GDS Reports First Quarter 2019 Results
First Quarter 2019 Financial Highlights
- Net revenue increased by 58.6% year-over-year (“Y-o-Y”) to
RMB891.8 million (US$132.9 million ) in the first quarter of 2019 (1Q2018:RMB562.2 million ). - Service revenue increased by 61.6% Y-o-Y to
RMB890.9 million (US$132.8 million ) in the first quarter of 2019 (1Q2018:RMB551.5 million ). - Net loss was
RMB136.6 million (US$20.4 million ) in the first quarter of 2019, compared with a net loss ofRMB85.9 million in the first quarter of 2018. - Adjusted EBITDA (non-GAAP) increased by 111.4% Y-o-Y to
RMB383.2 million (US$57.1 million ) in the first quarter of 2019 (1Q2018:RMB181.3 million ). See “Non-GAAP Disclosure” and “Reconciliations of GAAP and non-GAAP results” elsewhere in this earnings release. - Adjusted EBITDA margin (non-GAAP) increased to 43.0% in the first quarter of 2019 (1Q2018: 32.2%).
Operating Highlights
- Total area committed increased by 62.7% Y-o-Y to 199,831 square meters (“sqm”) as of
March 31, 2019 (March 31, 2018 : 122,819 sqm). - Area utilized (or revenue generating space) increased by 76.4% Y-o-Y to 118,050 sqm as of
March 31, 2019 (March 31, 2018 : 66,905 sqm). - Area in service increased by 65.8% Y-o-Y to 171,515 sqm as of
March 31, 2019 (March 31, 2018 : 103,475 sqm). - Commitment rate for area in service was 96.1% as of
March 31, 2019 (March 31, 2018 : 93.8%), and utilization rate was 68.8% as ofMarch 31, 2019 (March 31, 2018 : 64.7%). - Area under construction was 65,736 sqm as of
March 31, 2019 (March 31, 2018 : 40,357 sqm). - Pre-commitment rate for area under construction was 53.4% as of
March 31, 2019 (March 31, 2018 : 63.8%).
“2019 began right where 2018 left off, with robust growth that translated into strong first quarter results across our business,” said Mr.
“First quarter 2019 marked the continuation of our growing financials with a 59% increase in revenue and a 111% increase in adjusted EBITDA,” commented Mr.
First Quarter 2019 Financial Results
Net revenue in the first quarter of 2019 was
Cost of revenue in the first quarter of 2019 was
Gross profit was
Adjusted Net Operating Income (“Adjusted NOI”) (non-GAAP) is defined as net loss (computed in accordance with GAAP), excluding net interest expenses, income tax expenses (benefits), depreciation and amortization, accretion expenses for asset retirement costs, share-based compensation expenses, selling and marketing expenses, general and administrative expenses, research and development expenses, foreign currency exchange loss (gain) and others. Adjusted NOI was
Adjusted NOI margin (non-GAAP) was 51.3% in the first quarter of 2019, compared with 44.8% in the first quarter of 2018, and 49.8% in the fourth quarter of 2018. The increase over the previous quarter was mainly due to improved power efficiency achieved in the colder months and the leverage effect realized on fixed-cost components of cost of revenue.
Selling and marketing expenses, excluding share-based compensation expenses of
General and administrative expenses, excluding share-based compensation expenses of
Research and development costs were
Net interest expenses for the first quarter of 2019 were
Foreign currency exchange gain for the first quarter of 2019 was
Net loss in the first quarter of 2019 was
Adjusted EBITDA (non-GAAP) is defined as net loss excluding net interest expenses, income tax expenses (benefits), depreciation and amortization, accretion expenses for asset retirement costs and share-based compensation expenses. Adjusted EBITDA was
Adjusted EBITDA margin (non-GAAP) was 43.0% in the first quarter of 2019, compared with 32.2% in the first quarter of 2018, and 40.0% in the fourth quarter of 2018. The increase over the previous quarter was mainly due to improved power efficiency achieved in the colder months, the leverage effect realized on fixed-cost components of cost of revenue, the leverage effect realized on general and administrative expenses, and the positive impact from foreign currency exchange gain.
Basic and diluted loss per ordinary share in the first quarter of 2019 was
Basic and diluted loss per American Depositary Share (“ADS”) in the first quarter of 2019 was
Sales
Total area committed at the end of the first quarter of 2019 was 199,831 sqm, compared with 122,819 sqm at the end of the first quarter of 2018 and 183,743 sqm at the end of the fourth quarter of 2018, an increase of 62.7% Y-o-Y and 8.8% quarter-over-quarter (“Q-o-Q”). In the first quarter of 2019, net additional total area committed was 16,088 sqm, including significant contributions from the
Data Center Resources
Area in service at the end of the first quarter of 2019 was 171,515 sqm, compared with 103,475 sqm at the end of the first quarter of 2018 and 160,356 sqm at the end of the fourth quarter of 2018, an increase of 65.8% Y-o-Y and 7.0% Q-o-Q. In the first quarter of 2019, SH9 (3,330 sqm) and BJ5 Phase 2 (8,092 sqm) data centers came into service.
Area under construction at the end of the first quarter of 2019 was 65,736 sqm, compared with 40,357 sqm at the end of the first quarter of 2018 and 65,201 sqm at the end of the fourth quarter of 2018, an increase of 62.9% Y-o-Y and 0.8% Q-o-Q. In the first quarter of 2019, construction commenced on GZ3 Phase 2 (3,441 sqm),
Commitment rate of area in service was 96.1% at the end of the first quarter of 2019, compared with 93.8% at the end of the first quarter of 2018 and 94.9% at the end of fourth quarter of 2018. Pre-commitment rate of area under construction was 53.4% at the end of the first quarter of 2019, compared with 63.8% at the end of the first quarter of 2018 and 48.4% at the end of the fourth quarter of 2018.
Area utilized at the end of the first quarter of 2019 was 118,050 sqm, compared with 66,905 sqm at the end of the first quarter of 2018 and 108,326 sqm at the end of the fourth quarter of 2018, an increase of 76.4% Y-o-Y and 9.0% Q-o-Q. Net additional area utilized was 9,724 sqm in the first quarter, which mainly came from the additional area utilized in SH4, SH8 and BJ5 Phase 1 data centers.
Utilization rate of area in service was 68.8% at the end of the first quarter of 2019, compared with 64.7% at the end of the first quarter of 2018 and 67.6% at the end of the fourth quarter of 2018.
Liquidity
As of
Recent Developments
The Company recently commenced construction of a new data center in Daxing district, Beijing’s premier data center hub. The new data center,
Langfang Land Acquisition
In order to further enhance its resource supply in the
Langfang 1 & 2 Data Centers
As a first step in establishing its presence in Langfang and to fulfil immediate demand requirements, the Company recently entered into a lease for 2 existing buildings. The Company has commenced converting the first building into a data center, Langfang 1 (“LF1”), while the second building is held for future development. LF1 has a design capacity of 4,858 sqm of IT area, which will be fully pre-committed to a major customer during 2Q19. Completion of LF1 is expected around the end of 2019.
The Company recently entered into an agreement for the acquisition of a data center in the Huangpu district of
Annual Report
On March 13, 2019, the Company filed its annual report on Form 20-F for the fiscal year ended December 31, 2018 with the
Business Outlook
The Company confirms that the previously provided guidance for total revenues of
This forecast reflects the Company’s current and preliminary view on the current business situation and market conditions, which are subject to change.
Upcoming Investor Conferences
The Company will attend the following upcoming investor conferences in
- Deutsche Bank’s 10th Annual dbAccess
Asia Conference inSingapore onMay 21 . - Goldman Sachs’ TechNet Conference Asia Pacific 2019 in
Hong Kong onMay 22 – 23. - RBC’s 2019 Data Center & Connectivity Investor Day in
San Francisco onMay 29 . - Cowen’s 47th Annual
Technology, Media & Telecom Conference inNew York onMay 30 . - Credit Suisse’s 21st Annual
Communications Conference inNew York onJune 4 – 5. - DBS Vickers’ Asia Tech Frontier Conference Day 2019 in
Hong Kong onJune 4 .
Conference Call
Management will hold a conference call at
United States: | 1-845-675-0437 |
International: | +65-6713-5090 |
Hong Kong: | +852-3018-6771 |
China: | 400-620-8038 |
Conference ID: | 3554535 |
A telephone replay will be available approximately two hours after the call until
United States: | 1-646-254-3697 |
International: Hong Kong: China: |
+61-2-8199-0299 +852-3051-2780 400-632-2162 |
Replay Access Code: | 3554535 |
A live and archived webcast of the conference call will be available on the Company's investor relations website at investors.gds-services.com.
Non-GAAP Disclosure
Our management and board of directors use adjusted NOI, adjusted NOI margin, adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures, to evaluate our operating performance, establish budgets and develop operational goals for managing our business. In particular, we believe that the exclusion of the expenses eliminated in calculating adjusted NOI and adjusted EBITDA can provide a useful measure of our core operating performance.
We also present these non-GAAP measures because we believe these non-GAAP measures are frequently used by securities analysts, investors and other interested parties as measures of the financial performance of companies in our industry.
These non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. These non-GAAP financial measures have limitations as analytical tools, and when assessing our operating performance, cash flows or our liquidity, investors should not consider them in isolation, or as a substitute for net income (loss), cash flows used in operating activities or other consolidated statements of operations and cash flow data prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of these non-GAAP financial measures instead of their nearest GAAP equivalent. First, adjusted EBITDA, adjusted EBITDA margin, adjusted NOI, and adjusted NOI margin are not substitutes for net income (loss), cash flows used in operating activities or other consolidated statements of operation and cash flow data prepared in accordance with U.S. GAAP. Second, other companies may calculate these non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of these non-GAAP financial measures as tools for comparison. Finally, these non-GAAP financial measures do not reflect the impact of net interest expenses, incomes tax benefits (expenses), depreciation and amortization, accretion expenses for asset retirement costs, and share-based compensation expenses, each of which have been and may continue to be incurred in our business.
We mitigate these limitations by reconciling the non-GAAP financial measure to the most comparable U.S. GAAP performance measure, all of which should be considered when evaluating our performance.
For more information on these non-GAAP financial measures, please see the table captioned “Reconciliations of GAAP and non-GAAP results” set forth at the end of this press release.
Exchange Rate
This announcement contains translations of certain RMB amounts into U.S. dollars (“USD”) at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to USD were made at the rate of
Statement Regarding Preliminary Unaudited Financial Information
The unaudited financial information set out in this earnings release is preliminary and subject to potential adjustments. Adjustments to the consolidated financial statements may be identified when audit work has been performed for the Company’s year-end audit, which could result in significant differences from this preliminary unaudited financial information.
About
Safe Harbor
This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “aim,” “anticipate,” “believe,” “continue,” “estimate,” “expect,” “future,” “guidance,” “intend,” “is/are likely to,” “may,” “ongoing,” “plan,” “potential,” “target,” “will,” and similar statements. Among other things, statements that are not historical facts, including statements about GDS Holdings’ beliefs and expectations regarding the growth of its businesses and its revenue for the full fiscal year, the business outlook and quotations from management in this announcement, as well as GDS Holdings’ strategic and operational plans, are or contain forward-looking statements.
For investor and media inquiries, please contact:
Phone: +86 (21) 2033-0295
Email: ir@gds-services.com
Phone: +86 (10) 5730-6200
Email: GDS@tpg-ir.com
Phone: +1 (212) 481-2050
Email: GDS@tpg-ir.com
GDS HOLDINGS LIMITED | ||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||||
(Amount in thousands of Renminbi ("RMB") and US dollars ("US$")) | ||||
As of December 31, 2018 |
As of March 31, 2019 | |||
RMB | RMB | US$ | ||
Assets | ||||
Current assets | ||||
Cash | 2,161,622 | 6,001,214 | 894,209 | |
Accounts receivable, net of allowance for doubtful accounts | 536,842 | 713,601 | 106,330 | |
Value-added-tax (“VAT”) recoverable | 163,476 | 217,123 | 32,352 | |
Prepaid expenses and other current assets | 175,456 | 199,420 | 29,715 | |
Total current assets | 3,037,396 | 7,131,358 | 1,062,606 | |
Property and equipment, net | 13,994,945 | 14,630,720 | 2,180,045 | |
Operating lease right-of-use assets | - | 497,600 | 74,144 | |
Goodwill and intangible assets, net | 2,234,462 | 2,175,429 | 324,149 | |
Other non-current assets | 1,618,440 | 1,705,597 | 254,141 | |
Total assets | 20,885,243 | 26,140,704 | 3,895,085 | |
Liabilities, Redeemable Preferred Shares and Shareholders’ Equity | ||||
Current liabilities | ||||
Short-term borrowings and current portion of long-term borrowings | 1,283,320 | 860,139 | 128,165 | |
Accounts payable | 1,508,020 | 1,532,044 | 228,282 | |
Accrued expenses and other payables | 549,641 | 637,030 | 94,920 | |
Operating lease liabilities, current | - | 70,124 | 10,449 | |
Finance lease and other financing obligations, current | 166,898 | 119,919 | 17,868 | |
Total current liabilities | 3,507,879 | 3,219,256 | 479,684 | |
Long-term borrowings, excluding current portion | 5,203,708 | 6,582,579 | 980,835 | |
Convertible bonds payable | 2,004,714 | 1,969,683 | 293,492 | |
Operating lease liabilities, non-current | - | 402,420 | 59,962 | |
Finance lease and other financing obligations, non-current | 4,134,327 | 4,039,333 | 601,879 | |
Other long-term liabilities | 512,690 | 504,725 | 75,206 | |
Total liabilities | 15,363,318 | 16,717,996 | 2,491,058 | |
Redeemable preferred shares | - | 1,010,586 | 150,582 | |
Shareholders' equity | ||||
Ordinary shares | 341 | 378 | 56 | |
Additional paid-in capital | 7,275,945 | 10,283,372 | 1,532,270 | |
Accumulated other comprehensive loss | (139,254) | (119,901) | (17,866) | |
Accumulated deficit | (1,615,107) | (1,751,727) | (261,015) | |
Total shareholders’ equity | 5,521,925 | 8,412,122 | 1,253,445 | |
Commitments and contingencies | ||||
Total liabilities, redeemable preferred shares and shareholders' equity | 20,885,243 | 26,140,704 | 3,895,085 |
Note: Effective
GDS HOLDINGS LIMITED | |||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||
(Amount in thousands of Renminbi ("RMB") and US dollars ("US$") | |||||
except for number of shares and per share data) | |||||
Three months ended | |||||
March 31, 2018 | December 31, 2018 | March 31, 2019 | |||
RMB | RMB | RMB | US$ | ||
Net revenue | |||||
Service revenue | 551,473 | 829,050 | 890,946 | 132,755 | |
Equipment sales | 10,752 | 471 | 895 | 133 | |
Total net revenue | 562,225 | 829,521 | 891,841 | 132,888 | |
Cost of revenue | (439,308) | (639,383) | (679,832) | (101,298) | |
Gross profit | 122,917 | 190,138 | 212,009 | 31,590 | |
Operating expenses | |||||
Selling and marketing expenses | (26,849) | (32,269) | (27,832) | (4,147) | |
General and administrative expenses | (62,936) | (90,661) | (90,301) | (13,455) | |
Research and development expenses | (2,672) | (4,724) | (4,639) | (691) | |
Income from operations | 30,460 | 62,484 | 89,237 | 13,297 | |
Other income (expenses): | |||||
Net interest expenses | (115,054) | (202,493) | (219,117) | (32,649) | |
Foreign currency exchange (loss) gain, net | (3,219) | 327 | 4,772 | 711 | |
Others, net | 609 | 2,944 | 2,503 | 373 | |
Loss before income taxes | (87,204) | (136,738) | (122,605) | (18,268) | |
Income tax benefits (expenses) | 1,278 | 13,827 | (14,015) | (2,088) | |
Net loss | (85,926) | (122,911) | (136,620) | (20,356) | |
Change in redemption value of redeemable preferred shares | - | - | (17,760) | (2,646) | |
Cumulative dividend on preferred shares | - | - | (559) | (83) | |
Net loss attributable to ordinary shareholders | (85,926) | (122,911) | (154,939) | (23,085) | |
Loss per ordinary share | |||||
Basic and diluted | (0.09) | (0.12) | (0.15) | (0.02) | |
Weighted average number of ordinary share outstanding | |||||
Basic and diluted | 969,747,050 | 1,000,435,164 | 1,025,055,553 | 1,025,055,553 | |
GDS HOLDINGS LIMITED | ||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | ||||
(Amount in thousands of Renminbi ("RMB") and US dollars ("US$") | ||||
except for number of shares and per share data) | ||||
Three months ended | ||||
March 31, 2018 | December 31, 2018 | March 31, 2019 | ||
RMB | RMB | RMB | US$ | |
Net loss | (85,926) | (122,911) | (136,620) | (20,356) |
Foreign currency translation adjustments, net of nil tax | (40,406) | 3,331 | 19,353 | 2,884 |
Comprehensive loss | (126,332) | (119,580) | (117,267) | (17,472) |
GDS HOLDINGS LIMITED | ||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
(Amount in thousands of Renminbi ("RMB") and US dollars ("US$")) | ||||
Three months ended | ||||
March 31, 2018 | December 31, 2018 | March 31, 2019 | ||
RMB | RMB | RMB | US$ | |
Net loss | (85,926) | (122,911) | (136,620) | (20,356) |
Depreciation and amortization | 137,488 | 230,599 | 254,037 | 37,853 |
Amortization of debt issuance cost and debt discount | 7,928 | 28,150 | 16,990 | 2,532 |
Share-based compensation expense | 15,633 | 34,932 | 31,957 | 4,762 |
Others | (2,777) | (30,274) | (5,160) | (769) |
Changes in operating assets and liabilities | (215,775) | (29,129) | (221,010) | (32,932) |
Net cash (used in) provided by operating activities | (143,429) | 111,367 | (59,806) | (8,910) |
Purchase of property and equipment | (762,972) | (1,661,485) | (829,446) | (123,592) |
Payments related to acquisitions | (43,807) | (31,223) | (5,000) | (745) |
Net cash used in investing activities | (806,779) | (1,692,708) | (834,446) | (124,337) |
Net proceeds from financing activities | 2,113,003 | 263,600 | 4,789,711 | 713,689 |
Net cash provided by financing activities | 2,113,003 | 263,600 | 4,789,711 | 713,689 |
Effect of exchange rate changes on cash and restricted cash | (57,636) | (4,879) | (9,215) | (1,373) |
Net increase (decrease) of cash and restricted cash | 1,105,159 | (1,322,620) | 3,886,244 | 579,069 |
Cash and restricted cash at the beginning of period | 1,947,600 | 3,607,368 | 2,284,748 | 340,438 |
Cash and restricted cash at end of period | 3,052,759 | 2,284,748 | 6,170,992 | 919,507 |
GDS HOLDINGS LIMITED | ||||
UNAUDITED RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS | ||||
(Amount in thousands of Renminbi ("RMB") and US dollars ("US$") | ||||
except for percentage data) | ||||
Three months ended | ||||
March 31, 2018 |
December 31, 2018 | March 31, 2019 | ||
RMB | RMB | RMB | US$ | |
Net loss | (85,926) | (122,911) | (136,620) | (20,356) |
Net interest expenses | 115,054 | 202,493 | 219,117 | 32,649 |
Income tax (benefits) expenses | (1,278) | (13,827) | 14,015 | 2,088 |
Depreciation and amortization | 137,488 | 230,599 | 254,037 | 37,853 |
Accretion expenses for asset retirement costs | 309 | 555 | 711 | 106 |
Share-based compensation expenses | 15,633 | 34,932 | 31,957 | 4,762 |
Selling and marketing expenses (1) | 21,819 | 23,497 | 20,330 | 3,029 |
General and administrative expenses (1) | 43,958 | 56,660 | 57,090 | 8,507 |
Research and development expenses (1) | 2,340 | 4,132 | 3,970 | 591 |
Foreign currency exchange loss (gain), net | 3,219 | (327) | (4,772) | (711) |
Others, net | (609) | (2,944) | (2,503) | (373) |
Adjusted NOI | 252,007 | 412,859 | 457,332 | 68,145 |
Adjusted NOI margin | 44.8% | 49.8% | 51.3% | 51.3% |
Note 1:
Selling and marketing expenses, general and administrative expenses and research and development expenses exclude depreciation, amortization and share-based compensation expenses.
GDS HOLDINGS LIMITED | ||||
UNAUDITED RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS | ||||
(Amount in thousands of Renminbi ("RMB") and US dollars ("US$") | ||||
except for percentage data) | ||||
Three months ended | ||||
March 31, 2018 |
December 31, 2018 | March 31, 2019 | ||
RMB | RMB | RMB | US$ | |
Net loss | (85,926) | (122,911) | (136,620) | (20,356) |
Net interest expenses | 115,054 | 202,493 | 219,117 | 32,649 |
Income tax (benefits) expenses | (1,278) | (13,827) | 14,015 | 2,088 |
Depreciation and amortization | 137,488 | 230,599 | 254,037 | 37,853 |
Accretion expenses for asset retirement costs | 309 | 555 | 711 | 106 |
Share-based compensation expenses | 15,633 | 34,932 | 31,957 | 4,762 |
Adjusted EBITDA | 181,280 | 331,841 | 383,217 | 57,102 |
Adjusted EBITDA margin | 32.2% | 40.0% | 43.0% | 43.0% |
Source: GDS Holdings Limited