Q1 2022 Chindata Group Holdings Ltd Earnings Call
Today's conference is scheduled to begin shortly please continue to standby and thank you for your patience.
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[music].
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Good morning, and good evening, ladies and gentlemen, thank you and welcome to 10 data groups holding for a limited first quarter 2022 earnings conference call. We will be hosting a question and answer session. After management's prepared remark. Please note today's.
It is being recorded.
Now I'll turn the call over to the first speaker today, Mr. Don Joe.
From Investor Relations of churn data group. Please go ahead dawn.
Thank you operator, Hello, everyone. Welcome to <unk> 2022 first quarter earnings Conference call. This is down from Investor Relations team of the company with US today are Mr.
Our CEO , Mr. Nick Wang our CFO and MS. Zoe Zhang often is V P.
During this call Nick will take you through the quarterly review of our operational performance and Zoe will present, our financial results management team will be here to answer your questions. Afterwards.
Now I'll quickly go over the safe Harbor some of the statements that we make today regarding our business operations and financial performance may be considered forward looking and so statements involve a number of risks and uncertainties that could cause actual results to differ materially for more information. Please refer.
To the risk factors discussed in our filings with the SEC.
During this call we will present, both GAAP and non-GAAP financial measures.
A reconciliation of non-GAAP to GAAP measures is included in our earnings press release, which is distributed and available to the public through our Investor Relations website, located at Investor Daqing data group Dot com.
We have also updated our quarterly presentation on the company's Investor Relations website, which you can be referred to as a supplementary materials for today's call.
Without further Ado I'll now turn over the call to Nick Nick. Please go ahead.
Thank you Joel.
Hello, everyone and thank you for joining the call.
Despite a headwind in micro environment and Colby related issues, we continue to manage the challenges and grow our business.
Our business momentum remains very strong in the first quarter.
And here out of highlights to begin with.
On slide four.
By end of the first quarter of 2022.
Our total capacity to reach 704 megawatts.
An increase of 31 megawatts during the quarter.
We put one new project under construction.
Our total number of data centers up to 28.
Specifically in the first quarter.
Our in service capacity increased by 58 megawatts to 498 megawatts.
Our contracted capacity increased by 54 megawatts.
Bringing our total contracted.
Capacity to 619 megawatts.
We utilized capacity increased by 40 megawatts to 344 megawatts.
Our total capacity maintained a high contracted.
The ratio of 88 per share.
We continue to our energy efficiency and performance with year to date average appeal.
By the first quarter at one point to one.
The number of our approved and pending patents was 310.
<unk> 231 in the same quarter last year.
Financially.
Our top and bottom line remained strong and healthy.
Revenue was RMB $920 6 million for the quarter.
Which is a 43, 1% year over year growth.
Adjusted EBITDA was RMB 494.5 minutes.
67% year over year growth with a margin of 53, 7%.
A historical high.
Net income was RMB $94 6 million for the quarter.
Which is 62, 5% year over year growth with.
With a margin of 10, 3%.
We have achieved net profit performance for five consecutive quarters.
In terms of a financing.
We have successively quite finalized a 500 million in U S dollars syndication loan financing handmade.
Ensuring sustainable financing for our future development.
With such performance, we have been beating market consensus for 17 straight quarters things IPO.
On top of this with the current momentum and taking into numerous factors. We are raising our full year 2022 revenue and adjusted EBITDA guidance Mike.
My colleague Zoe will share more details later.
Now let.
Let me walk you through more details of operation.
And I will start with our product deliver in the first quarter.
Our expectation going forward.
We have put two projects totaling 58 megawatts into service as well.
Schedule.
One of them is feet in 12.
These six megawatts project that supports an existing key international appliance business.
It is located in one of our campuses in Colombia, China.
The other you would see in 15.
52 megawatts Hyperscale project that supports the business of the anchor client and is located in our campuses in <unk> China.
You can refer to slide seven for the profile of these two products.
We also started the construction of a new project.
18.
30 megawatt Hyperscale project located at one of our campuses in Colombia.
This project will support our business off the anchor client.
And is scheduled for delivery in 2023.
Progress is also achieved in our deployment in APAC emerging markets as.
As we have successfully completed business acquisitions in Thailand.
The project is located in Bangkok, and it's currently running minor capacity for our local clients.
Further technical upgrade.
We expect to bring the total capacity of the project to five megawatts to better serve our potential clients in the region.
With these new projects.
And as you can see on slide nine.
We had brought our total capacity to 704 megawatts by the end of the first quarter.
In service capacity by quarter end stands at 498 megawatts.
Compare it was 440 megawatts in the previous quarter and 291 megawatts in the same quarter last year.
For the 206 megawatts under construction capacity around 50% of them is scheduled for delivery in 2022 and 2023, respectively.
The Kobe prevention and control matters currently taken at different locations in China, it's more or less affected supply chain logistics and onsite labor work.
Bringing challenges for the company.
However, the company has taken active measures and our own assessment milk is is that such impact is confined to a very limited range.
We believe the experience we have gained in early days of the pandemic and year 2020 with more stringent control matters would also help us better respond to the current situation.
We have therefore kept a deliberate schedule of the majority of the project unchanged.
Projects in 13 was slightly delayed but was put into service in May 2022.
We're expecting delays in projects and 16 in the seat and 17 due to customer related reasons.
As for our overseas pilot project aimed.
106, the phase one.
Where we are shipping our entire solution overseas.
We have been carefully managing the challenges and the schedule remains unchanged.
On slide 11.
In terms of client commitment.
Our major client continue to grow healthy.
And we continue to receive commitment from them.
This quarter, we have an additional 54 megawatts contracted capacity mainly contributed by our 52 megawatts I O I capacity conversion on projects in 15.
This project is now fully contracted.
And that is supporting the anchor client.
Meanwhile, we also added 27 megawatts of new <unk> capacity from two northern China projects for the anchor client as well.
One of which well be supporting their high density deployment with 32 kilowatts cabinets.
These development, bringing our total contracted in Iowa capacity to 619 megawatts.
With an 88% from truckload either water ratio.
It is also our ongoing effort to further look for Hyperscale demand.
And the opportunities from enterprises client and cloud service providers.
Well at the same time to further penetrate the APAC emerging market.
With these recent developments.
The commitment profile of our total capacity remains very healthy.
On slide 12 for.
For all of our in service capacity now.
95% of it is either contracted or was I owe a commitment from the client.
And this ratio has been stable.
The ratio of our total capacity in this quarter is 88%.
Compare with 87% in the previous quarter and 88% in the same quarter last year.
Again all.
Our healthy commitment profile can be attributed to the advantage of our Hyperscale business.
We just credible demand from the leading players in the industry and a long term contract, but guaranteed sustainable revenue streams.
To share more color on this.
End of the first quarter over 90% of our contracts are 10 years contract.
While the weighted average remaining term of per contract megawatts at around eight years.
No.
Coming to a customer moving on slide 14.
Thanks to our clients excellent and the resilient business performance, we were able to keep a steady and healthy ramp up pace.
We added 40 megawatts of utilized capacity in the first quarter.
Bringing our total utilized capacity to 344 megawatts.
Compare was 238 megawatts in the same quarter last year.
Which is up 45% year over year growth.
New utilization, mostly came from projects in the greater Beijing area.
Specifically in Shanxi in Quebec.
Utilization ratio at the end of the first quarter was 69%, which is healthy and similar to previous level.
Finally.
Let's look at take a look at our business geographically.
In terms of utilization.
Revenue generation related capacity.
The majority of them are in greater Beijing area in China, which are exactly in or very close to the design of Jones alcohol clusters under the Easter data West computing National policy.
Looking ahead, we currently have a total of 260 megawatts capacity and then construction among.
My mom wage around 50% of them is in.
In the APAC emerging market.
Take a closer look at our current deployment APAC emerging market, which is around 17% of our total capacity.
Our total off around 117 in Malaysia and India.
One wage 89% are either contracted always Iowa by the end of the first quarter.
And we are serving international clients or domestic clients that are going overboard in this region with great growth potentials.
We believe our existing deployment, both in China, and APAC emerging markets what enable to go further.
If you would like to learn more about the details of all of our assets and our growth plan et cetera.
Free to refer to the other pages of our IR presentation.
Lastly.
Another key event for the company recently is definitely our 500 million U S daughter syndication loan financing project.
We have finalized the financing.
The deal was oversubscribed.
We're having reputable international and domestic banks selected as lenders.
Interest rate is around 4% to 5% handle.
Which is in line with our unique investment grade rating, how do we gain previously.
Proceeds will be used for business development and to refinance one of our existing debt.
We expect the deal to be fully completed in the second quarter.
This deal is definitely improving our financial screens and or the current macro environment.
<unk> support our growth going forward.
With this concludes our business review I will now hand over to <unk> for discussion of financial performance Zoe. Please.
Thank you Nick.
Now, let me walk you through our quarterly financial performance.
Financials remain at healthy momentum on.
On slide 10-Q, one revenue in the first quarter increased by 43, 1% year over year to RMB $920 16, driven by the real particularly out of the Companys, Colorado City Gate.
On slide 22.
In line with the company's revenue growth.
Total cost of revenue in the first quarter of 2022 increased by 29, 1% to RMB $499 60 from RMB 380, $686 nine meetings in the same period of 2021, mainly driven.
And by increased utility costs, and the depreciation and amortization expenses.
Selling and marketing expenses in the first quarter of 2022 increased by six 8% year over year to RMB 22, painful, meaning primarily due to higher share based compensation expense.
General and administrative expenses in the fourth.
First quarter of 2022 increased by 32, 9% year over year to RMB 127, 8 million, primarily due to higher share based compensation extensive.
Research and development expenses in the first quarter of 2022 increased by five 4% year over year to RMB 19, 2 million, primarily due to higher personnel costs.
As the company continued to invest in research and development initiatives to further enhance ease of service offering.
With this.
Operating income in the first quarter of 2022 increased by 107, 9% year over year to RMB 251.6 meeting with a margin of 28, 3%.
Net income in the first quarter of 2022 increased by 62, 5% year over year to RMB 94, six meetings with a net margin of 10, 3%.
We achieved that carlsbad to consolidate for five consecutive quarters.
Now, let's take a look at the call expansion cost on slide 23.
Utility costs like at a similar level to the previous quarter, indicating a similar percentage of revenue of 28, 3% compared with 28 five in the fourth quarter of 2021.
Again as a reminder, we have taken into consideration last year's tariff hike when we're setting up our 2000 10-Q2 guidance.
The economies of scale of our business is further improving.
Indicated by a smaller percentage of revenue would taken by other maintenance costs and adjusted SG&A expenses.
The percentage of revenue.
<unk> and other costs was eight 5% in the first quarter.
Pi compared with nine 9% in the fourth quarter of 2021, and 10, 8% in the first quarter of 2021.
Kristin to defer revenue for adjusted SG&A was nine 5% in the first quarter.
Paired with 11 in the fourth quarter.
2021, and a 13, 6% in the first quarter of two of 2021.
With me on Slide 24, our non-GAAP profitability continued to improve.
Adjusted EBITDA in the first quarter of 2022 increased by 67% to RMB $494 5 million from RMB 307.8 meeting in the same period of last year.
Adjusted EBITDA margin in the first quarter hit a new high.
53, 7% adjust.
Adjusted net income increased by 62, 4% year over year to RMB 177.5 meeting also reaching a historical high margin at 19, 3%.
Detailed in the GAAP to non-GAAP reconciliation on the EBITDA and net income would you be available you know about 6K filing are the appendix you never I R. P. P T.
Now, let's take a look at our cash and the debt position and our Capex on slide 25.
We continue to work in our business expansion to meet the increasing demand from our customers.
By investing more capital into our under construction data center.
Capex in the first quarter was RMB $1224 9 million.
We have a cash and a debt position of RMB 4370, 2.3 needed and RMB $5535 5 million, but ended first quarter respectively.
Andy up in a net debt position of RMB 1000 to 192 full media.
Cash dynamics during the quarter was contributed by our net operating cash flow of RMB 168, 2 million net financing cash flow of RMB, $39 3 million and the mostly offset by RMB 1063.
<unk> meeting investing cash outflow.
Again, we grew with high quality healthy cash flow leverage and recoveries.
Slide 27, but end of the fourth quarter, our total debt to capital ratio was 35%.
Our total debt to last 12 months adjusted EBITDA ratio was three <unk>.
Parents to three nine in the previous quarter and ballpoint eight in the same quarter last year.
Our last 12 months adjusted EBITDA to last 12 months interest ratio was six one compared with six in the previous quarter.
And $4 five since.
At the end of the same quarter last year.
Finally, our business momentum together with other factors that we have taken into consideration led us to raise our revenue and adjusted EBITDA guidance for full year 2022.
On slide 28, we lifted both revenue and adjusted EBITDA guidance range of five RMB 16 needed.
Making revenue guidance range now at RMB.
<unk> thousand 132 falls out in the 213 meeting.
Adjusted EBITDA guidance range at RMB 2100 to 2000 to 113 million, implying a midpoint increase of one 5% and two 9% respectively.
This forecast reflects our current and preliminary views on the market and our operational foundation.
This concludes our prepared remarks for today operator, we are now ready to take questions.
Thank you to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.
When asking a question. Please state your question in Chinese first then repeat your question in English for the convenience of everyone on the call. Please ask one question at a time again, that's star one to ask a question.
Our first question comes from Yang Lu with Morgan Stanley . Your line is open.
If they don't kind of hits you wanted to see if Rachel Schacter of course, we're going to close at once performance.
Oh has it been a gentle winters aquarium cohort shortly.
And then for them to do.
Two other cohorts you get called all Ngls should show cause their credentials.
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I don't know if endorsing it up here.
Florida, Egfr population centers were locked up well it sounds like gibberish agenda.
Taking away all the cohorts Union, China should show that ultimately, you'll middle Hashanah without a piano.
Trisha I will translate my question.
So question is about the.
The demand from the anchor customer a buy this at the beginning of this year measurement indicates very strong demand from this customer.
In the past few months Oh, there's lots of things happened in recruiting the Covid lockdown several tier one cities and now after the end of May what's the current new Ultra Luke you can come up with new knowledge from this customer. Thank you.
Thank you.
I'm going to refer this question to my colleague our CEO Bob.
Welcome please.
Right.
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This is the translation to Boston.
Sorry.
Yeah. This is the translation from Barclays remark. Thank you for your questions.
That's right.
Yeah.
George.
Hi can you hear me.
So translation from Barclays go ahead.
Thank you translation from Hoffman's works.
Thank you for your question in our view of the pandemic has actually yeah fight is a increase in its actual business grows and in turn the demand that it has on its suppliers is actually increasing as well we have been discussing and experience.
King a more urgent demand from our customer no matter in terms of timing delivery schedule and also the quantity are also giving us more incentives. Thank you.
Thank you.
Our next question comes from Tina.
<unk> with Goldman Sachs. Your line is open.
Uh huh.
Uh huh.
Uhm.
EBITDA should.
Beat consensus Jaeger Yoga shebang.
I can tell you they are legal.
Oh, no one tissue diode.
Our EBITDA margin J O clock.
You did about what kind of I shouldn't just nutrition shouldn't you shouldn't see the couch it that we should see.
Being chair of course, you know what you do are you sure did I tell me, but I can't do.
So the EBITDA margin.
That's all I really can't I just shared.
I think the guide of collection and even though she that she.
Yeah sure.
Yeah Yeah.
Yeah Bob.
Yeah.
Sure.
Oh, well I, though.
Oh Wow.
Sure due to Youll Columba I, just I thought you know module.
Now what I say.
Oh, Thank you very much for your Thailand, Congrats on very strong Q result, which EBITDA beat consensus by 13%. So my question is regarding your EBITDA margin, which as management mentioned has been historical high at 53, 7% in the first quarter and was also observed.
During the past five quarter, if the EBITDA margin has been increasing sequentially each quarter.
On the other hand, according to your latest EBITDA margin guidance, which is at 51, 2% for 2022 of which then implies.
Implies that over the next three quarters that might be something some expenses or other thing that's dragging down the EBITDA margin. So wondering what those potential expenses will be thank you.
Thank you Tina maybe I'm going to ask my colleague to answer your questions and I'll try to fix.
Make some comments as well.
So you please okay.
Gena. Thank you for your question.
Now if we look at EBIT that will go into the component effect is and therefore this quarter and also last quarter utility cost of license revenue.
That's a very steady.
Steady range and as we mentioned just now in the script, we take a very conservative consumption.
Turning to cost and in the first quarter. The actual utility cost is slightly lower than our original expectation due to late attend the special.
We can use them for beating the green power so.
This is one of the reason and the for the rest of year, although still take the conservative assumptions are.
Assumption and second reason is our you know that with the economies of scale and maintenance cost and the management expenses.
Is it F G and H since he is with us.
Revenue has been in the decreasing churn and the plots the first quarter, the special situation, especially in China.
There's almost no movement no travel in the setting of the marketing events. So if there is that correct.
Is that this will be like the loosened in the second half of this year and we will come back to the normal operation of the selling and general administration expenses shortly each of this.
Sensors as well so that is that right.
Oh that we will remain very stable and steady you'd be their module for the full year guidance.
Thank you.
It would be a conservative.
Yeah.
Yeah, we took a pretty conservative.
That's definitely every time, we get about the guidance.
So there are always upside potential upside.
Thanks, Yeah, just one quick follow up about the Green Green Energy Certificate, which you are paid in first quarter I Wonder if that's just one off or that's ongoing.
Let me tell his room is ongoing but a quota we'd beat it just depends on the demand and also depends on the supply side. So in mind, having some slight fluctuation among quarters.
Understand that's very clear thanks.
Thank you.
Thank you. Our next question comes from hung she Lee with C. I see your line is open.
Hi, Thanks management for taking my question and congrats congratulations on a job beating consensus without them.
Great question.
No.
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No.
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Yes.
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He was really unchanged.
Our hotels, but when he shares our meant you got that right.
The researchers to get back to what you were doing that now.
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But as you go in Ecu I shouldn't counting cohort I, usually outages are underway.
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Since July two LNG that usually on it yes, okay I shall G O.
What should I wish I had is you want to do over.
Sometimes they'll shop not.
What does that ease.
My first question is about the lockdown impact and athlete shall we expect any such external factors to impact our capacity deliberate plan and my second question is about the overseas demand profile.
Because so many carriers start expanding fastly Ah in southeast Asia, and gather region, so what al or what our.
Comparative advantage to them too to grasp that opportunity.
And my third question or I can always go home and I since you're on boarding for awhile.
Did you see any right.
Our improvement was a judgment on the strategy okay. Thank you.
Thank you uncle, Oh, I'm going to answer your first and second questions and.
The third question.
Your first question about the Colgate and interest impact I can tell you. We're in good shape, we're in good shape.
There had been some challenges.
But overall the lockdown and some are.
In China in some a few tier one cities so far all had actually a very minimum impact on our operations.
Because all of our unique advantage in data center in terms of data center locations Ah.
I always said that our data central location energy abound in region, but actually those region is less populated less populated regions.
And these factor location fact that definitely plays a key role putting us in a better much better position than our peers for sure.
To be specific in terms of cut.
Customer moving all capacity to ramp up there was no negative impact and quite country like Coop Hangzhou said, we observed a faster move in and ramp up rate from our key clients during the lockdown period.
And in terms of onsite operation.
The experience we gained back in early part of 2020, when Covid pandemic just broke how have they enable us to meet with a lot of necessary measures and tools to pander to better handle the current acute situation.
In addition, most of our Hyperscale data centers and manage and operating in a concentrated and closed campus environment and normally theres anyway. So all of this operational model definitely makes us a better adapt to all stringent government requirements.
Probably locked down environment.
And in terms of our project delivery for domestic product.
The lockdown has almost slowdown impact on our supply chain and logistics bill for creating some challenges for product delivery.
We believe the risk is well within our control.
The company has been taking a very proactive measures to make sure our REIT personnel.
I'll always be available on a 24 hours a day seven days a week stages is all about on the Worldview dividend worse.
Our overseas projects, our faces some challenges on export related supply chain for example, slower customer and clearing.
In some key tier one cities and outbound logistics is also a little bit slower than expected on the China side, but again, we have but we have been taking the appropriate measures or other part of the supply chain process. The entire managed by our project management can.
Can make up for the time when they lose.
So based on these remedy matters and also thanks to our unique location and operation model. We're very confident that we can deliver all of our almost all of the domestic and overseas projects on time based on our original schedule.
As long as our client doesn't ask for.
Deliberately voluntarily ask for any postponement.
That's real first question your second question related to our overseas business.
We have a very strong business momentum in APAC emerging markets or southeast Asia market as I can tell from our script description.
Our current projects in the region are going very well in Malaysia at your whole state. We are actively developing the phase one and phase two of our M Y zero six project.
We're committed to deliver them on time.
We're also making positive progress on securing phase III up and why you don't see.
<unk> project, which you haven't seen in our asset table capacity people and we expect to start development. Once we receive customers can minimum in near future.
In the quite a important areas the development work for M Y neurosurgery is on track to deliver on our original schedule.
At the same time, there's discussion on expansion of this project I'm wildly off sick, sorry M Y zero three with our key clients is ongoing smoothly. We also expect some good news in the near future as well.
Meantime in the meantime, we are also actively in discussion with potential clients.
In Thailand, and we expect to set up our initial presence in this market.
At the moment I can tell you our overseas business represent a 117 megawatts capacity at present.
The region or.
Or around 17% of our total capacity for the part of people have been talking about their strategy pizza, but the 170 megawatts.
Already you got sick.
<unk> presence in the region, which people tend to ignore.
Since.
Same time, we also have a very strong demand commitment.
Not only for the current.
The capacity, but also for future and these commitments I actually coming from a leading Chinese company.
How about <unk>.
The growth plan in overseas market and also international cloud player as well all those big names.
No.
U S based or European based Werent talking with them and also close.
Close discussion is underway.
To support their ambitious goals in the region as well.
Without any adult Oh, I want to reemphasize APAC emerging market is the most important growth engine 14 data and we're not satisfied with our current presence of only 117 megawatts, which is already in the leading position among peers.
Aim to become the biggest Hyperscale data center service provider in this region.
And our objective is to have overseas business accounting for 30% of our total portfolio in the long run.
And thank you I'll ask my Bob Obviously Youll have all started the third part of the question.
Yeah.
Okay.
When you do things.
So in that sense, you should Oh, Julia bye okay.
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And so that's helped with that is it associated with the.
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He couldn't do what you Gotta E a woman Tim luxuries.
That's the Shelton.
Yeah.
Yeah.
Thank you for asking.
Calculations like buses word.
From Q1, we have been focusing on our I D C main business.
We are trying to keep on delivering very stable operation and delivery schedule and evidently from the financials and operational figures I think we have made it.
We have also spent some of that our efforts in setting up building and optimizing our entire management and execution team.
From a strategic point of view.
We do not have a very material change to our overall growth strategy.
But from the second half of the year.
We anticipated that there will be more internal discussion and research on our.
Further amplify and implementation of the diversification.
Our business.
Yeah. Thanks.
Thank you. Our next question comes from Sara Wang with UBS. Your line is open.
Thank you.
Sure.
Yeah.
Well no.
Yeah.
Sure.
She goes on yet.
Yes.
Well it sounds from what he thought he was with Douglas Utah.
Uh huh.
Yeah sure.
Uh huh.
Welcome to all who are younger than somebody.
Yeah.
Yeah sure.
<unk> com.
T y.
Yeah, Yeah yeah.
Thank you management for the opportunity to ask a question. So I have two questions first is on the demand so.
On the solid results just wondering on the mix.
Matt do we see a diversified demand.
For example, more.
The cloud services are provided by over <unk>.
Core clients.
And then my second question is that right.
Any update.
To.
Where risk back in Hong Kong. Thank you.
Thank you for your first question I'm going to refer to our CEO .
I'll address your second question.
Yeah.
Glenn in cohort, one, which I'll cover that turns out.
Well just looking at pricing anytime soon.
Which endothelial progenitor.
So you can time she's.
I'm glad to hear you so well.
And then with Shenkman.
Some countries are faced with Hyundai time, there to be done.
So thoughts on each of the courtroom.
Like I used to Daiichi <unk> towards the initiation of cohort that's it.
And then both can digest what are you sure.
So all in which I think will confirm the itchy towards that from a page you should attend.
Sure I'm going to just wanted to tie that year, she had withheld quite achieved towards Asia.
Okay.
Yep.
Yeah.
Yeah.
Yeah.
It's always fun nature.
Okay translation.
Yeah.
Yes.
Yeah, well I think what you're doing but yes, okay.
Okay.
The demand from our anchor client is mostly driven by the core business. While at the same time. We are also actively and talk with anchor client on their new business.
Business initiatives, such as <unk> cloud business as long as their enterprise services business, but so far we are not making a substantial progress, but we believe that as we are keeping in touch with them and we try to work together to look for opportunities.
We expect to have some positive results going forward.
Thank you.
All right.
Guarding the Hong Kong listing and as we committed to last time in our Q4 2021 earnings release call.
I already said that there was a internal consensus we're going to do this and we haven't changed at all.
So still internal consensus we're going to do this and the most likely kick off time kind of be a third quarter. This year.
Okay.
Hello.
Yes, Hello, Yeah. Thank you.
Yeah, Operator go ahead with some other questions.
Please.
As a reminder to ask a question. Please press star one on your telephone.
We have a question from Harry Zhang with D. B S Bank Hong Kong Your line is open.
Okay. Here one is on tier one that you were going to see what are those issues out of China.
Sure why don't you cover.
A lot of Oh.
What kind of adherence to the Italian ones.
Sure.
Yeah, I'm going to die.
So yeah.
Got it on my shoulder, which argues I sound like a higher it would be I'll call it out.
Are you talking about robust year shall have one so even though you have to do that to you why should that way like Joan.
Telephone shoulder, which under my leadership.
Thanks.
Thanks management for the opportunity to ask questions and congratulations on the strong results in the first quarter.
My question is are we can see that by expanding fast in China, but Margaret also concerned on the customer concentration risk as we can see the revenue contribution from bad debt and so we're still over 80%.
But 'twenty one so does the company have any plan to further reduce the revenue contribution from <unk> to a certain percentage in the next few years. Thank you.
Thank you.
Again, I think the home club home should be the best person to all those questions I'm going to make some other comments.
I wish all of them de shrink over that's what I used to say it came down.
What do you use to get to that and like it seems like she shops.
Jose you Duane was almost assure you taught in Chicago.
So cool.
And then once I went to Duke.
Cook would correlate down to hear Sweden mentioned as usual, let me get that one to each year.
Cohort two that she show automation strategy.
Yeah, usually that's when I actually in there.
He said when you didn't cohort and geopolitical at home.
Uh huh.
J J E.
She is shopping network.
Do you see the Pudong cleanliness looking cook with Azure Sulu Quintin that'd be another chunk deal you definitely see the woman.
Yep.
And they are highly L T and digest, what Tricia I think with any kind of thought that I should be.
Jim Connor.
Yes.
Huh.
Potential Asia partners work.
And so we're making progress on our business development and.
We keep on focusing on the hyperscale build to suit demand exploring opportunities with other quality clients with various collaboration models.
We not only keep an eye on the domestic opportunities, but also strategic opportunities overseas.
Especially in Southeast Asia, where we have particular ACH.
We hopefully will have good news in the second half of this year, which we will probably share with the market on to the question on they're reducing concentration.
It will happen along with our client diversification efforts, however, as a side note I want to so.
You emphasize got our anchor clients growth is still very healthy so far okay.
I think I wanted to call them try to maybe it's actually people people always try to emphasize concentration risk but for us.
This concentration is a good concentration and bring a lot of opportunity instead of risk and also in the short term you will see that our business is our anchor customer.
Very healthy very strong very robust order banks is also very strong and as short to midterm that concentration or our long term benefits as well.
So most of the contract we with our with.
With our anchor clients pay your base so as much as we can get.
Oh Wow.
The business with them now because basically it's a little over the next 10 years, we have a solid base.
Thank you.
Oh sure Yeah, we don't you didn't like.
Thank you. Our next question comes from Chi Tsang Shea with critics. Your line is open.
Okay.
And to quantify it.
And I'm Gonna Staples, losing in Korea.
What do you mean the ones you should.
Some countries are sitting on Gucci to tell Daedal find themselves short way called you can answer is it hasn't been going.
Oh last haynesville, so I will translate for myself. So would you consider more aggressive M&A an environment of lower market validation. Thank you.
Yeah.
Thank you a couple of questions.
So to answer your questions our principal for doing any.
Merger acquisition projects are pretty simple and straightforward.
Two points number one.
It can provide complementary long term to do that and switching data.
Especially about that.
Jack was interrogated come provides a potentials for diversified customers and also can cover our currently underrepresented geography, that's number 1.2.
Whatever to emerge at the final emerge I wasn't in place.
<unk> need to be justifiable for us long term value period, that's two principal simple principle.
I won't say that we're looking at the merger acquisition.
Opportunity to more aggressively but the we have been looking at some very interesting merge acquisition opportunity. These days based on our own simple principle.
Actually recently a few of them.
A pretty much a draw our attention and I can tell you about some positive progress has been made so far and we'll do the proper disclosure to Republic when appropriate.
Thank you.
Thanks Becky.
Yes.
Okay.
Thank you. Our next question comes from <unk> Yang Liu with Morgan Stanley . Your line is open.
Okay.
Joanna to fail.
Sure.
<unk> took a modular.
So it took a while away for sure.
Alexander trying to children's is sure.
Hi, gentlemen, I just.
Oh Julia July four.
Her teenage Youtube channel switching that you didn't call that 20 ships are they do all the things you do ourselves.
So trigger any other change go super well, sometimes hopefully that's helpful.
So to your account you clean jumbo Schmehl labor shortage.
Cortisol and what kind of a two question on keeping the operating leverage.
Uh huh.
Let me translate my question.
It's about the margins, we see the maintenance and other costs as a percentage of revenue.
<unk> kept declining.
And actually the absolute amounts for running extended to a fourth quarter last year and actually even lower than third quarter last year and my question is what is the long term.
The ratio of this Oh this cost item I know what is the potential upsides for the margin or the operating leverage obviously.
Thank you.
Thank you Joey.
Joey.
Do you want to answer this question.
Okay. Thank.
Thank you for your question as you can see for the first quarter, we had two new additions for the in service data centers and Oh sneak introduced a rise located installed base.
Very adjacent almost in the same position yellow current operating hyper scale data center classes and not the other ones they choose 52 megawatts.
Shanxi Province is also in our existing Hyperscale datacenter classic and this explains the benefits of economies of scales and also.
You can see we will have new data centers to be operating in the second half of this year.
Oversea market and considering this the a S.
SG&A, sorry, the maintenance and upgrade and maintenance expenses.
I think we will slightly change a little bit with all of our new data center in <unk>.
Ah <unk>.
Exploring hyperscale clusters in oversea market all in the new locations, but the overall the overall chance it will be when it comes to the steady stage and we assume this will be around like 10.
10%.
Will be like around email very healthy we just well thank you.
Yes.
The one additional comment automate I've tried to make is actually where our model business model in all of our data center cluster all pretty much in the country to energy are found in energy efficient region.
Provide a huge the much bigger economies of scale.
Based on these economies of scale the larger scale of our business rolls the fixed portion of our expenses and costs like maintenance operation expense of cost and also SG&A R&D.
Human capital cost.
Percentage wise it will keep decreasing that's actually go.
A certain trend moving into the future. So if you ask me what my long term profile and projections for our for this sort of a percentage based experience is kind of going down.
For sure.
Thanks for the additional color.
Thank you and that's all the time, we have for the Q&A session. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
Thank you everyone.
Okay.
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Yeah.
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