Release Date: November 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- GDS Holdings Ltd (GDS, Financial) achieved a revenue growth of 18% and adjusted EBITDA growth of 15% year on year, reflecting strong performance in challenging market conditions.
- The company reported a significant increase in the move-in rate, with over 25,000 square meters of additional area utilized in 3Q 2024, driven by AI demand.
- GDS Holdings Ltd (GDS) has a strong sales pipeline, with 431 megawatts of total customer commitment and a new contract with a leading global tech company.
- The company is expanding internationally, entering new markets like Thailand, and has plans to develop a 120 megawatt data center campus in Chonburi province.
- GDS Holdings Ltd (GDS) is pursuing a China REIT strategy to enhance liquidity, reduce leverage, and capture new sales opportunities, with plans to launch a C-REIT in the second half of 2025.
Negative Points
- The adjusted EBITDA margin for the China segment decreased by 1 percentage point year on year due to increased power tariffs.
- GDS Holdings Ltd (GDS) reported a negative cash flow before financing of RMB293 million for the first nine months of 2024, although it expects to be positive by year-end.
- The company anticipates a slight decline in MSR per square meter over the next year, which could impact revenue growth.
- GDS Holdings Ltd (GDS) is facing higher CapEx requirements, revising its China CapEx guidance to RMB3 billion for 2024 due to increased move-in rates.
- The company acknowledges the need for additional investment to capture AI demand in Tier 1 markets, which could strain financial resources if not managed carefully.
Q & A Highlights
Q: Regarding the China strategy, with strong demand and CapEx revision, is the increased CapEx a pull forward from future plans, and how does it relate to the REIT strategy?
A: Wei Huang, CEO: We are maintaining our strategy to stabilize and grow organically in China, focusing on high-quality business. If we can efficiently recycle capital through the REIT strategy, we may invest more aggressively in the future.
Q: Can you discuss the development of the Batam market and the type of demand expected there?
A: Wei Huang, CEO: Batam is seen as a data center hub with strong interest from hyperscale customers globally. We have a robust pipeline from various countries.
Q: What is the rationale for entering the Thailand market, and could it become a data center hub like Johor?
A: Wei Huang, CEO: Thailand's growing economy and government support make it an attractive market. We are confident in the demand and see potential for Thailand to become a data center hub in Asia Pacific.
Q: With the net area utilized growing but revenue growth lagging, what is the trend for unit pricing in China?
A: Daniel Newman, CFO: The disparity is due to a lag in move-in and revenue recognition. We expect a 2% decline in MSR over the next year, aiming for a 10% revenue growth.
Q: How should we think about new orders for the international business next year, and which markets are prioritized?
A: Wei Huang, CEO: SIJORI remains a focus with a target of 200 megawatts in new sales next year. We are also exploring new markets like Japan and Europe to maintain long-term growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
