View:
Download DOC
Download PDF
Download XLS

QuickLinks -- Click here to rapidly navigate through this document

 

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

May 2018

Commission File Number: 001-37925

GDS Holdings Limited
(Registrant's name)

2/F, Tower 2, Youyou Century Place
428 South Yanggao Road
Pudong, Shanghai 200127
People's Republic of China
(Address of principal executive offices)

        Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F ý   Form 40-F o

        Indicate by check mark if the registrant is submitting the Form 6-K on paper as permitted by Regulation S-T Rule 101(b)(1): o

        Indicate by check mark if the registrant is submitting the Form 6-K on paper as permitted by Regulation S-T Rule 101(b)(7): o


EXHIBITS

        Exhibit 99.1—Index to Unaudited Condensed Consolidated Financial Statements

2


 SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  GDS Holdings Limited

Date: May 29, 2018

  

By:

  

/s/ WILLIAM WEI HUANG

      Name:   William Wei Huang

      Title:   Chief Executive Officer

3



QuickLinks

EXHIBITS
SIGNATURES

QuickLinks -- Click here to rapidly navigate through this document


Exhibit 99.1

GDS HOLDINGS LIMITED AND SUBSIDIARIES

Index to Unaudited Condensed Consolidated Financial Statements

 
   Page  

Unaudited Condensed Consolidated Balance Sheets as of December 31, 2017 and March 31, 2018

     F-2  

Unaudited Condensed Consolidated Statements of Operations for the Three-month Periods Ended March 31, 2017 and 2018

    
F-3		  

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three-month Periods Ended March 31, 2017 and 2018

    
F-4		  

Unaudited Condensed Consolidated Statement of Changes in Shareholders' Equity for the Three-month Period Ended March 31, 2018

    
F-5		  

Unaudited Condensed Consolidated Statements of Cash Flows for the Three-month Periods Ended March 31, 2017 and 2018

    
F-6		  

Notes to Unaudited Condensed Consolidated Financial Statements

    
F-7		  

F-1


GDS HOLDINGS LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data and per share data, or otherwise noted)

 
    
   As of  
 
   Note   December 31,
2017 		  March 31,
2018 		 

Assets

                  

Current assets

                  

Cash (including cash of VIEs of RMB266,560 and RMB242,292 as of December 31, 2017 and March 31, 2018, respectively)

   5     1,873,446     2,978,627  

Restricted cash (including restricted cash of VIEs of RMB10,837 and RMB10,865 as of December 31, 2017 and March 31, 2018, respectively)

  5     10,837     10,865  

Accounts receivable, net of allowance for doubtful accounts (including accounts receivable, net of allowance for doubtful accounts of VIEs of RMB348,536 and RMB458,269 as of December 31, 2017 and March 31, 2018, respectively)

   6     364,654     469,173  

Value-added-tax ("VAT") recoverable (including VAT recoverable of VIEs of RMB27,596 and RMB25,880 as of December 31, 2017 and March 31, 2018, respectively)

         112,067     118,106  

Prepaid expenses (including prepaid expenses of VIEs of RMB32,919 and RMB37,934 as of December 31, 2017 and March 31, 2018, respectively)

        50,373     60,956  

Other current assets (including other current asset of VIEs of RMB7,283 and RMB45,938 as of December 31, 2017 and March 31, 2018, respectively)

         42,651     72,536  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total current assets

         2,454,028     3,710,263  

Property and equipment, net (including property and equipment, net of VIEs of RMB2,164,121 and RMB2,370,103 as of December 31, 2017 and March 31, 2018, respectively)

  

7

    
8,165,601		    
8,817,797		  

Intangible assets, net (including intangible assets, net of VIEs of RMB143,151 and RMB139,098 as of December 31, 2017 and March 31, 2018, respectively)

   8     348,466     339,046  

Prepaid land use rights, net

         26,245     26,021  

Goodwill

         1,570,755     1,570,755  

Deferred tax assets (including deferred tax assets of VIEs of RMB11,846 and RMB11,624 as of December 31, 2017 and March 31, 2018, respectively)

         14,305     33,975  

Restricted cash (including restricted cash of VIEs of RMB23,592 and RMB23,612 as of December 31, 2017 and March 31, 2018, respectively)

  5     63,317     63,267  

VAT recoverable (including VAT recoverable of VIEs of RMB26,235 and RMB53,520 as of December 31, 2017 and March 31, 2018, respectively)

        290,065     376,486  

Other non-current assets (including other non-current assets of VIEs of RMB80,763 and RMB73,862 as of December 31, 2017 and March 31, 2018, respectively)

         211,785     197,517  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total assets

         13,144,567     15,135,127  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Liabilities and Shareholders' Equity

                  

Current liabilities

  

 

    
 		    
 		  

Short-term borrowings and current portion of long-term borrowings (including short-term borrowings and current portion of long-term borrowings of VIEs of RMB232,000 and RMB258,000 as of December 31, 2017 and March 31, 2018, respectively)

   9     790,484     905,495  

Accounts payable (including accounts payable of VIEs of RMB339,175 and RMB386,959 as of December 31, 2017 and March 31, 2018, respectively)

         1,110,411     984,906  

Accrued expenses and other payables (including accrued expenses and other payables of VIEs of RMB91,542 and RMB99, 060 as of December 31, 2017 and March 31, 2018 respectively)

         368,624     373,516  

Deferred revenue (including deferred revenue of VIEs of RMB46,526 and RMB42,298 as of December 31, 2017 and March 31, 2018, respectively)

  6     55,609     61,144  

Capital lease and other financing obligations, current (including capital lease and other financing obligations, current of VIEs of RMB84,771 and RMB89,940 as of December 31, 2017 and March 31, 2018, respectively)

   10     97,943     120,718  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total current liabilities

         2,423,071     2,445,779  

Long-term borrowings, excluding current portion (including long-term borrowings, excluding current portion of VIEs of RMB85,250 and RMB89,000 as of December 31, 2017 and March 31, 2018, respectively)

  

9

    
3,459,765		    
4,244,884		  

Capital lease and other financing obligations, non-current (including capital lease and other financing obligations, non-current of VIEs of RMB879,685 and RMB855,438 as of December 31, 2017 and March 31, 2018, respectively)

   10     2,303,044     2,335,141  

Deferred tax liabilities (including deferred tax liabilities of VIEs of RMB70,030 and RMB68,308 as of December 31, 2017 and March 31, 2018, respectively)

         124,277     121,185  

Other long-term liabilities (including other long-term liabilities of VIEs of RMB13,145 and RMB7,863 as of December 31, 2017 and March 31, 2018, respectively)

         358,898     336,431  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total liabilities

         8,669,055     9,483,420  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Shareholders' equity

                  

Ordinary shares (US$0.00005 par value; 2,002,000,000 shares authorized; 941,269,679 and 1,007,069,664 shares issued and outstanding as of December 31, 2017 and March 31, 2018, respectively)

   11     320     341  

Additional paid-in capital

         5,861,445     7,163,225  

Accumulated other comprehensive loss

         (200,688 )   (241,094 )

Accumulated deficit

         (1,185,565 )   (1,270,765 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total shareholders' equity

         4,475,512     5,651,707  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Commitments and contingencies

   16              
​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total liabilities and shareholders' equity

         13,144,567     15,135,127  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​

   

See accompanying notes to unaudited condensed consolidated financial statements.

F-2


GDS HOLDINGS LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data and per share data, or otherwise noted)

 
    
   Three-month periods ended
March 31, 		 
 
   Note   2017   2018  

Net revenue

   13     350,043     562,225  

Cost of revenue

         (243,845 )   (439,308 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Gross profit

         106,198     122,917  

Operating expenses

  

 

    
 		    
 		  

Selling and marketing expenses

         (21,256 )   (26,849 )

General and administrative expenses

         (48,768 )   (62,936 )

Research and development expenses

         (1,458 )   (2,672 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Income from operations

         34,716     30,460  

Other income (expenses):

  

 

    
 		    
 		  

Interest income

         1,823     3,656  

Interest expenses

         (80,431 )   (118,710 )

Foreign currency exchange loss, net

         (2,606 )   (3,219 )

Government grants

         849     671  

Others, net

         (23 )   (62 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Loss before income taxes

         (45,672 )   (87,204 )

Income tax benefits

  

14

    
1,367		    
1,278 		 
​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net loss

         (44,305 )   (85,926 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Loss per ordinary share

                  

Basic and diluted

   15     (0.06 )   (0.09 )

Weighted average number of ordinary share outstanding

  

 

    
 		    
 		  

Basic and diluted

   15     760,009,043     969,747,050  

   

See accompanying notes to unaudited condensed consolidated financial statements.

F-3


GDS HOLDINGS LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except share data and per share data, or otherwise noted)

 
   Three-month periods
ended March 31, 		 
 
   2017   2018  

Net loss

     (44,305 )   (85,926 )

Other comprehensive loss

              

Foreign currency translation adjustments, net of nil income taxes

     (6,274 )   (40,406 )
​ ​ ​ ​ ​ ​ ​ ​

Comprehensive loss

     (50,579 )   (126,332 )
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

   

See accompanying notes to unaudited condensed consolidated financial statements.

F-4


GDS HOLDINGS LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN SHAREHOLDERS' EQUITY

(In thousands, except share data and per share data, or otherwise noted)

 
    
   Ordinary Shares    
   Accumulated
other
comprehensive
loss 		   
    
  
 
    
   Additional
paid-in
capital 		  Accumulated
deficit 		  Total
equity 		 
 
   Note   Number   Amount  

Balance at January 1, 2018, as previously reported

           941,269,679     320     5,861,445     (200,688 )   (1,185,565 )   4,475,512  

Impact of change in accounting policy

     3     —     —     —     —     726     726  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Adjusted balance at January 1, 2018

           941,269,679     320     5,861,445     (200,688 )   (1,184,839 )   4,476,238  

Loss for the period

           —     —     —     —     (85,926 )   (85,926 )

Other comprehensive loss, net of nil income taxes

           —     —     —     (40,406 )   —     (40,406 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total comprehensive loss

           —     —     —     (40,406 )   (85,926 )   (126,332 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Issuance of ordinary shares, net of issuance cost of RMB13,077

     11     65,800,000     21     1,283,287     —     —     1,283,308  

Share-based compensation

     12     —     —     15,633     —     —     15,633  

Shares surrendered

           (15 )   —     —     —     —     —  

Exercise of share options

     12     264,488     —     1,368     —     —     1,368  

Settlement of liability-classified restricted shares award

     12     65,920     —     1,492     —     —     1,492  

Settlement of share options and restricted share awards with shares held by depository bank

           (330,408 )   —     —     —     —     —  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Balance at March 31, 2018

           1,007,069,664     341     7,163,225     (241,094 )   (1,270,765 )   5,651,707  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

   

See accompanying notes to unaudited condensed consolidated financial statements.

F-5


GDS HOLDINGS LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, except share data and per share data, or otherwise noted)

 
    
   Three-month periods
ended March 31, 		 
 
   Note   2017
(As adjusted,
note 3) 		  2018  

Cash flows from operating activities

                    

Net loss

           (44,305 )   (85,926 )

Adjustments to reconcile net loss to net cash used in operating activities:

                    

Amortization of debt issuance cost and debt discount

           4,530     7,928  

Depreciation and amortization

           77,324     137,488  

Share-based compensation expense

           13,506     15,633  

Deferred tax benefit

           (4,131 )   (2,777 )

Changes in operating assets and liabilities, net of effect of acquisitions:

    
 		    
 		    
 		  

Increase of accounts receivable

           (62,164 )   (103,793 )

Increase of VAT recoverable

           (36,770 )   (92,460 )

Decrease (increase) of prepaid expenses

           2,489     (10,583 )

Increase of other current assets

           (700 )   (2,502 )

Decrease of other non-current assets

           179     4,615  

Decrease of accounts payable

           (18,012 )   (17,319 )

Increase of deferred revenue

           12,726     5,535  

Increase of accrued expenses and other payables

           10,285     6,681  

Increase (decrease) of other long-term liabilities

           21,352     (5,949 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net cash used in operating activities

           (23,691 )   (143,429 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash flows from investing activities

                    

Payments for purchase of property and equipment

           (379,970 )   (762,972 )

Cash paid for the acquisition of subsidiaries

           —     (16,424 )

Deposits paid for potential acquisitions

           —     (27,383 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net cash used in investing activities

           (379,970 )   (806,779 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash flows from financing activities

                    

Proceeds from short-term borrowings

           118,273     92,842  

Proceeds from long-term borrowings

           414,511     971,795  

Repayment of short-term borrowings

           (104,000 )   (93,500 )

Repayment of long-term borrowings

           (267,736 )   (61,707 )

Payment of issuance cost of borrowings

           (9,771 )   (24,850 )

Proceeds from exercise of stock options

           —     1,368  

Payment under capital lease and other financing obligations

           (4,925 )   (32,211 )

Deposits paid for borrowings

           —     (8,333 )

Proceeds from issuance of ordinary shares

           —     1,296,385  

Payment for issuance cost of ordinary shares

           —     (13,077 )

Payment of contingent consideration for the acquisition of subsidiaries

           —     (15,709 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net cash provided by financing activities

           146,352     2,113,003  

Effect of exchange rate changes on cash and restricted cash

          
(11,929
)		  
(57,636
)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net (decrease) increase in cash and restricted cash

           (269,238 )   1,105,159  

Cash and restricted cash at beginning of period

           1,838,992     1,947,600  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash and restricted cash at end of period

     5     1,569,754     3,052,759  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Supplemental disclosures of cash flow information

                    

Interest paid

           (39,802 )   (90,590 )

Income tax paid

           (470 )   (1,258 )

Supplemental disclosures of non-cash investing and financing activities

    
 		    
 		    
 		  

Changes in payables for purchase of property and equipment

           32,198     108,186  

Purchase of property and equipment through capital leases and other financing arrangement

           25,250     80,041  

Changes in consideration payable for the acquisition of subsidiaries

           —     2,519  

Settlement of liability-classified restricted share award

           —     1,492  

   

See accompanying notes to unaudited condensed consolidated financial statements.

F-6


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data and per share data, or otherwise noted)

1 BASIS OF PRESENTATION

        The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("US GAAP"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted as permitted by rules and regulations of the United States Securities and Exchange Commission ("SEC"). The condensed consolidated balance sheet as of December 31, 2017 was derived from the audited consolidated financial statements of GDS Holdings Limited ("GDS Holdings") and its subsidiaries (collectively, "the Company"). The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated balance sheet of the Company as of December 31, 2017 and the related consolidated statements of operations, comprehensive loss, changes in shareholders' equity (deficit) and cash flows for the year then ended and the related notes to the consolidated financial statements, included in the Annual Report on Form 20-F for the year ended December 31, 2017, filed with the SEC on March 29, 2018.

        The condensed consolidated financial statements are presented in Renminbi ("RMB"), rounded to the nearest thousand.

        In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the financial position as of March 31, 2018, and the results of operations and cash flows for the three-month periods ended March 31, 2017 and 2018, have been made.

        The preparation of condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include, but are not limited to, the useful lives of long-lived assets, the fair values of assets acquired and liabilities assumed and the consideration transferred in a business combination, the fair value of the reporting unit for the goodwill impairment test, the allowance for doubtful accounts receivable, the realization of deferred income tax assets, the fair value of share—based compensation awards, the recoverability of long-lived assets, the fair value of leased property and the fair value of the asset retirement obligation. Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates, and as such, differences may be material to the condensed consolidated financial statements.

2 PRINCIPLES OF CONSOLIDATION

        The accompanying condensed consolidated financial statements include the financial statements of GDS Holdings Limited, its subsidiaries and consolidated variable interest entities ("VIEs") and their subsidiaries for which the Company is the primary beneficiary. The VIEs are Beijing Wanguo Chang'an Science and Technology Co., Ltd. ("GDS Beijing") and Shanghai Shu'an Data Services Co., Ltd. ("GDS Shanghai").

        In certain regions of the PRC, the Company's operations are conducted through VIEs to comply with the People's Republic of China ("PRC") laws and regulations, which prohibit foreign investments in companies that are engaged in data center related business in those regions. Individuals acting as

F-7


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

2 PRINCIPLES OF CONSOLIDATION (Continued)

nominee equity holders hold the legal equity interests of the VIEs on behalf of the Company. The equity holders of the VIEs are the CEO of the Company and his relative.

        Under the terms of the VIE Agreements, the Company has (i) the right to receive service fees on a yearly basis at an amount equivalent to all of the net profits of the VIEs under the exclusive technology license and services agreements when such services are provided; (ii) the right to receive all dividends declared by the VIEs and the right to all undistributed earnings of the VIEs; (iii) the right to receive the residual benefits of the VIEs through its exclusive option to acquire 100% of the equity interests in the VIEs, to the extent permitted under PRC law; and (iv) the right to require each of the shareholder of the VIEs to appoint the PRC citizen(s) as designated by GDS (Shanghai) Investment Co., Ltd. ("GDS Management Company"), a subsidiary of the Company, to act as such shareholder's exclusive attorney-in-fact to exercise all shareholder rights, including, but not limited to, voting on all matters of the VIEs requiring shareholder approval, disposing of all or part of the shareholder's equity interest in the VIEs, and appointing directors and executive officers.

        In accordance with Accounting Standards Codification ("ASC") 810-10-25-38A, the Company has a controlling financial interest in the VIEs because the Company has (i) the power to direct activities of the VIEs that most significantly impact the economic performance of the VIEs; and (ii) the obligation to absorb the expected losses and the right to receive expected residual return of the VIEs that could potentially be significant to the VIEs. The terms of the VIE Agreements and the Company's financial support to the VIEs were considered in determining that the Company is the primary beneficiary of the VIEs. Accordingly, the financial statements of the VIEs are consolidated in the Company's consolidated financial statements.

        Under the terms of the VIE Agreements, the VIEs' equity holders have no rights to the net assets nor have the obligations to fund the deficit, and such rights and obligations have been vested to the Company. All of the equity (net assets) or deficits (net liabilities) and net income (loss) of the VIEs are attributed to the Company.

        The Company has been advised by its PRC legal counsel that each of the VIE agreements is valid, binding and enforceable in accordance with its terms and applicable PRC laws and the ownership structure of the VIEs does not violate applicable PRC Laws. However, there are substantial uncertainties regarding the interpretation and application of PRC laws and future PRC laws and regulations. There can be no assurance that the PRC authorities will take a view that is not contrary to or otherwise different. If the current ownership structure of the Company and the VIE Agreements are determined to be in violation of any existing or future PRC laws and regulations, the PRC government could:

F-8


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

2 PRINCIPLES OF CONSOLIDATION (Continued)

        The imposition of any of these government actions could result in the termination of the VIE agreements, which would result in the Company losing the (i) ability to direct the activities of the VIEs and (ii) rights to receive substantially all the economic benefits and residual returns from the VIEs and thus result in the deconsolidation of the VIEs in the Company's consolidated financial statements.

        The assets and liabilities of the VIEs and their subsidiaries are presented parenthetically on the face of the condensed consolidated balance sheets. Net revenue, net income, operating, investing and financing cash flows of the VIEs that were included in the Company's condensed consolidated financial statements for the three-month periods ended March 31, 2017 and 2018 are as follows:

 
   Three-month periods
ended March 31, 		 
 
   2017   2018  

Net revenue

     316,874     541,320  

Net income

     8,968     60,704  

Net cash (used in) provided by operating activities

     (72,243 )   92,132  

Net cash used in investing activities

     (27,768 )   (207,357 )

Net cash (used in) provided by financing activities

     (161,143 )   91,005  

        The unrecognized revenue producing assets that are held by the VIEs and their subsidiaries comprise of internally developed software, intellectual property and trademarks which were not recorded on the Company's condensed consolidated balance sheets as they do not meet all the capitalization criteria.

        Costs recognized by the VIEs for outsourcing and other services provided by other entities within the Company were RMB99,824 and RMB173,256 for the three months ended March 31, 2017 and 2018, respectively.

3 CHANGES IN ACCOUNTING POLICIES

        There have been no material changes in the Company's significant accounting policies, other than the adoption of accounting pronouncements below, as compared to the significant accounting policies described in the Company's Annual Report on Form 20-F for the year ended December 31, 2017.

1)
The Company adopted Accounting Standards Codification ("ASC") 606 Revenue from Contracts with Customers on January 1, 2018. The Company applied ASC 606 using the cumulative effect method—i.e. by recognizing the cumulative effect of initially applying ASC 606 as an adjustment to the opening balance of accumulated deficit at January 1, 2018. The Company elects to apply this guidance retrospectively only to contracts that are not completed contracts as of January 1, 2018. Therefore, the comparative information has not been adjusted and continues to be reported under ASC 605.

F-9


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

3 CHANGES IN ACCOUNTING POLICIES (Continued)

   
   As of
March 31,
2018 		  Adjustments   Balances
without
adoption of
ASC 606 		 
 

Assets

                    
 

Accounts receivable

     469,173     (1,327 )   467,846  
 

Total current assets

     3,710,263     (1,327 )   3,708,936  
 

Property and equipment, net

     8,817,797     843     8,818,640  
 

Total assets

     15,135,127     (484 )   15,134,643  
 

Shareholders' equity

                    
 

Accumulated deficit

     (1,270,765 )   (484 )   (1,271,249 )
 

Total shareholders' equity

     5,651,707     (484 )   5,651,223  
 

Total liabilities and shareholders' equity

     15,135,127     (484 )   15,134,643  
   
   Three-month
period ended
March 31,
2018 		  Adjustments   Amounts
without
adoption of
ASC 606 		 
 

Net revenue

     562,225     523     562,748  
 

Cost of revenue

     (439,308 )   (281 )   (439,589 )
 

Income from operations

     30,460     242     30,702  
 

Net loss

     (85,926 )   242     (85,684 )
 

Loss per ordinary share

                    
 

Basic and diluted

     (0.09 )   0.00     (0.09 )

F-10


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

3 CHANGES IN ACCOUNTING POLICIES (Continued)

F-11


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

3 CHANGES IN ACCOUNTING POLICIES (Continued)

F-12


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

3 CHANGES IN ACCOUNTING POLICIES (Continued)

2)
The Company adopted Accounting Standards Update ("ASU") No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash on January 1, 2018. According to this ASU, the amounts generally described as restricted cash are included with cash when reconciling the beginning-of-period and end-of-period total amounts shown on the condensed consolidated statements of cash flows using a retrospective transition method to each period. As a result of the adoption of ASU 2016-18, the condensed consolidated statement of cash flows for the three-month period ended March 31, 2017 was retrospectively adjusted by excluding the increase of restricted cash of RMB14,763 from cash flows from operating activities. A reconciliation of cash and restricted cash in the condensed consolidated balance sheets to the amounts in the condensed consolidated statements of cash flows is in Note 5.

3)
The Company adopted ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments on January 1, 2018. According to this ASU, cash payments not made soon after the acquisition date of a business combination by an acquirer to settle a contingent consideration liability should be separated and classified as cash outflows for financing activities and operating activities. Cash payments up to the amount of the contingent consideration liability recognized at the acquisition date (including measurement-period adjustments) should be classified as financing activities; any excess should be classified as operating activities. Cash payments made soon after the acquisition date of a business combination by an acquirer to settle a contingent consideration liability should be classified as cash outflows for investing activities. The amendments in this ASU should be applied using a retrospective transition method to each period presented. The adoption of ASU 2016-15 does not have impact to the condensed consolidated statement of cash flows for the three-month period ended March 31, 2017.

4)
The Company adopted ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory on January 1, 2018. This ASU requires the recognition of the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, which consequently eliminates the exception for an intra-entity transfer of an asset other than inventory to the recognition of current and deferred income taxes. Deferred tax assets recognized as a result of this ASU shall be assessed for realizability. ASU 2016-16 was applied on a modified retrospective basis, with a cumulative-effect adjustment directly to accumulated deficit of the Company as of January 1, 2018, and the comparative information is not adjusted. The adoption of this ASU does not have impact to the accumulated deficit of the Company as of January 1, 2018.

F-13


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

4 RECENTLY ISSUED ACCOUNTING STANDARDS

        In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. While the Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements, the Company currently believes the most significant changes relate to the recognition of right-of-use ("ROU") assets and lease liabilities on its balance sheet for operating leases of the building of certain data centers. As of March 31, 2018, the Company had operating lease commitments expiring within 20 years from the inception of the leases. The total amount of the Company's future minimum lease payments under operating leases was RMB669,116 as of March 31, 2018.

5 CASH AND RESTRICTED CASH

        A reconciliation of cash and restricted cash in the condensed consolidated balance sheets to the amounts in the condensed consolidated statements of cash flows is as follows:

 
   As at
December 31,
2017 		  As at
March 31,
2018 		 

Cash

     1,873,446     2,978,627  

Restricted cash—current assets

     10,837     10,865  

Restricted cash—non-current assets

     63,317     63,267  
​ ​ ​ ​ ​ ​ ​ ​

Total cash and restricted cash shown in the condensed consolidated statements of cash flows

     1,947,600     3,052,759  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

        Restricted cash represents amounts held by banks, which are not available for the Company's use, as security for bank borrowings and related interests, issuance of commercial acceptance notes relating to purchase of property and equipment or letters of guarantee. Restricted cash included in non-current assets was to secure the repayment of long-term bank borrowings and related interests. Upon repayment of bank borrowings, maturity of the commercial acceptance notes and letters of guarantee, the deposits are released by the bank and available for general use by the Company.

F-14


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

6 CONTRACT BALANCES

Accounts Receivable, Net

        Accounts receivable, net consisted of the following:

 
   As at
December 31,
2017 		  As at
March 31,
2018 		 

Accounts receivable

     364,654     469,173  

Less: allowance for doubtful accounts

     —     —  
​ ​ ​ ​ ​ ​ ​ ​

Accounts receivable, net

     364,654     469,173  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

        The Company generally invoices its customers on a monthly or quarterly basis in accordance with the contract terms. Due to the timing difference between the billing and revenue recognition, accounts receivable included an unbilled portion of RMB253,724 and RMB288,132 as of December 31, 2017 and March 31, 2018, respectively.

Deferred Revenue

        The opening and closing balances of the Company's deferred revenue are as following:

 
   Deferred revenue  

Beginning balance as of January 1, 2018

     55,609  

Closing balance as of March 31, 2018

     61,144  
​ ​ ​ ​ ​

Increase

     5,535  
​ ​ ​ ​ ​
​ ​ ​ ​ ​
​ ​ ​ ​ ​

        The difference between the opening and closing balances of the Company's deferred revenue primarily results from the timing difference between the Company's performance obligation and the customer's payment. The amounts of revenue recognized during the three months ended March 31, 2018 from the opening deferred revenue balance was RMB26,081.

F-15


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

7 PROPERTY AND EQUIPMENT, NET

        Property and equipment consisted of the following:

 
   As of
December 31,
2017 		  As of
March 31,
2018 		 

At cost:

              

Buildings

     2,693,843     2,784,281  

Data center equipment

     2,202,247     2,312,578  

Leasehold improvement

     2,243,691     2,367,737  

Furniture and office equipment

     36,762     40,146  

Vehicles

     2,972     3,571  
​ ​ ​ ​ ​ ​ ​ ​

    7,179,515     7,508,313  

Less: Accumulated depreciation

     (965,758 )   (1,088,981 )
​ ​ ​ ​ ​ ​ ​ ​

    6,213,757     6,419,332  

Construction in progress

     1,951,844     2,398,465  
​ ​ ​ ​ ​ ​ ​ ​

Property and equipment, net

     8,165,601     8,817,797  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
(1)
The carrying amounts of the Company's property and equipment acquired under capital leases and other financing arrangement at the respective balance sheet dates were as follows:
 
   As of
December 31,
2017 		  As of
March 31,
2018 		 

At cost (note):

              

Buildings

     2,488,522     2,522,630  

Data center equipment

     192,946     246,399  
​ ​ ​ ​ ​ ​ ​ ​

    2,681,468     2,769,029  

Less: Accumulated depreciation

     (141,948 )   (171,988 )
​ ​ ​ ​ ​ ​ ​ ​

    2,539,520     2,597,041  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

F-16


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

7 PROPERTY AND EQUIPMENT, NET (Continued)

(2)
Depreciation of property and equipment (including assets acquired under capital leases and other financing arrangement) was RMB72,935 and RMB127,845 for the three-month periods ended March 31, 2017 and 2018, respectively, and included in the following captions:
 
   Three-month periods
ended March 31, 		 
 
   2017   2018  

Cost of revenue

     71,203     125,803  

General and administrative expenses

     1,589     1,900  

Research and development expenses

     143     142  
​ ​ ​ ​ ​ ​ ​ ​

    72,935     127,845  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
(3)
Interest costs that are directly attributable to the construction of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of that asset. A reconciliation of total interest costs to "Interest expenses" as reported in the condensed consolidated statements of operations is as follows:
 
   Three-month periods
ended March 31, 		 
 
   2017   2018  

Total interest costs

     89,873     137,691  

Less: interest costs capitalized

     (9,442 )   (18,981 )
​ ​ ​ ​ ​ ​ ​ ​

Interest expenses

     80,431     118,710  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
(4)
Property and equipment with net a book value of RMB698,922 and RMB687,773 was pledged as security for bank loans as of December 31, 2017 and March 31, 2018, respectively.

(5)
As of December 31, 2017 and March 31, 2018, payables for purchase of property and equipment that are contractually due beyond one year of RMB195,749 and RMB221,377 are recorded in other long-term liabilities in the condensed consolidated balance sheets.

8 INTANGIBLE ASSETS, NET

        Intangible assets consisted of the following:

 
   As of
December 31,
2017 		  As of
March 31,
2018 		 

Customer relationships

     379,322     379,322  

Favorable leases

     15,500     15,500  

Licenses

     6,000     6,000  
​ ​ ​ ​ ​ ​ ​ ​

    400,822     400,822  

Less: accumulated amortization

     (52,356 )   (61,776 )
​ ​ ​ ​ ​ ​ ​ ​

Intangible assets, net

     348,466     339,046  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

F-17


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

8 INTANGIBLE ASSETS, NET (Continued)

        Amortization of intangible assets was RMB4,235 and RMB9,420 for the three-month periods ended March 31, 2017 and 2018, respectively.

9 LOANS AND BORROWINGS

        The Company's borrowings consisted of the following:

 
   As of
December 31,
2017 		  As of
March 31,
2018 		 

Short-term borrowings

     462,946     462,288  

Current portion of long-term borrowings

     327,538     443,207  
​ ​ ​ ​ ​ ​ ​ ​

Sub-total

     790,484     905,495  
​ ​ ​ ​ ​ ​ ​ ​

Long-term borrowings, excluding current portion

     3,459,765     4,244,884  
​ ​ ​ ​ ​ ​ ​ ​

Total loans and borrowings

     4,250,249     5,150,379  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

Short-term borrowings

        The Company's short-term borrowings consisted of the following:

 
   As of
December 31,
2017 		  As of
March 31,
2018 		 

Unsecured short-term loans and borrowings

     230,000     200,000  

Secured short-term loans and borrowings

     232,946     262,288  
​ ​ ​ ​ ​ ​ ​ ​

    462,946     462,288  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

        In March 2018, a subsidiary of the Company entered into a one-year facility agreement with third party banks for a total amount of RMB500,000. As of March 31, 2018, the Company has not drawn down any amount under such facility. The loans under the facility will bear an interest rate of 5.8725% (not taking into consideration of issuance cost) and will be required to be repaid in full prior to the maturity date in the event (a) William Wei Huang ceases to directly or indirectly own at least 99.9% of the equity interests of GDS Beijing and (b) GDS Beijing fails to renew its internet data center ("IDC") license on or before the date of its expiry date. The loan facility contains financial covenants that limit certain financial ratios during the relevant period, as defined in the facility agreement.

        Short-term borrowings were secured by the following assets:

 
   As of
December 31,
2017 		  As of
March 31,
2018 		 

Accounts receivable

     11,615     11,990  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

        The weighted average interest rates of short-term borrowings outstanding as of December 31, 2017 and March 31, 2018 were 7.93% and 7.95% per annum, respectively.

F-18


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

9 LOANS AND BORROWINGS (Continued)

Long-term borrowings

        The Company's long-term borrowings consisted of the following:

 
   As of
December 31,
2017 		  As of
March 31,
2018 		 

Unsecured long-term loans and borrowings

     167,250     147,000  

Secured long-term loans and borrowings

     3,620,053     4,541,091  
​ ​ ​ ​ ​ ​ ​ ​

    3,787,303     4,688,091  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

        The weighted average interest rates of long-term borrowings as of December 31, 2017 and March 31, 2018 were 6.93% and 7.08% per annum, respectively.

        Long-term borrowings were secured by the following assets:

 
   As of
December 31,
2017 		  As of
March 31,
2018 		 

Accounts receivable

     124,428     158,767  

Property and equipment, net

     698,922     687,773  

Prepaid land use rights, net

     6,091     5,745  
​ ​ ​ ​ ​ ​ ​ ​

    829,441     852,285  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

        The aggregate maturities of the long-term borrowings for each for the five years and thereafter subsequent to March 31, 2018 are as follows:

 
   Long-term
borrowings 		 

Twelve-months ending March 31,

        

2019

     443,207  

2020

     686,313  

2021

     943,314  

2022

     1,070,590  

2023

     1,014,522  

Thereafter

     530,145  
​ ​ ​ ​ ​

    4,688,091  
​ ​ ​ ​ ​
​ ​ ​ ​ ​
​ ​ ​ ​ ​

        In March 2018, a subsidiary of the Company entered into a loan agreement with a third-party bank which extended the term of a short-term working capital loan matured in March 2018 of RMB50,000 for two years. As of March 31, 2018, the outstanding loan under this agreement was RMB50,000 with an effective interest rate of 5.7% per annum.

        As of March 31, 2018, the Company had total working capital and project financing credit facilities of RMB6,042,861 from various financial institutions, of which the unused amount was RMB766,014. As of March 31, 2018, the Company had drawn down RMB5,276,847, of which RMB462,288 was recorded

F-19


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

9 LOANS AND BORROWINGS (Continued)

in short-term loans and borrowings and RMB4,688,091 (net of debt issuance costs of RMB126,468) was recorded in long-term loans and borrowings, respectively. Drawdowns from the credit facility are subject to the approval of the banks and are subject to the terms and conditions of each agreement.

10 LEASE

Capital lease and other financing obligations

        The Company's capital lease and other financing obligations are summarized as follows:

 
   December 31, 2017   March 31, 2018  
 
   Capital
lease
obligations 		  Other
financing
obligations 		  Total   Capital
lease
obligations 		  Other
financing
obligations 		  Total  

Within 1 year

     212,780     45,007     257,787     240,901     40,792     281,693  

After 1 year but within 2 years

     220,293     63,151     283,444     243,947     71,350     315,297  

After 2 years but within 3 years

     316,475     75,685     392,160     316,080     75,584     391,664  

After 3 years but within 4 years

     144,052     76,678     220,730     137,713     77,968     215,681  

After 4 years but within 5 years

     141,910     80,832     222,742     143,597     80,832     224,429  

After 5 years

     1,900,744     1,469,318     3,370,062     1,859,265     2,451,396     4,310,661  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total

     2,936,254     1,810,671     4,746,925     2,941,503     2,797,922     5,739,425  

Less total future interest

    
(1,209,120
)		  
(905,590
)		  
(2,114,710
)		  
(1,182,921
)		  
(891,026
)		  
(2,073,947
)

Less: estimated building costs

     —     (231,228 )   (231,228 )   —     (1,209,619 )   (1,209,619 )
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Present value of lease and other financing obligations

     1,727,134     673,853     2,400,987     1,758,582     697,277     2,455,859  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Including:

                                      

Current portion

                 97,943                 120,718  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Non-current portion

                 2,303,044                 2,335,141  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

        The Company's capital and build-to-suit leases expire at various dates ranging from 2020 to 2037. The weighted average effective interest rate of the Company's capital and build-to-suit leases was 7.28% and 7.48% as of December 31, 2017 and March 31, 2018, respectively.

        During the three months ended March 31, 2018, the Company entered into three lease agreements with third party lessors in respect of certain data center equipment (the "Equipment Leases"). Equipment Leases had lease terms of 3 years. The Company determined that the leases were capital leases as the present value of the minimum lease payments exceeded 90% of the fair value of the leased equipment at the inception of the leases. Accordingly, on the lease commencement date, the Company recorded capital lease assets and capital lease obligations at an amount equal to the present value of the minimum lease payments in the aggregate amount of RMB53,583.

Operating leases

        The Company leases data centers, offices and other equipment that are classified as operating leases. The majority of the Company's operating leases expire at various dates though 2037.

F-20


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

10 LEASE (Continued)

        Future minimum operating lease payments as of March 31, 2018 are summarized as follow:

Twelve-months ending March 31,

        

2019

     97,128  

2020

     82,299  

2021

     64,250  

2022

     33,217  

2023

     32,514  

Thereafter

     359,708  
​ ​ ​ ​ ​

Total

     669,116  
​ ​ ​ ​ ​
​ ​ ​ ​ ​
​ ​ ​ ​ ​

        Rental expenses were approximately RMB29,358 and RMB29,688 for the three-month periods ended March 31, 2017 and 2018, respectively. The Company did not sublease any of its operating leases for the periods presented.

11 ORDINARY SHARES

        On January 26, 2018, the Company completed a public offering in which the Company offered and sold 8,000,000 ADSs (or 64,000,000 Class A ordinary shares), and SBCVC Holdings Limited ("SBCVC"), one of the Company's principal shareholders, sold 3,000,000 ADSs (or 24,000,000 Class A ordinary shares), at a price of US$26.00 per ADS. On January 29, 2018, the underwriters exercised their option to purchase from the Company and SBCVC additional 225,000 ADSs (or 1,800,000 Class A ordinary shares) and 1,425,000 ADSs (or 11,400,000 Class A ordinary shares), respectively. The Company raised a total of US$202,696 (RMB1,283,308) in proceeds from this public offering, net of underwriting discounts and commissions and other issuance costs.

        As of March 31, 2018, the Company's outstanding share capital consisted of 939,479,328 Class A ordinary shares and 67,590,336 Class B ordinary shares.

12 SHARE-BASED COMPENSATION

        The Company adopted the 2014 Equity Incentive Plan ("the 2014 Plan") in July 2014 for the granting of share options to key employees, directors and external consultants in exchange for their services. The total number of shares, which may be issued under the 2014 Plan, is 29,240,000 shares.

        The Company adopted the 2016 Equity Incentive Plan ("the 2016 Plan") in August 2016 for the granting of share options, stock appreciation rights and other stock-based award (collectively referred to as the "Awards") to key employees and directors. The maximum aggregate number of shares, which may be subject to Awards under the 2016 Plan, is 56,707,560 shares.

F-21


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

12 SHARE-BASED COMPENSATION (Continued)

        A summary of the option activity is as follows:

 
   Number of
options 		  Weighted
average
exercise
price 		  Weighted
average
grant-date
fair value
per option 		 
 
    
   (RMB)
   (RMB)
  

Options outstanding at January 1, 2018

     28,087,236     5.1     3.2  

Granted

     —              

Exercised

     (264,488 )   4.9     1.9  

Forfeited

     —              
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Options outstanding at March 31, 2018

     27,822,748     4.9     3.3  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Options vested and expect to vest at March 31, 2018

     27,822,748     4.9     3.3  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

        The following table summarizes information with respect to stock options outstanding and stock options exercisable as of March 31, 2018:

 
   Number of
options 		  Weighted average
remaining
contractual life 		  Weighted average
exercise price 		 
 
    
   (years)
   (RMB)
  

Options outstanding and exercisable

     27,822,748     2.0     4.9  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

        As of December 31, 2017 and March 31, 2018, 266,666 forfeitable and unvested non-employee options were treated as unissued for accounting purposes and were not included in the table above. As of March 31, 2018, there were no unvested employee stock options.

Settlement of liability-classified restricted shares award

        In March 2018, the Company issued 65,920 fully vested restricted shares to its directors to settle a portion of their remuneration for services provided by the directors, which had been recorded in general and administrative expenses. The number of restricted shares issued was determined by the fair value of the restricted shares on the date of settlement and the share-settled portion of the liability of RMB1,492. Upon issuance of the shares to settle the obligation, equity is increased by the amount of the liability settled in shares and no additional share-based compensation expense was recorded.

        A summary of the restricted share activity is as follows:

 
   Number of
Shares 		  Weighted average
grant-date fair
value per share 		 
 
    
   (RMB)
  

Unvested at January 1, 2018

     24,525,620     5.3  

Granted

     65,920     22.6  

Vested

     (65,920 )   22.6  

Forfeited

     (388,488 )   5.7  
​ ​ ​ ​ ​ ​ ​ ​

Unvested at March 31, 2018

     24,137,132     5.3  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

F-22


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

12 SHARE-BASED COMPENSATION (Continued)

        A summary of share-based compensation expenses for the three-month periods ended March 31, 2017 and 2018 is as follows:

 
   Three-month
periods ended
March 31, 		 
 
   2017   2018  

Costs of revenue

     1,730     2,893  

Selling and marketing expenses

     4,357     5,030  

General and administrative expenses

     7,308     7,520  

Research and development expenses

     111     190  
​ ​ ​ ​ ​ ​ ​ ​

Total share-based compensation expenses

     13,506     15,633  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

13 REVENUE

        Net revenue consisted of the following:

 
   Three-month periods
ended March 31, 		 
 
   2017   2018  

Colocation services

     271,283     408,694  

Managed service and others

     72,382     142,779  
​ ​ ​ ​ ​ ​ ​ ​

Service revenue

     343,665     551,473  

Equipment sales

     6,378     10,752  
​ ​ ​ ​ ​ ​ ​ ​

Total

     350,043     562,225  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

        During the three-month period ended March 31, 2017, the Company had two customers, which generated over 10% of the Company's total revenues or RMB50,875 and RMB39,456, respectively. During the three-month period ended March 31, 2018, the Company had three customers, which generated over 10% of the Company's total revenues or RMB113,137, RMB79,951 and RMB68,839, respectively.

14 INCOME TAX

        The income tax benefits for the three-month periods ended March 31, 2017 and 2018 were RMB1,367 and RMB1,278, respectively.

        The Company's effective tax rates for the three-month periods ended March 31, 2017 and 2018 were 3.0% and 1.5%, respectively, which were lower than the PRC statutory tax rate of 25% due to valuation allowances on deferred tax assets, mainly related to the net operating losses and other temporary difference generated by certain subsidiaries of the Company. These entities were in a cumulative loss position, which is a significant negative indicator to overcome that sufficient income will be generated over the periods in which the deferred income tax assets are deductible or utilized.

F-23


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

15 LOSS PER ORDINARY SHARE

        The computation of basic and diluted loss per share is as follows:

 
   Three-month periods ended
March 31, 		 
 
   2017   2018  

Net loss attributable to ordinary shareholders

     (44,305 )   (85,926 )
​ ​ ​ ​ ​ ​ ​ ​

Weighted average number of ordinary shares outstanding—basic and diluted

     760,009,043     969,747,050  

Loss per ordinary share—basic and diluted

     (0.06 )   (0.09 )

        In 2017, the Company issued 20,000,000 ordinary shares to its share depository bank which have been and will continue to be used to settle stock option and restricted share awards upon their exercise. No consideration was received by the Company for this issuance of ordinary shares. These ordinary shares are legally issued and outstanding but are treated as escrowed shares for accounting purposes and, therefore, have been excluded from the computation of loss per ordinary share. Any ordinary shares not used in the settlement of stock option and restricted share awards will be returned to the Company.

        The following securities were excluded from the computation of diluted loss per share because their effect is anti-dilutive.

 
   Three-month periods ended
March 31, 		 
 
   2017   2018  

Share options/restricted shares

     41,499,862     51,959,880  

Convertible bonds payable

     95,059,758     —  
​ ​ ​ ​ ​ ​ ​ ​

Total

     136,559,620     51,959,880  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

16 COMMITMENTS

(a)   Capital commitments

        Capital commitments, mainly related to data centers, outstanding at December 31, 2017 and March 31, 2018 not provided for in the condensed consolidated financial statements were as follows:

 
   As of
December 31,
2017 		  As of
March 31,
2018 		 

Contracted for

     1,065,551     641,001  
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​

(b)   Lease commitments

        The Company's lease commitments are disclosed in note 10.

F-24


GDS HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands, except share data and per share data, or otherwise noted)

17 SUBSEQUENT EVENTS

(a)   Acquisition of Guangzhou 3

        In May 2018, the Company consummated an acquisition of all equity interests in a target group from a third party for an aggregate purchase price of RMB262,244 (including contingent considerations of RMB245,244). The target group owns a data center in Guangzhou, China (Guangzhou 3). As of the date of this filing, the Company has not yet completed the fair value assessment of identifiable assets and liabilities assumed.

(b)   Acquisition of Beijing 4

        In May 2018, the Company consummated an acquisition of all equity interests in an entity which owns a data center project in Beijing, China (Beijing 4) from a third party for an aggregate purchase price of RMB25,500. As the entity did not meet the definition of a business as of the acquisition date according to ASC 805 Business Combinations, the acquisition is determined to be an asset acquisition.

(c)   Acquisition of Beijing 5

        In May 2018, the Company entered into an equity purchase agreement to acquire all of the equity interests in an entity which owns a data center project in Beijing, China (Beijing 5) from a third party for an estimated purchase price of RMB26,000 which is subject to change depending on the target entity's financial position on the closing date. As the entity did not meet the definition of a business as of the acquisition date according to ASC 805 Business Combinations, the acquisition is determined to be an asset acquisition.

(d)   Acquisition of Shanghai 11

        In May 2018, the Company entered into an equity purchase agreement to acquire all of the equity interests in a target group from a third party for an aggregate purchase price of RMB320,000 (including estimated contingent considerations of RMB70,000). The completion of the acquisition is subject to the fulfillment of certain customary closing conditions. The target group owns a data center in Shanghai, China (Shanghai 11). As of the date of this filing, the Company has not yet completed the fair value assessment of identifiable assets and liabilities assumed.

(e)   New loan facility

        In April 2018, the Company entered into a facility agreement with a third party bank for a total amount of US$100,000. The term of the facility is 36 months from April 30, 2018, and the interest rate agreed under the facility agreement is a floating rate in the aggregate of 4.85% per annum and the applicable LIBOR. The Company has not drawn down under such facility up to May 29, 2018.

F-25



QuickLinks

GDS HOLDINGS LIMITED AND SUBSIDIARIES Index to Unaudited Condensed Consolidated Financial Statements
GDS HOLDINGS LIMITED AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data and per share data, or otherwise noted)
GDS HOLDINGS LIMITED AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share data and per share data, or otherwise noted)
GDS HOLDINGS LIMITED AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands, except share data and per share data, or otherwise noted)
GDS HOLDINGS LIMITED AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (In thousands, except share data and per share data, or otherwise noted)
GDS HOLDINGS LIMITED AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, except share data and per share data, or otherwise noted)
GDS HOLDINGS LIMITED AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share data and per share data, or otherwise noted)