Q1 2023 Chindata Group Holdings Limited Earnings Call

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Good morning and good evening, ladies and gentlemen. Thank you for joining, and welcome to Chain Data Group Holdings Limited first quarter 2023 earnings conference call. We'll be hosting a question and answer session after management's prepared remarks. Additional to this event is being recorded.

I'll now turn the call over to the first speaker today, Mr. Don Cho from Investor Relations of Chin Data Group. fiscal we're hitting on.

Thank you, operator. Hello, everyone, and welcome to Ching Data Group's 2023 first quarter earnings conference call.

This is Tom from Investor Relations team of the company.

With us today are Mr. Nick Wong, our CFO , and Ms. Zoey Zhang, our Senior Vice President, Finance. During this call, Nick will take you through the quarterly review of our operation performance and Zoey will present our financial results.

management team will be here to answer your questions afterwards.

Now I will 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 such 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.

our filings with the SEC.

During this call, we will present both GAAP and unGAAP financial measures.

A reconciliation of non-gap-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.chaindatagroup.com.

We have also updated our quarterly presentation on the company's investor relations website.

which you can refer to as an important supplementary material for today's call.

Without further ado, I'll now turn over the call to Nick. Nick, please go ahead.

Thank you, Don.

Hello, everyone, and thanks for joining the call.

The first, on behalf of our CEO , I would like to first address our attendees with a important opening remark. We started the year of 2023 with another strong quarterly business and financial performance.

During the first quarter of 2023, the company continued to advance with our highly demanding project delivery schedule.

Demand from existing clients remained healthy and ramp-up was as scheduled.

As a result, we continue to grow our top and bottom line with adjusted EBITDA beating market consensus for 11 consecutive quarters.

Notably, on the demand side, we hold a very positive view on how AIGC-related development, such as machine learning, large language models, and AI generally, should drive industry demand in the long term.

Well, we have also noticed the recent effort of our existing client in cooperating such new technology into their current product lines.

In the first quarter, we have secured certain contracts for high-density cabinet deployments.

And we believe our unique supply model is capable of accommodating more of this AIGC-related demand in the future.

The key features of our business model are our energy-abundant region layout.

and our in-house food stack capabilities. And we have accumulated actual practical experience in deploying high density cabinets in our existing campuses.

with various cooling technologies suited, tested, and applied.

in our data centers.

in our overseas business.

The delivery of phase two and three of the over 100 megawatts MY06 Johor project remained a key focus. We are about to typical car

And we are devoting dedicated resources to ensure the timely delivery.

We remain confident with the capacity expansion target in the year 2023.

and a healthy momentum in our cornerstone hyperscale business continue to serve as solid fundamentals for our consideration on future business diversification.

Now, let's start with some key highlights for the first quarter.

Let's start with some key highlights for the first quarter. On slide 4. On slide 5.

We added one new project, an additional 27 megawatts of new capacity in the first quarter.

bringing our total capacity to 898 megawatts.

and total number of data centers to 33.

We put one hyperscale data center into service in Zhangjiaqou City.

bringing our total in-service capacity to 639 megawatts.

an increase of 26 MW during the quarter.

Command and ramp up to remain healthy.

We received an additional client commitment of 16 MW in the first quarter.

Braining our total contracted an IOI capacity to 816 MW.

leading to a client commitment rate of 91% of our total capacity.

We added 12 megawatts of utilized capacity in the quarter.

bringing our total utilized capacity to 537 megawatts, and maintain a solid utilization rate of 84%.

We remain fully committed to the mission of efficiently converting electric power into computing power by sticking to the energy side layout.

Leveraging our in-house full stack capabilities and pursued of CAP-HACS and O-PACS efficiency.

and offering our clients quantity and the reliable data center solutions.

Our supply side advantages gained widespread recognition and acclaimed from a variety of prestigious awarding bodies.

Some of our campuses in Shenzhi Province, Khabib Province, as well as in Yanzhi River Delta region, have recently won global and national level awards for their unique performance in design and construction, energy efficiency and operation management.

Our top and bottom line momentum remains strong.

Revenue in the first quarter was RMB 1445 minutes.

Representing a 56.8% Eurolear rules.

Adjusted EBDA grew by 64.6% Euro per year to RMB 813.8 million.

and have been for 11 consecutive quarters beating market consensus.

Adjust the EBDA margin reached new high of 56.4%, 56.4%.

Net income grew by 167.5% year over year to RMB 253 million.

with a net margin of 17.5%.

Finally, given the current business momentum,

We reiterated our full year revenue guidance range.

with a very positive outlook.

Well, raised our adjust the EBDA guidance range by 3.6% and midpoint.

The new guidance range is now between RMB 3.1 billion to RMB 3.22 billion.

Now, let's go into details and first take a close look at project level delivery and construction on slide 7 to 9.

We adhere to our energy side strategy and are consistently working on a highly demanding schedule to ensure timely delivery of these resources to our clients. We are working on a very demanding schedule to ensure timely delivery of these resources to our clients.

Our current delivery plan remains on schedule.

In the first quarter, we put one project into service in mainland China.

with a total capacity of 26 MW. This project is CN19 located in Zhang Ya'Kuo City, Kuala Bay.

supporting one of our key international clients.

The project utilization rate reached 14% in the first quarter of its operations.

In addition, we started the construction of one new hyperscale project during the first quarter.

C in 22 with a design capacity of 20 AMAGO was.

is located in one of our campuses in Jandaco City.

It is scheduled for delivery starting from the second quarter of 2024, and is intended for one of the key international clients. The project is currently 28% contracted.

With the buff changes during the quarter, as you can see on slide nine, we have brought our total capacity up by 27 megawatts.

reaching 800.98 Mg of loss by the end of the first quarter.

with the 639 megawatts in service and the 258 megawatts under construction.

of the under construction capacity by quarter hand.

We currently expect 188 MW to be delivered in 2023, and our teams in China and overseas are working diligently to ensure our supply readiness.

Now regarding demand on slide 10.

We continue to see additional demand coming from our existing clients.

Supporting their existing and potentially new business initiatives in our northern and eastern China campuses.

Our total climb commitment increased by 16 MW in the first quarter.

specifically

For one of the key international clients, we received a megawatt contracted capacity for the new ender construction product CN22.

And another six megawatts, indication of my interest on product CE01 and CE02.

We have also secured a contracted capacity of around two megawatts for our existing Northern China project for the end-to-client.

and some of the capacity were intended for 20 kilowatt.

high density cabinet deployment. Meanwhile, contracted capacity increased by 78 MW in quarter.

including 69 megawatts of IOUI conversion from MY06 to Phase I, MY06 Phase II in Joe Ho.

Malaysia and NY03 in Kuala Lumpur, Malaysia.

And aforementioned AMEGWAS contracted capacity for the new ender construction project. General speaking, we are pleased with the momentum of our existing client base.

There have been many exciting AI-related advantages takes place in this industry.

And there has been news on how one of our existing clients has already successfully integrated AI into its product.

Resolving in significant business roles.

And we think our clients are among the potential leaders in this new AI era.

and the data center company.

The essence of what we need to care about really is whether our know-how, our older relevant solutions was in the data center that helped to host a server. For example, energy, sufficiency, power distribution, coding technologies, etc.

are ready for a new AI era. And we believe Tundata is well positioned for the AIGC era.

In addition to the aforementioned and new contracted capacity.

We have actually accumulated practically experience in deploying high density cabinets.

from 20 kilowatt to up to 50 kilowatt per cabinet in our existing campuses.

to up to 50 kilowatt per cabinet in our existing campuses. Our high-period scale model.

Characterized with energy-side layout that ensures power sufficiency.

Our in-house design and building system and equipment level has enabled us to test and apply various cooling technologies suited for capital of different density.

including immersion, liquid cooling, cold plate liquid cooling, waterless cooling and indirect evaporative cooling, etc. in our campuses in China and overseas.

The commitment status of our asset portfolio continues to look healthy. On slide 12, for I was listing 639 MW of in service capacity, 95% was committed by clients in either contract or I.O.I. by the end of the first quarter.

This is relatively stable compared to 96% in the previous quarter and 95% in the same quarter last year.

For our total capacity on slide 12

The commitment ratio was 91% at the end of the first quarter. Compared with the 92% in the previous quarter and an 88% in the same quarter last year.

On top of healthy demand and our differentiated climb base.

And as we have been emphasizing.

Our unique contract profile brings long-term business visibility.

By the end of the first quarter, over 95% of our contracts were for 10-year contract terms older.

leading to a weighted average remaining terms of current contracted capacity of E.4 years.

And we expect less than 6% of our existing contracted capacity to expire until the end of 2007. Now, coming to customer moving on slide 14.

Our moving pace is healthy and in line with our schedule.

We added 12 megawatts of utilized capacity in the first quarter.

You're bringing our total utilized capacity to 537 MW.

Compare with 344 MW in the same quarter last year. This represents 56.1% Euro for your growth.

Cornerlay Moubian was contributed by projects in our Northern China Montana campus

The Indian movement was contributed by projects in our Northern China Centers supporting the anchor claim.

One of the international clients.

and the Chinese Cloud Climb as well by our overseas project in India, supporting the other international client.

These quarterly dynamics lead to quarter and utilization ratio of 84%.

Compare with 69% in the same quarter last year. Looking further at the mix of utilization ratio by project and geography of slide 15.

Bi-geography over-sus-business made up a similar share compared to the previous quarter at around 9-10% of total utilize capacity.

By project, 16 out of the existing 25 in service project.

or 64% of them, and now at 90% of the United Nations or above.

Demonstrating that the majority of our projects have reached a mature stage with quite healthy demand.

The performance of our high-per-scale campuses in design and construction, energy efficiency, and operation management have gained wider recognition, winning global and national award respectively.

Are slide sixteen.

In April , 2023, our Linktual campus in Shenxi Province was honored with the Data Center design and construction award at the 2023 Data Cloud Global Awards. These awards are highly prestigious within the spheres of data centers, cloud computing, edge computing,

and other critical IT infrastructure. And this is the second time we have received such a distinguished an accolade. Vingtuele campus is the largest single hyperskyl data campus in the Asia Pacific region. And the maintains the annual power usage efficiency or PUE of 1.16.

On slide 17, in March 2023.

Our Thong Huayuan campus in Jiangyao College was selected for the 2022 National New Data Center and National Green Data Center list by Ministry of Industry and Information Technology.

Demo Hau Yuan campus is operating at an annual PUE of 1.14.

Operation Management and Data Security.

on flight 18 in April 2023.

Our Nantong campus in Jiangsu Province was awarded the prestigious DECOS 2021 certification.

which was the first Chinese enterprise to obtain the decals 2021 standardization certification.

The decals standard is widely recognized in the data center industry in Southeast Asia and globally as an important indicator of operational management standard innovation.

The company is currently utilizing its QuimPong IDC operating and management system to manage its data center tenders.

achieving real-time monitoring of its key data center assets.

and he has maintained his efficiency.

Without, I had concluded my part.

And I will turn to Zoe or see your vice president for the details of our financial performance. Zoe, please.

Thank you, Nick. Now, let's be walking through our court confidential performance.

Generous speaking, we've maintained a very healthy financial momentum in the first quarter of years, 2000 countries.

Our revenue growth in the first quarter remains healthy. Recordings of 56.8% year-over-year to reach RV 1,443.5 million, which is in line with the 55.9% year-over-year increase in utilized capacity.

Overship business contributed to 9% of total utilized capacity in the first quarter, a similar level to the previous quarter.

Looking further down on slide 25, total cost of revenue in the first quarter increased by 64.2% to RMB$820.3 million from RMB$499.6 million in the same period.

of 2022, mainly driven by increase in utility cost and depreciation and amortization expenses. Total operating expenses in the first quarter of 2023 decreased by 1.4 percent year over year to RMB100 billion.

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Specifically, selling the market expenses in the first quarter of 2023 slightly decreased by 4.3% year-over-year to RMB 21.4 billion, primarily due to lower share-based compensation expense.

General and administrative expenses in the first quarter of 2023 decreased by 5.5% year over year to RMB 120.8 million, primarily due to lower share-based compensation expense.

Research and development expenses in the first quarter of 2023 increased by 29.5% year-over-year to RMB 24.9 million, primarily due to increase in R&D personnel and higher share base compensation expense. State-assisted, cyberviolence shutdowns were added as part of the insudation program. As the number is 14,206 per 23,979 employees, more than 1,000 anti-violence strategies were put into effect. The highest stage at which the nation's cyber security agencies face cost caps is going to be in the next couple weeks.

As a result of this, operating income in the first quarter of 2023 increased by 81.3% to RMB 456.1 million, and recorded an operating income margin of 31.6%.

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Net income in the first quarter of 2023 increased by 167.5% to RMB 253 million with a net margin of 17.5% compared with 10.3% in the same period of 2022.

and 84% in the fourth quarter of 2022.

For breakdown of cold costs and expense items on flight 26.

With the growth of our business and stringent cost control, we continue to see economy of scale that pushed out our cost to the best percentage of revenue.

Maintenance and other costs was 6.6% revenue in the first quarter, 2% lower than the previous quarter.

and adjusted FG&A was 6.8% of revenue, 1.5 percentage point lower than the previous quarter.

We are not seeing utility price changing in the region that we are operating and the utility cost made up a similar level of revenue in the first quarter. With such hyper-scale business model, an exchange cost can to effort as you can see on slide 27.

adjusted EBITDA recorded a 64.6% year-over-year growth, or 12.9% quarter-over-quarter growth to reach RMB 813.8 million, and a historical high margin.

of 56.4%. Adjusting that income increased by 77.9% year over year in the first quarter to RMB 315.8 billion at a margin of 21.9%.

Details in the gap net gap reconciliation on the EBITDA and the net income would be available in our 6K filing or the appendix in our IRPPT.

On slide 28, even the highly demanding delivery schedule will continue to incur similar level of impact during the first quarter that covered existing under construction projects.

as well as some initial investment in potential pipeline projects with good certainty.

PEPEX in the first quarter was RMB 1,653.9 million, compared with RMB 1,354.6 million in the previous quarter.

On slide 29, our operating cash flow continued to recover and improve following the COVID-19 epidemic in 2022 and a one-off climate system upgrade. Operating cash flow in the first quarter was R&B $693.3 million.

which is around 85% of our adjusted EBITDA compared with RB 389.4 million in the fourth quarter of 2022.

Financing cash flow was RMB $2,713.3 million in the first quarter and our ongoing project financing as well as U.S. dollar senior notes offering completed in February have ensured the funding flexibility.

that we need for project development. With this, we ended up with a total cash position of ARM-V 5,769.3 million and a net debt position of ARM-V 5,245.4 million.

Our leverage and coverage ratios remain in a reasonable and healthy range. On slide 30, NetEd to last 12 months adjusted EBITDA ratio was 1.9 by end of first quarter compared with 1.8 in the previous quarter. This is the primary drawdown of project financing.

as well as one-off issuance of the senior notes. Our total debt to last 12 months adjusted EBITDA ended up at 4.1 in the quarter, compared to 3.5 in the previous quarter, and 3.5 in the previous quarter.

3.4 in the same quarter in 2022.

On coverage ratio, the consistent growth in adjusted EBITDA led to a larger 12 funds suggested EBITDA to interest ratio at 8.1 compared with 7.9 in the previous quarter. And last 12 months funds from operating remaining at around 20% of...

based on rapid ramp up of our clients, continue to support a strong return profile of the company.

With an 84% IT capacity utilization ratio by the end of the first quarter, we are seeing a pre-tax ROIC of 18.7% compared with 17.6% in the previous quarter and 15.7% in the same quarter last year.

Finally, based on the company's current and preliminary views on the market and operational conditions,

We reiterated our 2023 revenue guidance in the range of RMB 5,880 to 8,080 million, while raised our 2023 adjusted EBITDA guidance.

to the range of RMB 3,100 to 3,220 millimeters, which is a 3.6% increase at midpoint compared with the previous reach.

These forecasts reflect the company's preliminary views, which are subject to change.

This concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you.

We will now begin the question and answer session. To ask a question on the phone, please press star 1 1 and wait for your name to be announced.

If you'd like to cancel requests, you can also press the hash or pound key. When asking the question, please state your questions in Chinese first, then repeat your question in English for the convenience of everyone in the call. Please ask one question at a time.

One moment for the first question. First question comes from the line of Yang Liu from Morgan Stanley . Please go ahead.

Congratulations on the strong results. If I can only have one question I would like to ask about the EBITDA margin. Because you revised the EBITDA by almost 100 million. RMB compared with the forecast three months ago.

Could you please share more about what is saving, where the saving comes from? I see that maintenance and other costs actually is running far below the revenue growth. That could be one in my view. I would like to ask about that too.

from the management perspective where the margin upside comes from. Thank you.

Yeah, thank you for the great questions. I think, yeah, I think there's a couple of reasons. Number one is actually the customer moving pace is either on schedule.

or get us accelerated, you know, than we expected before. So that's actually contributed in a significant, I think, I think you'd be the margin improvement on the top line. Our bottom line is that we, in our initial guidance and budget for the full year, we did reserve some room.

We did reserve some room for some potential diesel consumptions in the first half of this year just as a provision. At the time, we think that there might be some public substation revamping activities to take place in Changdao areas of the Kobi province, but it didn't happen in Q1. So as it didn't, it doesn't happen. So therefore, we can release some news from the Q1.

have on the cost control company-wide under the new leadership directions are very effective. And these effective cost control combined with the better economy skill help to achieve a lower cost and expenses basis.

And at the same time, we are not reducing all our necessary business activities, including R&D and sales market model.

I hope I answered your questions. Yes, thank you.

I answer your questions. Yes, thank you. Thank you for the questions.

Next questions, one moment please.

Next up we have the live from Sarah Wang from UPS. Please go ahead.

Hi, thank you for the opportunity to ask a question. So again, congratulations on the solid results. Just a quick one on the net ads in capacity committed or utilized. So I noticed that the net ads of megawatts in both metrics is slightly lower than the previous four or five quarters.

So, when I asked if this year's no matter if it's sales or net action, my goal was to utilize will be more back-handed loaded than last year. So, here's a quick overview of the new highest-income oil and sand jobs which are out there today.

Yes, most of the new product delivery is going to take place in the second half of this year. And we believe that there is more oversight to our full year top-line revenue guidance with upcoming on-time product delivery.

as well as some potential incremental project we may take from the customers. And under our very efficient and remodel, hopefully we can be the upper limit of the revenue guidance range. That's why when we say in the...

opening remark, we say we cannot reiterate our top two year revenue, but with a very positive outlook. Obviously the AI driven, relate, AI related demand, you know, will play a little bit part in this year as well.

this range, 120 to 150 megawatts. And we, and part of the confidence come from the fact that we already start to see a very early but clear sign of AITC-related distance coming from our existing clients. So that's a good news for us. Got it. Thank you.

Thank you for the questions. One more for the next questions. Next up we have the live from Mingran Li from CICC. Please ask your question. Hi, thanks for taking my question and congrats on the strong performance.

And I have a question on the energy side because we note that recently some local governments released policies which aim to promote the integration of energy storage system and data center. So what's your view on this trend and any future strategy about this? Thanks. We're going to focus on Sleeping dollar option in this form,ERP on 189. Moving forward, let's see how that plays out. Thank you.

Thank you, Ekol. I'm actually glad you bring out these energy-related questions because everybody knows that our mission and strategy are different from our peers. We always try to find the most efficient way.

to convert electric power to computing power. Therefore, most of our data centers are located in energy and also renewable energy-boundary regions, specifically in global energy.

So here is what we believe. What we believe is two or three years down the road.

Our data centers in these two places, like Guobei and Shanxi, would consume over roughly 50 percent of renewable power out of total power consumption.

As a matter of fact, today, the renewable power generation in these two places have already accounted for over 60% of total power generation.

So the logic is this.

To better use this abundant renewable power, an appropriate amount of energy storage infrastructure needs to be in place in order to smooth out the fluctuation of renewable energy supply and the frequency curve. And in these regions, we have seen a significant...

the most convenient and I would say efficient local users of this renewable power in the same areas will create a perfect scenario to do this, how to say, in Chinese, yuàmàng huàchù, or basically the combination of power grid.

plus renewable power generation, plus renewable power storage, and power usage by the IDC in the future. So that's our view. And therefore, accordingly, our plan is to develop our community as a place of Return to that community called the internet. to terms with our country and over the last two decades, our world has grown increasingly. There have been depth times over multi- Pharaohs,

is to cooperate with the business partners in the power generation, renewable power generation and power storage areas to better achieve our green data center objective without too much investment from ourselves. owns a company called

Hello, can you hear me? Yeah? Congratulations for a pretty good financial performance. My question will be given that the moving rate J.P. Chamber August 27th of 2014 B.C. Labor southern site of Nestlemond Editing. Correct? Appreciate that.

and you say the upper limit revenue guidance likely to attend, is this included the potential incremental AITC demand or this is not included in this case? Thank you, this is my first question. It is hard to tell, but I would say in our current

outlook. I would say that we already considered a scenario that around the second half of this year we're gonna see some AI related demand for a high density cabinets from our existing clients gonna pick up. Therefore there is opportunities that we're gonna beat.

our revenue range, but so far we only see a small, very small incremental demand in these sort of AI related business from our anchor customers. But I think they will become bigger, because I know that both of our clients, you know the name, right, ByteDance Microsoft.

We believe they are the leaders in this new chat GPT and IGC related trend. They are trendsetters essentially. So once they launch their AIGC large language model computing system, I think we're going to become their first of the choice in both China and overseas.

Got it understood. And to follow up this question, just want to know about, is there, knowing that it is now very early stage for the AITC demand, and do we have any color on like the contribution of the revenue, something like this to get the investor to know?

Sorry, I missed the last part because your voice is not very clear. Okay. To repeat again, is there any color to let us know about the AIGC-related contribution to the revenue or total capacity?

and any comment will be appreciated. Thank you. Yeah, I think here's the fact. I want to expand the topic on AI related stuff a little bit. So basically, how to quantify these...

AI potential chat GPT or AI GC demand. So basically from demand side, we always closely watching our anchor customers. We believe they are the AI GC trendsetters or leaders. We basically estimate how much high power GPU servers.

they're going to have or they already have. And the second thing that we gonna do is actually we already have designed and deployed a more high density cabinets in our data centers located in.

in our energy at boundary regions in China to accommodate these demands.

And we count the usage of this high density cabinets very closely. And so far, as I just mentioned, we have already seen early a very clear slide of our anchor client starting to deploy a large model computing.

in some of our selected data centers with high density cabinets as hosting units.

And one thing that we are proud of is actually currently we are one of the very few IDC companies being able to offer high density cabinets with the range from 20 kilowatts to 50 kilowatts per cabinet.

And they're going to be primarily used to host powerful GPU servers. So please also, I want to give you two things to note. Number one is that the traditional low-density cabinets, such as the 3-kilowatt or 5-kilowatt are not ideal.

for AI GPU servers hosting purpose, and they consume more powers. The second is the deployment of high density cabinets would require redesign of the traditional data centers with different cooling and transmission solutions. And these two attributes play right into Chin Data to customize hyperscale model.

So we expect these cabinets to be utilized very quickly.

utilized very quickly in the near and mid future.

And that's why we think with the ongoing developments of AI large model computing by our clients, we're more likely rather than not to see steady incremental demands for these high density cabinets for a foreseeable future from our anchor clients.

However, over the long run, we firmly believe that two of our existing anchor clients, Binance, Microsoft, will be the clear leaders in this new chatGPT and AIGC trend. Based on this early sign of powerful GPU server deployment, we believe that the new

Very clear and very helpful. Thank you. Matt, I think I can ask a little bit more about the EBITDA. Steve, could you tell us about the EBITDA expansion or trend in the following years, and also the electricity cost trend? This is my final question. I think, as we keep saying, there are, clearly, 3, feathers in the EBITDA outreach plan, which I think, are crazy, but are they the same in many different ways? That's not true. It sources streaming nobody gets a chance at it. It focuses on one of the e readiness

abounding the power, traditional power and renewable power supply at very low cost in these regions. That's point one. Point number two, the economy of skill is going to drive down the per unit or percentage base, the fixed nature of the cost, including maintenance, operational cost, and also other expenses like sales, marketing, and research and development.

As you can see what happened in the past 36 months, in the past three years, every 100 megawatts almost going to give you like a three or four percentage of savings on a cost and expenses. And that's why we think in the future, although we will not give you any official guidance for the coming years, especially 2024.

who's on 25. But by following this logic, you're going to see our EBITDA margin going to fall right in the very healthy range between the 50% to 55%. I would put that away. Adi, thank you. Thank you very much. I will back to the Q&A. Thank you for the questions.

Our next question comes from the line of Edison Lee from Jefferies. Please go ahead. Hey, hi Nick. Thank you very much for taking my question and congrats on the results. I have two questions. Number one is that for your raised guidance for this year, it still implies only 24% EPDOT growth in the next three quarters on a year-on-year basis.

and also the implied EBITDA margin is only 52%. Why? So other than being conservative, are there any particular reasons that you think the EBITDA growth will be a lot slower than first quarter? That's my first question. And number two is on your operating costs in the first quarter, which is actually down a little bit on a year-on-year basis.

Is that absolute level a sustainable level for the rest of the year? Thanks. I think, yeah, a good question. I think, you know, as I explained that for the full year budget, 2020-2023 budget, we do reserve some room for some potential diesel consumption as a provision, as there might be some public substation revamping to take...

to our operational, so we don't necessarily have to run this diesel burning, but in our budget, we do budget for this potential disruption from regular power supply from the power grid in Hebei. So that's why you see in the coming quarters, the EBITDA margin is a little bit lower. But if it doesn't happen or...

Even if it happens, it doesn't create any impact to us. I think we're definitely gonna release them and it's gonna use to our bottom line.

In terms of operating costs, basically, when we do the budget on a quarter by quarter basis, that element costs, Adam, include some timely hiring for some maintenance people, operating people, some business travel. Obviously, the pace is lagging behind a little bit, so maybe some of the expenses or the costs might be a push.

forward to the coming quarters, but it didn't impact my full year optimism on both top line and bottom line for sure. Hey Nick, can I follow up by asking about this great revamp? So if it's gonna happen, how long do you think it's gonna take? I think it's gonna be probably a couple of weeks.

A couple of weeks. Okay, so that couple of weeks will be 100% backed up by diesel.

Not really 100%. Maybe some of the data center in Changyao coal will be impacted, but we don't know. We don't know yet. But based on our pattern of forecasting things, you can see there's a lot of – there has been a conservatism built into in this estimation. So therefore, I think

Anything in reality happens, we think is going to be better than our worst case scenario, which we're building to our budget.

Okay, yeah. Okay. Thank you. Thank you. Thank you for the questions. Once again, to ask a question, please press star 11 and wait for our name to be announced.

Oh, by the way, the other thing is actually just like our finance VP Zoe mentioned, one thing haven't happened in this year is actually the utility cost and power terrific remain very stable. And we believe that the

there are unlikely will be any power to re-hide in the summertime this year. You'll like it happened in the past because of the sufficient supply of power.

there unlikely will be any power to re-hide in the summertime this year. You'll like it happened in the past because of the sufficient supply of power in the regions.

Thank you. We have a follow-up question from the line of Yang Liu from Morgan Stanley . Please go ahead.

Thanks for the opportunity to ask another question. I see that your operating cash flow rebounded a lot this quarter back to a pretty normal range. Do you think that this kind of normalization is already behind us or this kind of not far to slide down to awesome~~?

operating cash flow largely seen as the EBITDA trend will continue in the next few quarters or there's further room to see this kind of normalization of cash flow.

or what's your view on the future receiver days trend. Thank you.

I think the accounts receivable have turned back to normalization already. So I think as you can see from the first quarter, the operating cash flow performance is much better than the Q4 2022 and much much better than the Q3 2022.

So, because of the one time the ERP or system upgrade issues faced by our anchor client has been solved. So I expect that moving forward in the following quarters, everything will go back to normal.

So the one time the ERP or system is upgrading issues, you know, faced by our anchor client has been solved. So I expect that moving forward in the following quarters, everything will go back to normal. Okay, thank you.

Thank you for the questions. Ladies and gentlemen, that concludes our conference today. Thank you for participating. You may now disconnect your lines.

Thank you for the questions. Ladies and gentlemen, that concludes our conference today. Thank you for participating. You may now disconnect your lines. Thank you very much. Thank you, everyone, for your time.