unk> and the then over time increase the capacity.

The Tommy the initial land and the <unk>.

As a result, we are.

Well positioned positioning the for the expense.

And all of the 50% of our current of sales pipeline.

The order from customers, who have already landed at 1 of our locations.

The expansion orders were not to go are the 2 open tender.

For the remaining 50% of our pipeline the situation varies from the highly competitive 2 limited competition, depending on the location and the customer requirements.

So this means that we can be selective.

About 1 of the business we pursue.

We are not under the passion to chase highly competitive deals just the to meet sales targets.

A key to our success has been our ability to continuously sketch to scale up our supply as shown on slide 7.

We now have our highest ever area under construction construction at the over 160000 square meter of 397 megawatts of power capacity.

Meanwhile, we have sustained our pre commitment rate at <unk> 68 per se.

As shown on slide 9.

Each tier 1 market, we have established the cluster of data centers.

The fifth separates the locations, which mirrors the footprint of the car.

Is what give our platform of unique value proposition.

No other data center company is anywhere close to having this market presents in fact, most of our kind of competitive only have supply in a few places.

During the <unk> 'twenty, 1 we started the construction of 5 new data centers on land and build the buildings, which were previously how the for future development.

And of the same time, we talk to our resource pipeline.

Greenfield land.

Purchase exit rates of locations on the edge of Shanghai and Beijing.

This shows how our capacity sourcing and the construction cycle is working.

We currently have over 500000 square meter of capacity capacity held for future development of.

Over 90% is greenfield greenfield debt, which we own and the which comes with power quota.

This result pipeline the risks our growth and the visibility.

Visit the visit of the available available yet.

Balance sheets.

Sustainable.

Pattern of advantage it in results of price.

We currently have about RMB, 3.3 billion, which means U S dollar $498 million of investment tied up in health held for future direct the future projects.

Sure.

There have been number of recent developments in government the policy, including the including specific policy policies related to resource allocation in Beijing, Shanghai and the Guangdong some of the of details on new but in our view the underlying policy.

Directions direction is consistent.

On the on the 1 had data centers on new infrastructure, which is important for China, China's digital transformation on it.

Other hand, the government is sky guided of by carbon neutral objectives, and the maintaining tight tight control over the allocation of land and the power for data centers for.

For data center use.

We hear people talking about the oversupply, let's put this in the context.

Across all of our tier 1 market supply is constrained constrained and the bar is being raised by government policy.

The only exception is the area in Jiangsu province to the immediate the immediate the northwest of Shanghai.

There are a number of payers who have largest the best developable capacity competition. In this 1 area is more intense and the pricing is more aggressive.

It takes some time to work through but the in the long term, we believe the supply of will be constrained.

They're just like everywhere else, we are taking a long term view and the are seeking to consolidate consignment of some of the surprise.

During the current Dakota, we closed we closed the true previous announced announced the acquisition.

BJ 15 brings over 19000 square meter of capacity. It is 100% committed committed and the 80% utilized.

BJ 15 was the highly competitive M&A deal since closing we have we have started to kind of.

Converging.

Existing beauty on the same sites, which we call. The B Bj's 16, it is already almost of 100% pre committed.

With this expansion the implying the effort.

Acquisition multiple of comps down by about a 1 to 2 times.

T J 1 it's our first of the data center in the Tianjin area.

With the added to the advantage of what is that is it.

It's the only 30 kilometers from the edge of Beijing and it bring it brings over 14000 square meter of the highly marketable capacity will pay the relatively small premium to organic view of the cost.

We are current at the end event advanced the stage for us for another for another data center acquisition, which would of Brean expansion capacity with some customer commitments. Once again, we expect we expect to pay a single digital acquisition multiple.

We saw the quarter, we saw this quarter, how Chongqing in Hong Kong.

True to the new market for us in terms of self development of Tibet divert the datacenters.

Josh drove significant new business from established the strategic customers by the end of this year, we expect effect to enter 1 of 2 further new market in China.

The same logic of the follow on followed the customer is.

Driving our southeast Asia expansion packs.

Our initial focus is 1 is on <unk>.

Singapore However.

As the Singapore government is not approving new projects, we are looking for alternative ways of establishing our presents in the Singapore market.

Given that given the constraints.

Our supply in Singapore, and the rising co locate the co location of price price is we are also considering complementary options in the neighboring countries.

We have identified some very promising investment opportunities and we aim to make it make it at least the 1 of 2 commitments within the next couple of quarters.

Now I will hand over to debt for the financial and operating review. Thank you.

Thank you William.

Tony on Slide 15, where we strip out the contribution from equipment sales.

On the effects of FX changes.

In <unk> 'twenty 1.

Service revenue grew by 4.7%.

Underlying adjusted gross profit grew by 6.2%.

On the underlying adjusted EBITDA.

The 7.2%.

Quarter on quarter.

Our underlying adjusted EBITDA margin was 47, 9% of new.

New high for us.

Turning to slide 16.

So that is revenue growth is driven mainly by delivery of the committed backlog.

Losing of acquisitions.

Net additional area utilized during the <unk> 'twenty 1.

With 16152 square meters.

Exceeding our expectations for the first quarter.

Which is normally a slow season in terms of moving.

Yeah.

In <unk> 'twenty 1.

Organic moving to be slightly lower.

As a result of the midyear of points.

Moving would be in line without talking.

Yeah.

And it's all declined 2.6% quarter on quarter.

And 1 for 'twenty 1.

The RMB 2425 gross.

The square meter per month.

For FY 'twenty, 1 as a whole we expect in the sorts of declined by a low single digit percentage.

On a year.

To some extent the MSR trend is the reflection of the average selling prices in our backlog.

However, there are many other factors, which affect MSR and the computing.

The customer mix.

The central location.

On the C level the belt.

On the cost and contract structure.

We've said many times that we target to sustain investment returns.

We've been launching largely successful for them.

Only a gradual small decline in the IRR over the years.

Across our portfolio as a whole.

Right.

Turning to slide 17.

The underlying adjusted gross profit margin.

It was $54.4 per cent for <unk> 'twenty 1.

An increase.

<unk> 7 percentage points quarter on quarter.

Yes.

Due to the timing of data center completions.

The utilization rate was on.

The slightly higher level of 72, 9%.

Compared with 71, 1% at the.

The end of <unk> 'twenty.

Yeah.

Now on the along with the talks of EBITA margin was 47, 9% from <unk> 21, an increase of 1.1 percentage points quarter on quarter.

Yeah.

As you can see on slide 18.

We have a lot of the data center capacity told me at the service into 'twenty 1.

43000 square meters compared with only 13800 square meters in <unk> 'twenty 1.

Despite the fixed costs associated with this additional capacity.

We expect out of <unk> 'twenty, 1 margin 3 of these slightly lower than for <unk>.

We'll continue the upward trend from last year.

Turning to slide 19.

Capex of <unk> 21.

Was RMB 2.3 billion.

Consisting mainly of payments for organic Capex.

As we closed on.

Pages, 15, and <unk> 21.

We expect RMB, 2.8 billion of acquisition consideration maybe page on the current quarter.

Yes.

Thought about what kind of capex.

For <unk> 'twenty kind.

FY 'twenty 1.

Relates to contracts.

We have 9 such projects for 1 customer.

Which of designated for transfer of the JV with GIC.

And 2 such projects.

2 other customers.

It was not part of out of existing agreements with GIC.

Yeah.

The currently in discussions with GIC, it's about increasing our percentage ownership in the jbs.

And including 11 projects in a partnership.

Okay.

We think that the combination of point.

The equity participation.

On management fees.

It makes these projects more worthwhile for us.

We will update you when ready.

Is that at the end of <unk> 'twenty 1.

We had around RMB 1 billion the accumulated capex paid for these 11 projects.

Looking at other financing position on slide 26.

We have RMB $14.9 billion of the cash on our balance sheets.

And on net debt to EBITDA ratio is 2.9 times.

Given the ongoing levels of organic capex and the <unk>.

15th acquisition consideration.

This ratio to go back up to around 5 times.

At the middle of this year.

Yes.

During the <unk> 'twenty 1.

Completed debt financings for the.

The total for synergy amount of RMB, 1.3 billion.

So the U S dollars 191 million.

Including post new project financing and refinancing of existing facilities businesses the.

The average interest rates.

These completed facilities is 5%.

Based on the prevailing loans prime rate.

This compares with an effective interest rate of 6% for all of them.

Out debt and <unk> 21.

In the past 4 months, we've completed RMB, 1.9 billion of <unk>.

The financing.

And we expect to complete another RMB, 1.7 billion the refinancing.

By the end of the current quarter.

With that.

We'll have RMB, 2.1 billion of refinancing debt.

As part of our plan for this year.

Once completed we expect our effective interest rate to come down.

Okay.

Turning to slide 21.

We confirm without previously provided guidance for total revenues adjusted EBITDA and Kathy.

Ex remain unchanged.

Before we finish I would like to say a few words about ESG.

We plan to publish our inaugural ESG report in the next few months.

We appreciate the as investors are keen to know our plans.

Typically for renewable energy.

Given its importance to all of our stakeholders.

As market leader.

And to take the leadership position in renewables.

We are operating in markets, which have the own challenges.

Which of which are also very dynamic.

The supply of renewables is increasing rapidly in China.

For the per kilowatt basis, the generation cost.

Soon reach parity with Brown power.

China leads the world.

It's the investment in ultra high voltage long distance power transmission.

Which means the renewable energy is going to be more successful in tier 1 markets.

The power trading markets in China.

For developing rapidly.

All of this creates exciting possibilities.

Which we will reflect the targets timeline on how to get there.

We will not disappoint.

We would now like to open the call to questions operator.

I'm sorry on library to answer the question you will need the best part of 1 of them.

The phone to withdraw your question please press the.

Sounds good.

Please standby.

For the Q&A roster for the.

Benefit of all participants on today's call. Please limit yourself to 2 questions.

Okay.

From the line of yeah.

From Morgan Stanley. Please ask your question.

Thanks for the opportunity I have 2 questions here.

The first is related with the competition in general for Us.

William for previous mentioned you expect a normalization for the competition in the future what do we need to see before of real normalization is it should be consolidation or is this should be policy turnaround of the thing.

Approvals.

What's your expectation here.

On the second question is related with the consolidation.

The consolidation right.

If the GDS channel to be the consolidator.

What should be the most.

Multiple trend in the next few quarters or.

For the next few years, because we see a lot of a piece of the infrastructure from the entering the market the might of pushup the dog.

The acquisition multiple of in private market on the west.

It would be the worse.

Or what is your expectation on the multiple here. Thank you.

The growth.

Okay.

The first of question is.

The amount of the competition in this area right.

I think of number 1 day.

The.

The capacity.

The capacity on the land of power is allocated to the different payer in the losses.

Couple of years.

So the I.

This area as I mentioned the competition is intense.

But it is now in a very good positioning is.

Number 1 we have.

The way.

We already out of our capacity already have the customer commitment.

Since the last year. So we are not very.

A number of what we are now.

Pursue some.

Deal, which only once.

Fulfill our sales target work.

Hydro relaxed because we are well positioned there.

Based on the hour.

The national footprint GDS is.

Has the.

GDS already in the multi market we are not of just focused on 1 market.

<unk> maintained our.

I took out of the every deal.

Every deal it depends on our part.

Our intention.

If some strategic deal with Phil importance, we will do it but.

Yeah.

On the deal it's our quantities of is it not.

Not that good, but we'll walk away.

This is <unk>.

The strategy in this area.

From lots of point of view of asking of the number 1 the demand.

Because we believe in this area in the whole Shanghai area.

On China.

The demand is still will continue growth.

So we don't worry about the in the future.

This AR inventory.

Inventory.

Ah well be of the issue of it.

It will take time.

So we are part of the relax on the other hand, the GDS has the.

As I used to mention that we have more than almost 8.

700 customer base. So we are our customers quite a diversified.

80% of our 80% 85% of our new incremental.

All the is from our installed base. So we are not we are not of desperate per year. So we're quite relaxed.

Look at this Airbus competition.

The first the question, but once again as I mentioned the.

Sure.

I think the government's policy.

It's changing I guess in.

In general I mean.

The carbon neutral.

The policy will guide it.

We will raise the bar uptake of carbon quota allocation.

And the business that is at the in my view.

Slide were slow as well.

Slowly too tied up the.

So I think the the demand in the.

<unk> more balance in the in the next few years.

Sure.

The second question is.

On consolidation I think.

Yes, we are in the.

On the multi market even in the oversea market. So consolidation is definitely is our future growth. So we are open.

In terms of the apply the.

Project.

Did it.

The platform. So we're quite open. So this is a we keep open our eyes to watching the opportunity.

In terms of multiple I think the.

We always do the reasonable deal right, we don't want it.

Wanted to.

B.

The buyer.

So we are true we will.

The consistent too.

Let's see.

Take care of the impact on Investor benefits.

Each.

Acquisition deal.

Okay. Thank you.

True.

Our next question comes from the line of John Atkin from RBC. Please ask your question.

Thank you very much so I have the operational question and then of strategic question. So.

On the operational topics, you have 43000 square meters coming into service in <unk>.

I wonder what's the timing is that weighted towards the beginning or end or middle of the quarter.

<unk>.

Also on the renewal schedule that you share.

A reasonable amount is coming due.

For the final 3 quarters of 2021, and where do things stand with your renewal discussions with your customers.

John This is Jamie.

Regarding the question regarding on the.

On the timing for the delivery of the for 2000 claims we are looking at more closer to.

The current period on the delivery of mostly.

Okay.

And can you repeat that I'm, sorry, I didn't I didn't catch that.

Yeah. So we are looking more towards the end of quarter, which is the mine the twin pillars.

The independent.

Got it.

Right.

And.

Well, you'll be a lot of the second question on renewable debt.

Yes, yes, yes.

The renewals yeah.

In the in the back of the back of your presentation of the Jackie.

The amount of.

<unk> for the final 3 quarters of this year next year of the following year, but in the for the near term renewals.

Now on.

End of 'twenty 1.

What is the.

What is the discussions that you have of your customers are you anticipating the new.

100 per cent of it.

What's the.

What's the point of view of discussions around that and the renewal rents are moving.

Yes.

Okay.

Okay.

Yes, John I think the will.

Will the new almost all of it so there's 1.

The situation, where we are going to pull out of date.

Call of third party data center.

Because it's no longer.

Up to the central operating standards.

There may be some term debt.

That's in the thousands of square meters, which you know.

The insignificant even by Scott.

The standards of data center industry.

Other than that the spectrum.

Very high renewal rates.

This year.

Hmm.

I would say is the.

The overall assumption the pricing will be flat.

Most of the contracts.

Discussed quite a.

A few times before about all of them.

Strategy.

At this point in the cycle.

We're still increasing our market share of deepening relationships with large customers.

We do.

Push.

Too hard on the on the on the pricing because we're getting better.

The tradeoffs in terms of the new business at reasonable prices and the terms.

In many other places in China.

Interest income achieved.

Achieving the.

For the group flat pricing on the renewals.

Satisfactory at this time.

Thank you and then lastly, there was the press article in the last 2 days about partnering or acquiring the data center business of the.

Logistics real estate company and I wondered if you can comment on what you.

With you as the strategic advantages of such a partnership inside of China or.

The other markets like Malaysia, or Indonesia that youre targeting for entry.

Yeah.

Well, we did we did not respond to.

The story that was put out by 1.1.

News agency.

And the way.

On the respond now.

Now.

But as a general comment and you know all acquisitions to date of being.

And the effect after the acquisition sweep.

The quad, 80% of central facilities.

On the.

Yeah.

Each acquisition.

Is involved the single sites.

Somewhere between 4000 to 20000 square meters at the stages of.

The development.

We haven't done and the acquisitions of what you might call platform.

James.

But.

In terms of strategy I think.

It's all part of the same.

The same theme which is that.

Seek ways to leverage it.

Our market leadership position.

To establish even more competitive phones to scale would go on to choose.

The market presence and so on.

The platform acquisitions.

You have to look at the valuation the different way.

You'd have to expense.

The synergy is.

The strategic benefit for them.

And so.

But we're very open minded about that so I think the.

We have the window of opportunity.

Given the position that we've established for them.

2.2 really.

I've tried to do some more significant deals.

Yeah.

Thank you very much.

Okay.

Our next question comes from the line of called the C suite from.

From Cowen Please ask your question.

Great. Thank you maybe just following up on that last 1.

As you start to potentially look at.

Platform type acquisitions.

It is what's the capacity financially speaking.

You think that you guys might be comfortable doing the.

Article that Jonathan referencing, suggesting a pretty high price target or price tag of excuse me.

<unk>.

I'm just trying to get a sense of what is the.

Feasibility of of doing such a large deal.

And then secondly.

Even though the installed number of the 16000 plus.

It was stronger than the guided too.

You missed service revenue expectations of at least 9 little debt.

These are the result of the.

Greater pressure on <unk>.

And I think it was anticipated it was down as you mentioned 3.7%.

Quarter over quarter, just wondering if.

If that's timing related or what might be the behind the magnitude of that fell off and then.

Based on your guidance for still low single digit declines. It would suggest then that ARPA is most likely flat.

For the remainder of the year off of that 1.2 number I'm just curious if you would support that view. Thank you.

Yes.

Yeah.

No.

The first part about our financial capacity I think it's relatively easy to.

The calculate.

You know what it is today we have.

Just on the 15 billion RMB cash.

Cash on our balance sheet or just the.

In the first quarter of course, we have.

The big slug of the.

The acquisition consideration to pay during the second quarter.

And we gave guidance for annual Capex of accounts.

12 billion RMB, which include you took on.

M&A, but not beyond the M&A.

If we finance that.

Fix 50, 50 equity debt, which as you know.

Most of the conservative because of course, we target a higher leverage from that.

That would involve the 6 billion of.

Uh huh.

Equity of 6 billion of debt.

For the 6 billion of equity that's that's the.

There's maybe 15 billion of.

The cash.

So there's a fair amount of capacity that is something.

Opportunity arises which is.

Oh no.

So most of the new.

Not only of the course of business.

Just more generally.

Total up to.

The.

Number of different financings, we've done the number of different.

Markets and sources of capital.

The attach whether it be stock markets in the U S.

The only in Hong Kong.

On the strategic investors in Singapore.

Private placements for Chinese financial investors and financial institutions.

Institutions.

Uh huh.

Joint venture of the sovereign wealth funds and that's what I hope over the years, we proved that.

Yes, we have.

Enough.

Ingenuity to be able to find ways to finance whatever you want to do I think.

I think.

Never considered ourselves the capital constrained even when we built 3 data centers, we put them in any of those 2010 I didn't consider that.

The capital constrained.

The comments about the MSR.

The comment.

Uh huh.

2.6% quarter on quarter decline the first quarter.

It's often just to do with.

The Mexico timing.

That's why I gave the assurance of over the full year is still looking at low single digits. So that means not much for the decline and the subsequent.

So this year, maybe 1% from the second quarter.

Not much in the second half since the.

The second half of the year, we don't provide quarterly guidance.

Yeah.

Your comment about the revenue was the first quarter, but we didn't actually provide.

Yes.

On the other hand, I think probably all EBITDA exceeded most people's expectations on EBITA margin exceeded most peoples.

The expectations.

So the.

The balance is the balance there.

Okay. Thank you.

Thank you.

Our next question.

Comes from the line of James Huang from UBS. Please ask your question.

Good morning management, Hi, James Huang from UBS.

Quick question.

First question is on a self build so can you maybe comment on the expense the.

It kind of self built by the large power Kaufman on for.

For example have you seen any kind of recently in the proportion of the build by these customers in the hypothetical how would you ensure your future growth.

For these customers which increased.

Portion of sales built so that's the first question on the second question was just on the current on the demand environment.

Seems like the number of projects put out for public tender the he has come down.

And also I think William mentioned that this year, we you guys probably the flow down in the cloud business in China, but do you see the.

With the weakness at the.

On a 1 off thing.

Or do you think.

It's slowed down will be complete thank you. Thank.

Thank you.

Okay.

The first of all questions.

The customer set for you right I think the.

This is not.

The other new something new I mean since a couple of.

For the 5 years ago. The <unk> market is a separate market in my view, so again I should remind the the.

All the investors GDS the strategy is the folks on the table market right. So I think the if the market is second to the widening of the self pay market, which is in the most of it most of almost 100% so far it's the ethane.

On the remote area and it is.

What do we can see is other tier 1 market still very very.

Good day meant that from the our customer so I think in terms of the of tier 1 market, we didn't see a lot of debt.

The different.

Share with lots of couple of years, so there's a chance it will maintain so.

So once again the separate market.

The second question.

Great.

Net.

Sorry.

Go ahead of a second question went interest on the demand environment D. The the slowdown being Hussein. Thank you.

Okay.

Demand is it depends on the different.

Which market.

We talked about it in our view in the Chilean market.

All of the market.

Also on the market I didn't see a slowdown the the demand.

So thats why we cannot still maintain the ex.

High growth in the first quarter, which we just reported we think we think of them.

We didn't see it.

We still see our momentum in the next quarter, but I didn't I don't I don't see.

I don't know of which other.

What do you look at right in our view I think we already lockup of debt.

This quarter, we've maintained the whole yes.

Our sales commitment.

Thank you.

Thank you.

[laughter].

Our next question comes from the line of.

From Goldman Sachs. Please ask your question.

Hi management. Thank you for your time asked 2 questions. The first 1 is regarding your the H B O T project and the JV with GIC wondering if you could share more colors with us in terms of how your thoughts are for the JV as well as for the D O T projects going forward.

And then the second question is regarding competition as William you mentioned that the competition in Jiangsu Province has been relatively intense recently so I was just wondering historically speaking, let's say, maybe a few years ago.

Was there any like similar situation in any of the regions happening in China and then what was the process there and then how debt.

So how eventually debt the competition intensity come back to normal and would be very helpful. If we could have some like historical reference there. Thank you.

Hi.

Ill answer the first question on.

T O.

This makes the entire William.

Instead of that.

The <unk>.

The opportunity is mostly it's a remote site opportunity and it is quite different from now on.

For business in <unk>.

Tier 1 markets.

The situations almost exactly the opposite of tier 1 markets moving to our markets customers may have.

Multiple availabilities zone, the capacity of spread out.

And the Big challenge too.

Hum.

Uh huh.

Yes.

The expense.

Expand the.

It platforms in multiple locations in the synchronized way.

Whereas the.

In the remote sites.

Very few locations in fact.

The earnings presentation, where we showed.

The show the locations of the.

Starting from China, you see just a few docs outside of the the tier 1 markets.

On the sites.

Of note sites of customers can concentrate a lot of capacity very few place there's no barrier to entry very practical for the.

To do that themselves.

And yes.

Most of them on looking to outsource that mm for the <unk>.

As of outsourcing of are quite different.

So we established a partnership with GIC.

Was just the video well for them.

Conventional engineering.

On to ensure that we have the competitive cost of capital.

We are selective about that business just as we have some extra about the business should be doing.

Tier 1 markets.

Yeah.

Is that kind of businesses.

Put out 2 oh from tender, it's more competitive it's more price orientated business.

In tier 1 markets.

All I can say is that if.

If we don't win it without scale advantage and the cost of capital the advantage then.

Whoever wins, it will be probably as not getting a very good deal.

Thank you Dan and just.

A follow up on that so you mentioned I think you were.

Interest is even maybe increasing the share holding in the GIC JV I remember it was 10% for GDS, if I'm not mistaken. So if we increase potentially increase that share holding to over 50% of does that mean like all of these projects should that gets consolidated into our P&L right.

That's kind of would be the case, but.

Actually the drive of here is.

Uh huh.

What makes these projects worthwhile for us.

If we could zone 2.

Have a 51% equity interest.

And so we're able to charge a management fee, which effectively means charging of management fees trial for.

49%.

And then we calculate the return on equity.

Which is obviously the project with them.

Homes by the management team.

That's the.

At the 51% ownership level.

The project returns from these projects as is attractive.

It's not the interior, it's not something that we the.

Uh huh.

Relapsing.

And to do.

So we feel that the current justify putting more equity and up to that kind of level and maybe some.

<unk>.

We put an even a higher level of equity of the market. Some of them are we put in.

Yes.

But that's what was driving it that kind.

The.

Yeah Yeah.

If it means that the projects are.

The consolidated.

Yeah.

So the.

To.

Ensure that the disclosures to enable you to understand what contributions being made for these projects.

I understand thank you very much.

Yeah I have the second question in terms of the competition.

Yeah.

Yeah, I think the chance of promise.

Especially with the case in the current spot just a whole environment I think.

Yeah.

The.

In my view is the situation.

We number 1 we still believe scan the A&D.

The Comanche will gross in the.

All of the chair of the market number 1 so in terms of D. A competition, but right now I think the.

Yes.

The capacity.

<unk> will be.

What is the capacity.

<unk>.

A little bit of over supply.

It will be solved in the next set of 24 months it might be.

Okay. Thank you very much.

From.

Please do the math yourself to 1 question. Our next question comes from the line of Coke on Hardy Har around the from.

P Morgan.

Ask your question.

Yeah, Hi, Thanks for taking my question. My question is the about some of the recent regulations of its team in Beijing and Guangdong.

The management fee of the implications of this regulation looks like the capacity there is some kind of on.

Demand for on moving towards higher performance related projects, especially in Beijing, and the also related to that.

How how do you think the industry meet some of the carbon neutrality.

And the carbon credit for kind of requirements in some of these locations.

Do you have to purchase the secreted from the body.

Is that process something that can be passed onto customers through price increases are cost pass throughs. Thank you. Thank.

Thank you.

Yes.

Uh huh.

That's it.

I'll take the second part closed the Oklahoma on.

On the renewables I think.

In the long term.

Using renewable energy will not be any different in terms of the economics for them from using.

On a go Brown Brown power.

It would be it would be the norm.

On the infrastructure will exist.

<unk> loans.

The.

From the.

The Texas, where renewables has generated 2 of the places where most of the power.

Is consumed.

The powertrain market will allow.

Allow for cross regional.

Trading.

I think on the during the transitional period.

We may have to take.

Take some steps to.

Establish some day.

Iraq power purchase agreements.

We may consider investing in directly.

The renewable power projects.

Ideally.

It's such a situation.

Possible.

The projects, which are located close to the data centers. So that it can be direct to the trunk.

Transmission connection.

Without going through centuries true to the grid.

You know the there's always the ultimately the pullback of buying.

The renewable energy certificates.

Uh huh internationally.

Is it not in China.

I didn't the bat we.

We operate in tier 1 markets.

Data center businesses of tier 1 market business create.

Create some challenge because of the geographical.

On the separation.

Neither of the towers is generated.

The.

The challenge that everybody is facing.

And I think the.

The government policies.

Addressing both of.

The supply side.

And the market mechanisms on the consumer side.

To ensure that we can solve that.

So the problem.

Your question about the.

Regulations.

The Beijing, Shanghai, Guangdong go on 200 dress up on him.

Yes.

Okay.

Yeah Okay.

I think of Guangdong.

You talk about the Guangzhou and Beijing governments, new policy I.

I think.

In general I mean, the the.

The raise the bar.

To allocate it.

A couple of quarters.

And then the number 1 number 2 is that means they want a more of a lower QE.

In terms of the actual the carbon carbon neutral policy. The second of all I think the they tried to close some small data center right.

The fishing dataset, which means.

The impact is a positive because a lot of the existing.

A small of.

Data center will be.

The step by step the coast is we'll move to the large.

More power efficient data center like.

We built right. So I think of it is the 1 impact.

That's another impact is the same state they've raised the bar I think of it the governments realize the previous carbon quota allocation is not.

Non.

The efficiency.

So I would like to see this is a good for the leading company.

In the future too.

Obtain more carbon quarter. This is the baidu.

In terms of the how.

How do we improve our.

Operating to accurately.

Kind of a carbon neutral new guidance I think of that number 1 we will we will give our us give our ESG report soon right.

We will give a very clear roadmap right I think the the most important ways.

Why is the keep.

Improve our Puma AE.

Although we are the we are already in this area we are already the leader.

The company in the China data Center.

The number 2.

I think the.

Did.

The energy source.

Net.

It's very important right.

The path based on the current tier 1 market the hasn't.

Not that much.

Renewable energy in this city.

So we have the difference of weight.

The 2.2.

Maintained the the.

The.

To improve the car.

Carbon neutral.

Later, we will give some of that detail our roadmap.

By the way I would like to see it.

In the last the 2 yes.

Just must continue.

The central government issue the Green data center.

Example, right.

So GSK almost the when the 50% of the Green day dataset, which day.

Which central governments are let's say Jasmine.

Certification side of it.

Yes.

I'll give the certifications so that means GDS.

A couple of them.

We are already in the leading position for the in the China, China data Center of English for the Green dataset for the.

Renewable for the carbon neutral.

Right. So this is my answer.

Got it thank you very much.

Our next question comes from the line of Sam.

Raymond James Please ask your question.

Hey, guys. This is rob on for Frank Thanks for taking the question. So sort of my first question is are there any markets, where you're seeing pricing, that's either better or worse than average and then of the follow up.

What do you think some of the changes in government policies.

Are going to begin the benefit you guys. Thank you.

Okay.

Robert.

Apart from.

The 1 area that we talked about around the north.

Northwest of Shanghai, I think the situation.

Uh-huh parts of.

All of the tier 1 markets between the district of Beijing.

Yeah around the edge of Beijing.

The Shenzhen Guangzhou the areas around them.

The urban parts of Shanghai.

Uh huh.

Yes some.

Reported.

Shanghai.

The it's very consistent.

The play is constrained.

And.

The very often.

The customers have very little choice.

The number 1 reason why we lose business is because we don't have supply.

Are you surprised even without the.

The <unk> pipeline and 2 of the.

The scale about construction activities you know how on.

From that arises so no we wouldn't.

Yeah.

Wouldn't happen.

Because because we were not trying so despite our very best estimates.

We.

News business.

Continuously because we are unable to generate supply.

As many places as we want so that shows you. The this is the only.

Talk about supply constraints.

We'll see.

So that means the pricing is relatively stable in most of most of the places.

Oh really.

And it's not that all of the stable.

North West the north part of the Shanghai.

Either sales.

There is more.

Tissue the.

It took about the.

Benefits with government policies I think that.

Fundamentally I'm already.

What it is which is the.

Uh huh.

The.

The governments.

Disciplined approach to the allocation of the line kind of of wealth creation.

Challenge for us.

Uh Huh has ensured that the industry remains highly and vegetables, that's kind of.

Tragedy.

It has high barriers to entry.

And that's been the case for for years and.

We have very high conviction that it's kind of remain the case for for the consumer.

Foreseeable future.

Great. Thanks, guys.

Yeah.

Judy Zhang from St.

Now I'll turn the call all of that back to the company for closing remarks.

Okay. Thank you.

Joining us today.

The other questions. Please feel free to reach out to the GDS Investor relations for all accounts.

The information on websites and people sounds like group Investor Relations.

You may disconnect.

Yeah.

This concludes this conference call you may now disconnect. The line. Thank you.

Okay.

[music].

[music].

[music].

Hello, Ladies and gentlemen, thank you for standing by for the GDS Holdings Ltd. That's the first quarter 'twenty 'twenty 1 earnings conference call. At this time all participants are in a listen only mode. After management's prepared remarks, there will be a question and answer session. The base conference call is being recorded.

I'll now turn the call over to your host Ms. Laura Chen head of Investor Relations for the company. Please go ahead Laura.

Thank you and.

Hello, everyone will come through once you 'twenty 1 earnings conference call of GDS Holdings Ltd.

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 the IR website.

The GDS services Dot com.

Leading today's call is Mr. William Huang GDS, founder Chairman and CEO, who will provide an overview of our business strategy and performance.

Mr. Dan Newman GDS CFO will then review the financial and operating results.

Jamie Cool our C of O is also available to answer the question.

Before we continue please note that today's discussion will contain forward looking statements made under the safe Harbor provision of the U S. Private Securities Litigation Reform Act of 1995.

What's looking statements involve inherent risks on the southern cross.

As such the company's results maybe materially different from the views expressed today.

The other information regarding these and other on the circumstance.

<unk> in the company's prospectus as filed with the U S. A D C.

The company does not assume any obligation to update any forward looking statements, except as required under applicable law.

Please note that GDS earnings press release on this conference call kind of include discussion of unaudited GAAP financial information as well as unaudited non-GAAP financial measures.

<unk> press release on pace, a reconciliation of the unaudited non-GAAP measures for the.

On audited most directly comparable GAAP measures.

I'll now turn the call over to the GDS founder Chairman and CEO. William Please go ahead of Williams.

Okay.

Hello, everyone is in the winter.

Joining me on today's call.

I used the tend to call the another solid the stats of the results.

On a pro forma.

As of today.

In line with our expectation.

And we will you will remain on track to deliver our full year sales targets and financial guidance.

Our sales why don't you plenty of 1 was over on phase 3000 square meter organic all tier 1 market.

We haven't maintained the.

The same sales surround range since the beginning of lots of year and we are confident of maintaining a zone.

So it can be tempting to do well.

Despite the noise of about 1 of the growth of the cloud market in China New regulations.

The increasing competition.

We are not slowing down.

The reason of why we can maintain sales amendment and momentum is because of all of them.

Our positioning.

Particularly the hour increasingly.

Most of the customer relationships and our market presents which of mirroring the footprint of the clock.

The strength of the strength of all of our positioning is clearly in the changes.

Sales achievements in the past few months.

<unk> plenty of what we've won 6 of Hyperscale orders for.

These orders where the new markets.

Of course, we called on the anchor the order of 445 per cent of our Hong Kong 1 datacenter.

<unk> is a leading cloud service provider from China.

The addition to commitments for Hong Kong.

Which we all of which will enter service in terms of accounting to this customer has index.

Indicated strong the interest.

Anchoring our Hong Kong to data center, which will enter service 1 year later in 'twenty 'twenty total.

The it'll be 3.

Income Chi we called the <unk>.

Of course.

So the order for 50% of our Chongqing, 1 data center.

This came from the large cloud customer in the financial services industry.

In the kind of of the quarter. We 1 of the first of all time high the scale all of the in Beijing from a new cloud service provider, which is the focus of our survey governments and the OE customer.

Yes.

The 3 notable.

The high highlights our ability to keep our weenie as can the mix shift the shift, but key markets and of customers.

Couple of hold on a go we made of the importance of breakthrough with 2 new Hyperscale Internet customers.

I'm pleased to report that we have now 1 of the follow on order from 1 of them.

The leading e-commerce platform.

For capacity in 1 of our Shanghai data centers.

We also 1 of the big for a poll on all of the from the other.

The other 1 of leading content platform for capacity in the.

In their second of tier tier 1 market.

Our sales and the result of strategy is driven in the back by architecture of the car.

As shown on.

Slide 6.

The platforms deployed multiple availability zone in each region.

Each AZ is independent.

But all of the ANZ in the same region.

Interconnected connected with minimal latency.

These are architectures.

For real time and of high redundant.

Operations.

Hyperscale customers look to land and the.

Debt, which.

She means they stepped up of new Avis and the then over time increase the capacity.

When Tommy the initial land and the.

As a result, we are well positioned positioning the for the expense.

And of all of the 50% of our current of sales pipeline.

Cash and all of the from customers, who have already landed at 1 of our locations.

The expansion orders were not of go out of 2 open tender.

For the remaining 50% of our pipeline the situation varies from the highly competitive too limited to the competition, depending on the location and the customer requirements.

So this means that we can be selective.

About 1 of the business we pursue.

We are not under the pressure to chase highly competitive deals Jeff the to meet sales targets.

A key to our success has been our ability to continuously sketch to scale our stock price as shown on slide 7.

We now have of our highest ever area under the construction construction at the over 160000 square meter of 397 megawatts of power capacity.

Meanwhile, we have sustained our pre commitment rate at 68 per se.

As shown on slide 9.

Each tier 1 market, we have established the cluster of data center.

The second separates the locations, which mirrors the footprint of the car.

Is what gives our platform of unique value proposition.

No other data center company is anywhere close to having this market presents in fact, most of our kind of competitive only have supply in a few price.

During 1 of the turnkey well we started the construction of.

5 new data centers on land in the abuse of buildings, which were previously held for future development.

And for the same time, we talked to all of our resource of pipeline with.

Greenfield land.

Purchased asset.

Great for locations on the edge of Shanghai and Beijing.

The issue.

Our capacity the sourcing and the construction cycle is working.

We plan to have over 500000 square meter of capacity capacity held for future development over 90% is Greenfield green.

Greenfield debt, which we own and the which comes with power quota.

This result pipeline the risks of our growth and the visibility.

The visit visit for the available.

Net debt exchanges, our sustainable kind of competitive advantages in result of price.

We currently have about RMB, 3.3 billion, which means you have $498 million of investment tied up in how how the fall future divert the future projects.

There have been a number of recent developments in government policy.

Accordingly, including specific policy policies related to resource allocation in Beijing, Shanghai, and Guangdong some of the of details on new but I mean, our view of the underlying policy direction direction is consistent.

On the on the warhead data center on new infrastructure, which is important for China, China's digital transformation on.

Other hand, the government the sky guided of by carbon neutral objectives, and the maintaining tight tight control over the allocation of land and the power for data center for.

For data center use.

We hear people talking about the oversupply.

Let's put this in the context.

Across all of our tier 1 market supply is constrained.

And the the bar is being raised by government policy.

The only exception is the area in Jiangsu province to the immediate maybe of the northwest of the Shanghai.

Where there are a number of players who have largest Quebec developable capacity.

Competition in this 1 area is more intense and the pricing is more aggressive.

And it will take some time to work through but.

In the long term, we believe the supply of will be constrained.

They're just like everywhere else, we are taking a long term view and are seeking to consolidate consolidate some of the surprise.

During the current of the corner when Covid, we call of the 2 previous announced announced the acquisition.

P. J. The 15 brings over 19000 square meter of the capacity is 100% committed committed and the 80% utilized.

<unk> was the highly competitive M&A deal since closing we have we have started the kind of converging.

Existing beauty on the same sites, which we call the B B J F 16, it is already almost 100% pre committed which.

Expansion of the implying the effort.

Our position multiple cost down by about a 1 to 2 times.

TJ 1 it's our first of the data center in the Tianjin area.

With the added to the advantage of what is of that is is that it.

It's the only 30 kilobits for.

The edge of Beijing.

It brings over a 14000 square meter of of highly marketable capacity will pay the relatively small premium to organic view of the cost.

We are currently at the an event advanced of stage for us for another for another data center acquisition, which would of bringing expansion capacity with some customer commitments. Once again, we expect we expect to pay a single digital acquisition multiple.

We saw the quarter, we saw this quarter, how Chongqing in Hong Kong.

Talk to the new market for us in terms of self development of Tibet divert the Datacenters just drop of drove significant new business from established the strategic customers by the end of this year, we expect effect to the end to 1 of 2 further new market.

In China.

The same logic of the follow on follow the customer.

Driving our southeast Asia expansion packs.

Our initial focus is 1 is on <unk>.

However.

The Singapore government the is not approving new projects, we are looking for alternative ways of establishing our presents in the Singapore market.

Given the given the constraints.

Our supply in Singapore, and the rising co locate the Colocation price price is we are also considering <unk>.

Complementary options in the neighboring countries.

We have identified some very promising investment opportunities and we aim to make.

The list of 1 of 2 commitments within the next couple of quarters.

Now I will hand over to debt for the financial and operating review. Thank you.

Thank you William.

The only on slide 15, where we strip out the contribution from equipment sales and the effects of FX changes.

In <unk> 'twenty 1.

Revenue grew by 4.7%.

The underlying adjusted gross profit grew by 6.2% and on.

Underlying adjusted EBITDA grew by 7.2 percentage quarter on quarter.

The underlying adjusted EBITDA margin was 47, 9% of new high for us.

Yeah.

Turning to slide 16.

Service revenue growth is driven mainly by the delivery of the committed backlog.

[noise] of acquisitions acquisitions.

Yeah.

Net of additional area utilized hearing <unk> 'twenty 1.

With 16152 square meters.

Exceeding our expectations for the first quarter.

Which is normally a slow season in terms of moving.

In <unk> 'twenty, 1 we expect organic moving to be slightly lower.

As a result at the midyear of points.

Moving would be in line without talking.

And it's all declined 2.6% quarter on quarter.

And 1 for 'twenty 1.

The RMB 2425 per.

Of the square meter per month.

Yeah.

For FY 'twenty, 1 as a whole we expect in the solids declined by a low single digit percentage.

Year on year.

To some extent the MSR trend is the reflection of average selling prices in our backlog.

However, there are many other factors, which affect in the song.

The customer mix of data center locations some of them.

The level development cost and contract structure.

We've said many times that we target to sustain investment returns.

We've been largely largely successful.

With only a gradual small decline in the IRR of over the years.

Gross up <unk> as a whole.

Yeah.

Turning to slide 17.

The underlying adjusted gross profit margin.

The $54.4 per cent.

<unk> 21.

An increase of milk.

1.7 percentage points quarter on quarter.

Okay.

Due to the timing of the data center completions.

Utilization rate was the other.

The slightly higher level of 72, 9% per se.

Compared with 71, 1% at the edge.

End of <unk> 'twenty.

Yeah.

The ongoing adjusted EBITDA margin was 47, 9% from <unk> 21, an increase of 1.1 percentage points quarter on quarter.

Yeah.

As you can see on slide 18.

A lot of the data center capacity coming into service in 2021.

43000 square meters compared with only 13800 square meters and the <unk> 21.

Despite the fixed costs associated with this additional capacity.

We expect out of <unk> 'twenty, 1 margin on 3 of these slightly lower than for <unk> on a go.

Continue the upward trend from last year.

Turning to slide 19.

Capex of <unk> 21.

All of RMB, 2.3 billion.

Consisting mainly of payments for organic Capex.

Yes.

As we closed on.

Pages, 15, and <unk> 21.

We expect RMB 2.

Billions.

The acquisition consideration maybe page on the current quarter.

What about what kind of Capex in FY 'twenty.

For 'twenty 1.

It's the P O T contracts.

We have 9 such projects for 1 customer.

Which were designated for transfer to JV with GIC per seat and to start projects the.

2 other customers.

Which are not part of out of existing agreement with GIC.

The.

The currently in discussions with GIC writes about increasing our percentage ownership in the J B's per se.

And the including 11 projects and our partnership.

We think there's a combination of higher ex.

The participation and management fees it.

It makes these projects more worthwhile for us.

We will update you when ready.

Is that at the end of <unk> 'twenty 1 we.

We had around RMB 1 billion of accumulated Capex paid for these 11 projects okay.

Looking at other financing position on slide 26.

We have RMB $14.9 billion of the cash on our balance sheets.

And on net debt to EBITDA ratio is 2.9 times.

Yeah.

Given the ongoing levels of organic Capex and the Beijing, 15th acquisition consideration.

This ratio could go back up to around 5 times.

At the middle of this year.

Yes.

During the <unk> 'twenty 1.

We completed debt financing.

For the total for the synergy amount of RMB, 1.3 billion.

The equivalent to U S dollars 191 million.

Including both new project financing on it.

Refinancing of existing facilities.

Yes.

The average interest rate for these completed facilities is 5%.

Based on the prevailing loans prime rates.

This compares with an effective interest rate of 6% for all of our debt in <unk> 'twenty 1.

And the pulse for months, we've completed RMB.

The 9 billion of refinancing.

And we expect to complete another RMB, 1.7 billion the refinancing.

At the end of the current quarter.

With that we will.

I'll have RMB, 2.1 billion of refinancing the 2 as part of the plan for this year.

Once completed.

Our effective interest rate to come down.

Turning to slide 21.

The confirmed without previously provided guidance for total revenues adjusted EBITDA and Capex remain unchanged.

Before we finish I would like to say a few words about ESG.

We plan to publish our inaugural ESG report in the next few months.

We appreciate that investors are keen to know our plans.

Particularly for renewable energy given its importance for all of the all stakeholders.

As market leader.

I'm going to take a leading share positions in renewables.

We are operating in markets, which have the own challenges.

Which of which are also very dynamic.

The supply of renewables is increasing rapidly in China.

For the per kilowatt basis, the generation cost growth.

Soon reach parity with Brown power.

China leads the world.

It's the investment in ultra high voltage long distance power transmission.

Which means the renewable energy is going to be more successful in tier 1 markets.

The power trading market in China.

The developing rapidly.

All of this creates exciting possibilities.

Which we will reflect you know targets timeline on how to get the once again, we will not disappoint.

We would now like to open the call to questions operator.

That's all in line to answer a question you will need the best part of 1 of your telephone.

Your question. Please press the founder of Husky sleep.

While the compiled.

The Q&A roster for the.

Benefit of all participants on today's call. Please limit yourself to 2 questions.

It comes from the line of Jack Meehan from Morgan Stanley. Please ask your question.

Thanks for the opportunity I have 2 questions here.

The first is related with the competition in junk food.

William for previous mentioned you expect a normalization for the competition in the future or what do we need to see before of real normalization is it should be the consolidation or is there should be policy turn of wrong the thing approvals.

What's your expectation here.

On the second question is related to the with a consolidation of it right.

If the GDS channel to be the consolidator what's the.

B the a multiple of trend.

For the next few quarters or on the next few years because of where you see a lot of the pes and the infrastructure from the entering the market the my push up the.

The acquisition multiple.

Every market and what should be the Oh, what is your expectation on the multiple here. Thank you. Thank you.

Okay.

The first the question is.

A lot of the competition in this area right I.

I think on number 1 day.

The.

The capacity.

The capacity out of the land of power is allocated to the different payer in the loss of a couple.

A couple of years.

So the.

This area as I mentioned the competition is intense.

But the GDS now fair.

For a good positioning as a.

Number 1 we have some.

The way, we already out of our capacity you already have the customer commitment.

Our sales last year. So we are not very.

Number 1 we are not.

Pursue some day.

Deal, which only once.

The fulfill our sales target we have.

Hydro relaxed because we are well positioned there so.

Just on the hour.

The national footprint GDS is the.

Has the.

Gee, that's already in the multi market we are not of just focus on 1 market.

To maintain the hour.

Try to gather the average yields.

We never deal it depends on our per hour.

Sure.

If some strategically deal with Phil importance, we will do it but.

Yeah.

The deal it's a quantities.

But not that good but we'll walk away if the deal is.

Our strategy in this area.

From lots of point of view of asking of the number 1 the demand.

Because we believe in this area in the whole Shanghai area.

First on China.

The demand of steel will continue growth. So so we don't worry about the in the future.

This AR inventory.

Inventory.

Uh huh.

Well be of the issue.

It would take time.

So we are part of the last on the other half of the GDS has.

I used to mention that we have more than almost 8.

700 customer base. So we are on our customer types of diversified.

80% of our 80% 85% of our new Incrementals.

Order is from our installed base. So we are not we are not of desperate per year. So we have tightened relaxer to look at it this areas competition.

The first the question, but once again.

As I mentioned the.

Sure.

I think the government's policy.

Is changing.

In general I mean the.

The carbon neutral.

Our policy.

<unk> guidance.

We will raise the bar uptake of carbon quota allocation.

And the business that is in the in my view.

Slide where sort of as well.

Slowly too tied up the quarter, so I think the the demand and the stuff.

<unk> more balance in the in the next few years.

The second question is until the.

Consolidation I think.

Yes, we are in net.

On the multi market even in the oversea market. So consolidation is definitely is our future goal. So we are open.

In terms of the a pie the project.

Our platform. So we're quite open. So this is the we keep open our eyes to what should the opportunity.

In terms of multiple I think the.

We always do the reasonable deal right. We don't want we don't want them too.

B.

The buyer.

So we are true we will.

Consistent too.

Let's see.

Take care of the <unk>.

That's all of the Investor benefits.

In each.

Each acquisition deal.

Okay. Thank you. Thank you.

Our next question comes from the line of the John Atkin from RBC. Please ask your question.

Thank you very much so I have the operational question and then of strategic question. So on.

On on the operational topics, you have 43000 square meters coming into service in <unk>.

I wonder what's the timing is that weighted towards the beginning or end or middle of the quarter.

And.

Also on the renewal schedule that you share Hum.

On a reasonable amount is coming due.

For the final 3 quarters of 2021, and what are the things stand with your renewal discussions with your customers.

John This is Jamie.

Regarding the question regarding on the.

On the timing for the delivery of the for 2020.

The more closer to the.

The current period on the day rate mostly.

Yeah.

And can you repeat that I'm, sorry, I didn't I didn't catch that.

Yeah. So we are looking more towards the end of quarter, which is the most.

On the twin pillars of indebtedness.

Got it.

And.

Well, you'll be a lots of the second question on remember that into what the yes, yes, yes.

The renewals yeah.

In the in the back of the back of your presentation of Jackie would give the amount of.

Renewals for the <unk>.

3 quarters of this year next year of the following year, but in the for the near term renewals.

We now end.

End of 'twenty 1.

What is the.

What is the discussions that you had of your customers are you anticipating the nearly.

100% of it.

What's the what's the kind of idea of discussions around bad debt and renewal revenue.

Okay.

Okay.

Yes go on I think the.

Will the new almost all of it so that's 1.

The situation, where we are going to pull out of the rate.

Call of third party data center.

Because it's no longer.

Up to the sexual operating standards.

Other than maybe some churn but.

That's in the thousands of square meters, which you know.

Insignificant even by Scott.

The standards of data center industry.

Other than that the spectrum.

Very high renewal rates.

This year.

And.

I would say is the.

The overall assumption the pricing will be flat.

Most of the contracts.

Discussed quite.

A few times before about all.

Of strategy.

This point in the cycle.

Still increasing our market share of deepening relationships with large customers.

With the.

Push.

Too hard on the on the on the pricing because we are getting benefit tradeoffs in terms of of new business at reasonable prices and the terms.

And in many other places in China sort of at the same could achieve.

Achieving all.

For the group flat pricing on the renewals is quite satisfactory at this time.

Thank you and then lastly, there was the press article in the last 2 days about partnering or acquiring the data center business of the.

Logistics real estate company and I wondered if you can comment on on what you.

With you as the strategic advantages of such a partnership inside of China or in.

Other markets like Malaysia, or Indonesia that youre targeting for entry.

Yeah.

Well, we did we did not respond to.

The story that was put out by 1.1.

News agency.

And the way respond.

Now.

But as a general comment on acquisitions to date of being.

Yeah.

And in fact after the acquisition suites.

The quad stage at the same center facilities on.

Yeah.

Each acquisition.

Is it all of the single sites.

On somewhere between 4000 to 20000 square meters with the other stages of.

The development.

We haven't done and the acquisitions of what you might call platform claims.

But the.

In terms of strategy I think.

Thanks.

Part of the same.

The same theme which is that.

The seek ways to leverage.

Our market leadership position.

On to establish even more competitive advantages of scale advantages.

Market presence and so on.

I think platform acquisitions.

Do you have to look at the valuation of the different way.

You have to expense.

For.

Synergy is.

The strategic benefits all of them.

And so.

But yes.

Yeah, very open minded about that so think of these we have the window of opportunity.

Given the position that we've established.

2.2 really.

The trying to do some more significant deals.

Thank you very much.

Yeah.

Our next question comes from the line of called <unk> for.

Please ask your question.

Great. Thank you maybe just following up on that last 1 as you start to potentially look at.

That form type acquisitions.

It is what's the capacity financially speaking.

Net you think that you guys of it might be comfortable doing the.

Article that Jonathan referencing, suggesting a pretty high price target or price tag of excuse me.

Which I'm just trying to get a sense of what is the.

Feasibility of of doing such a large deal.

And then secondly.

Even though the installed number of the 16000 plus.

It was stronger than guided too.

You missed service revenue expectations at least my little debt.

He is the result of the past.

Greater pressure on <unk>.

Then I think it was anticipated it was down as you mentioned 3.7%.

Quarter over quarter, just wondering if.

If that's timing related or what might be the behind the magnitude of that sell off and then.

Based on your guidance for still low single digit declines. It would suggest then that ARPA is most likely flat.

For the remainder of the year off of that <unk> number I'm just curious if you would support that deal. Thank you.

No.

The first part about our financial capacity.

I think it's relatively easy to.

The calculate.

What it is today.

Of.

That's just under 15 billion RMB.

Cash on our balance sheet at the end of the.

The first quarter, because we have.

The big slug of the.

On the acquisition consideration to pay during the second quarter.

And we gave guidance of annual Capex of about.

12 billion of RMB, which included the law.

M&A, but not beyond the on M&A.

If we finance that.

Next.

50, 50 equity and debt, which as you know.

The conservative because of course, we target higher leverage from that.

That would involve the 6 billion of.

Uh huh of that.

Equity of 6 billion of deaths.

For the 6 billion of equity that's that's the.

For Us maybe 15 billion of those.

The cash.

So the fair amount of capacity there if something.

Opportunity arises which is.

No.

No not the mostly in the.

Not in the order of course of business.

It's more generally.

Total up to.

The.

Number of different financings, we've done the number of different.

The markets and sources of capital.

The tax was it.

The stock markets in the U S.

In Hong Kong the.

The strategic investors.

Singapore.

Private placements of Chinese financial investors and financial institutions.

Institutions.

Uh huh.

Joint venture with the sovereign wealth funds and so on it.

I hope over the years, we proved that.

We have.

Uh huh ingenuity to be able to find ways to finance whatever you wanted to.

I think we've never considered ourselves the capital constrained even even when we built data centers as we put them on in 2010, we didn't consider that we were capital constrained.

The comments about the MSR.

The comment.

Uh huh.

2.6% quarter on quarter decline the first quarter.

It's often just to do with.

Matthew magical timing.

That's why I gave the assurance of over the full year still looking at low single digits. So that means not much for the decline and the subsequent.

Quarters of this year, maybe 1% from the second quarter.

Uh huh.

The launch in the second half of the <unk>.

Second half of the year.

Provide quarterly guidance.

Yeah.

College about revenue in the first quarter, but we didn't actually provide revenue guidance.

On the other hand, I think probably all EBITDA exceeded most people's expectations on EBITDA margin exceeded the most peoples.

The expectations.

So the.

That's the kind of balance the balance there.

Okay. Thank you.

Yes.

Our next question comes from the line of James Huang from UBS. Please ask your question.

Hi, Good morning management, Hi, James Huang from UBS.

Quick question first.

The first question on self build so can you maybe comment on the expense of the.

It's kind of self built by the likes of called Kaufman on for.

For example have you seen any change of recently in the proportion of the fulfilled by these customers in the hypothetical.

How would you ensure your future growth.

These customers which increased.

Portion of self built so that's the first question on the.

The second question was just on the current on.

And the environment.

It seems like the number of projects put out for public tender. The he has come down.

And what's the I think William mentioned that this year.

You guys saw the the slowdown in the cloud business in China, but do you see the this week.

The weakness at the.

The 1 off thing.

Or do you think.

Slowdown will be the thing thank you.

Thank you.

Yeah.

Okay.

The first of all questions.

Customer of self build right.

This is Doug.

The new something new I mean since a couple of.

For the 5 years ago. The <unk> market is a separate market in my view, so again I should remind of the AR.

All of investors GDS. The strategy is focused on the tier 1 market right. So I think the if the market is stuck into the 1 of the self pay market, which is in the most of the most of almost 100% so far.

On the remote area and it is what do we can see as other tier 1 market still very very.

Good demand from the our customer so I think in terms of the of tier 1 market, we didn't see a lot of debt.

The different.

With lots of the type of yes. So these are the chassis were maintained so.

So once again the ability to separate market.

The second question.

Okay.

Yes.

Sorry.

Go ahead of our second question went interest on the demand environment do you see the slowdown being sort of thing. Thank you.

Okay.

It depends on the different.

What's the market.

We talk about it in our view in the tier 1 market.

All of the market.

Also of the market I didn't see a slowdown the the demand.

So that's why we cannot still maintain there.

High growth in the first quarter, which we just reported we're thinking we're thinking of them.

We didn't see it.

We still see our momentum in the next quarter, but I don't I don't see.

I don't know I don't know of which other.

What they look at Reits in our view I think we already the lockup of debt.

This quarter and the we'd maintain the whole yes.

Our sales commitment.

Thank you. Thank you.

[laughter].

Our next question comes from the line of.

From Goldman Sachs. Please ask your question.

Hi management. Thank you for your time ask 2 questions. The first 1 is regarding your the H B O T.

Project and the JV with GIC wondering if you could share more colors with us in terms of how your thoughts are for the JV as well as for the the Ot projects going forward.

And then the second question is regarding competition.

William you mentioned that the competition in Jiangsu Province has been relatively intense recently so I was just wondering historically speaking of let's say maybe a few years ago was there any like similar situation in any of the regions happening in China and then what was the process there and then.

How debt.

So how eventually debt the competition intensity come back to normal would.

It would be very helpful. If we could have some like historical reference there. Thank you.

Yes.

Hi.

Ill answer the first question on.

T O.

We've always makes it on William District.

So that the.

The beauty of huge he is mostly it's a remote site opportunity in it.

Quite different from now.

For business and.

In tier 1 markets.

The situations almost exactly the opposite of tier 1 markets 2 on markets customers may have.

On multiple availability zones, the capacity of spread out.

And the Big challenge too.

Uh huh.

Uh huh.

The expense.

Expand at the right.

Platforms in multiple locations in the synchronized way.

Whereas in the remote sites.

They have very few locations in fact.

For the presentation.

The presentation, where we showed.

Shows the locations of the debt.

Starting from China, you see just a few don't so outside of the tier 1 markets.

On the sites.

Right.

Our customers can concentrate a lot of capacity very few place.

Barriers to entry so very practical.

For them to do that for themselves.

And yet the most.

The I was looking to outsource that.

For the terms of outsourcing of quiet.

So the established partnership with GIC.

It was just.

Video for them.

The convention of engineering.

To ensure that we were kind of the competitive cost of capital.

But we are selective about that business just as we have a selection of about the business should be doing.

And Tim on markets.

It's the.

That kind of the businesses.

He's put out to tender.

More competitive it's more price orientated business.

Tier 1 markets like I say is the.

We don't win it without scale advantage and out of cost of capital advantage then.

We have the wins it will be probably as not getting a very good deal.

Okay.

Thank you Dan and just.

A follow up on that so you mentioned I think you where interest.

Interest is even maybe increasing the share holding in the GIC JV I remember it was 10% for GDS, if I'm not mistaken. So if we increase potentially increase that share holdings to over 50% of does that mean like all of these projects should like gets consolidated into our P&L right.

That's kind of would be the case.

Actually the drive of here is.

Uh huh.

What makes these projects worthwhile for us.

If we could zone 2.

Have a 51% equity interest.

And so we're able to charge a management fee, which affected the remains charging a management fee.

49% on them.

And then we calculate return on equity.

Which is obviously the project returns.

In homes by the management team.

That's the.

The 51% ownership level.

The project returns from these projects is attractive for them, it's not true.

Syria, it's not something that the.

Uh huh.

Relapsing.

And to do.

So we feel that the current justify putting more equity and up to that kind of level than maybe some.

<unk>.

We put an even higher level of equity of the markets on where we put in.

Yes.

But that's what was driving is that kind.

Creation.

Uh huh.

Yeah Yeah.

If it means that the projects are.

The consolidated.

Yeah.

So the.

<unk> and <unk>.

Sure that the.

The closures of enabled you to understand what contributions being made for the project.

I understand thank you very much and I have the second question in terms of the competition.

Yeah.

Yeah, I think the chance of promise of various space, especially the case in the current market.

The environment I think.

Yeah.

The.

In my view this.

The situation I guess week number 1 we still believe that.

Give me a simple growth in AR.

All of the share where market number 1 so in terms of D. A competition, but right now I think.

Yes.

The capacity.

<unk> will be.

What is the capacity.

Capacity.

A little bit of over supply.

It will be solved in the next 24 months it might be.

Okay. Thank you very much.

Yes.

Can you define from streams. Please limit yourself to 1 question. Our next question comes from the line of Cocoa Hardy Har around the from Jpmorgan. Please ask your question.

Yeah, Hi, Thanks for taking my question. My question is the about some of these recent regulations of you have seen in Beijing and Guangdong.

How does.

The management fee the <unk>.

Implications of this regulation looks like capacity there is some kind of.

Demand for on moving towards higher performance related projects, especially in Beijing, and the also related to that.

How how do you think the industry meet some of the carbon neutrality and the carbon credit for kind of requirements in some of these locations.

Do you have to purchase the secreted from third party.

Is that process something that can be passed onto customers through price increases are cost pass throughs. Thank you. Thank.

Thank you.

Yes.

Yeah.

Uh huh.

Yeah.

I'll take the second part first.

The Oklahoma.

On the renewables I think.

In the long for them.

Using renewable energy will not be any different in terms of the economics from the using.

Equal Brown Brown power.

It would be it would be the norm.

The infrastructure will exist.

The tranche loans.

The.

Oh.

From the.

The places where renewables is generated to the places where most of power.

Is consumed.

The powertrain markets will.

The allow for cross regional.

Trading.

For them.

I think in the during the transitional period.

Yes.

I have 2.

Take some steps.

To the.

Establish some day.

Power purchase agreements.

We may consider investing in directly.

The renewable power projects.

Ideally.

It's such a situation.

<unk>.

The projects, which are located close to the data centers so that it can be.

Correct.

From transmission connection.

Without getting too since the true to the grid.

The there's always the ultimately the pullback of buying.

The renewable energy certificates.

Uh huh internationally.

If not in China.

I didn't impact the.

We operate in tier 1 markets.

Data center business as the tier 1 market business.

Some challenge because of the geographical.

The separation from.

The web renewable powers.

Is generated.

The but that's the challenge that everybody is facing.

And I think the.

The government policy is.

Addressing both of the place.

For the supply side.

And the market mechanisms on the consumer side.

To ensure that the consoles that solve the problem.

Your question about the.

Regulations in Beijing, Shanghai, Guangdong Gong Zhu on to address that William.

Yeah.

Yeah.

Yeah Okay.

I think I won't on weekends.

You talk about the bundle and the Beijing governments, new policy right.

I think.

In general I mean, the the.

The raise the bar.

To allocate it.

A couple of quarters.

And the number 1 number 2 it does mean they wanted more of lower QE.

In terms of the actual the carbon carbon neutral policy. The second of all I think the they tried to close some small data center right.

The efficient dataset, which means.

The impact is a positive because a lot of the existing.

The small.

Data center will be.

The step by step the coast is we'll move to the large.

More power efficient data centers of like what we viewed right. So I think of this is the 1 impact.

That's another impact is the same day, they've raised the bar I think of it.

Governments realize the previous carbon quota allocation is not.

Not.

If the.

So I would like to see this is a good for the leading company.

In the future.

To.

Obtain more carbon quota.

Baidu.

In terms of the how.

How do we improve our AR.

Operating to accurately.

A couple of the carbon neutral new guidance I think of the number 1 we will we will give our gave our ESG report zone right.

We will give a very clear roadmap right I think the the <unk>.

The important ways.

Why is the keep.

Improve our Puma AE.

Although we are the we are already in this area we are already the leader.

The company in the China data Center.

Number 2 I think.

The did.

Good.

The energy.

Uh huh.

It's very important right.

Based on the current tier 1 market the hasn't.

Not that much.

Renewable energy in this city.

So we have the different the way.

The 2 to.

Maintain the.

To improve the cost of carbon neutral.

Later, we will give some of that detail our duo Max.

By the way I would like to see.

In the last the 2 yes.

Just 1 question.

The central government issue the Green data center.

Example, right.

So GDS gained almost the wind at 50% of the dataset, which day, which.

Which central governments.

The judgment.

Certification set of it.

Get the certifications so SaaS means GDS a.

A couple of them.

We are already in the leading position for the in the Chinese China data center of the English for.

For the Green data sets for the.

Renewable for the carbon neutral.

Right. So again this is my answer.

Got it thank you very much.

Our next question comes from the line of from some from Raymond.

James Please ask your question.

Hey, guys. This is rob on for Frank Thanks for taking the question. So some.

For my first question is are there any markets, where youre seeing pricing.

Better or worse than average and then the follow up.

What do you think some of the changes in government policies are.

I'm going to begin the benefit you guys. Thank you.

Yes.

Right.

All of it.

Apart from.

The 1 area that we talked about around the.

Northwest of Shanghai, I think the situation.

We have parts of the.

All of the typical markets, which was the.

District of Beijing, Yeah around the edge of Beijing.

The Shenzhen Guangzhou the areas around them.

On the urban parts of Shanghai.

Yeah.

Yes, some southern part of it.

Shanghai.

The.

It's very consistent.

Supply is constrained.

And.

Very often you.

Customers have probably the 2 choice.

The number 1 reason why we lose business because we don't have supply.

You surprised even without the.

The <unk> pipeline and the.

The scale about construction activities.

From that arise so we wouldn't.

Yeah.

Wouldn't happen.

The because because we were not trying so despite our very best efforts.

We.

News business.

The continuously because we are on the.

Moving to generate supply.

And as many places as we want so that shows you. The this is the when you talk about supply constraints.

It's real.

So that means the pricing is relatively stable in most most of the places.

Oh really.

Bolt on.

On the stable.

The northwest North part of the.

Shanghai.

Either it's just the there is more competition the.

Talk about the bell.

On the fit with government policy I think that well.

Well fundamentally I've already.

Said, what it is which is the.

Couple of the.

Governments.

And the approach to the allocation of line power.

Wealth creation.

Challenge for us.

Hum has ensured that the industry remains highly and vegetables, that's kind.

The attractive.

It has high barriers to entry.

And that's been the case for for years and.

We have very high conviction is kind of remain the case for the.

The foreseeable future.

Okay.

Great. Thanks, guys.

Do you think on strain I'd like to now turn the call over back for the company for closing remarks.

Okay. Thank you all once again for joining us today, if you have other questions.

The free to reach out to the GDS Investor Relations for all contact information on websites and people sounds like group Investor Relations.

You may disconnect.

Yes.

This concludes this conference call you May now disconnect. Your line. Thank you.