GDS Reports Third Quarter 2017 Results
Third Quarter 2017 Financial Highlights
- Net revenue increased by 42.8% year-over-year (“Y-o-Y”) to
RMB424.4 million (US$63.8 million ) in the third quarter of 2017 (3Q2016:RMB297.2 million ). - Service revenue increased by 58.5% Y-o-Y to
RMB423.0 million (US$63.6 million ) in the third quarter of 2017 (3Q2016:RMB266.9 million ). - Net loss was
RMB90.3 million (US$13.6 million ) in the third quarter of 2017, compared with a net loss ofRMB52.6 million in the third quarter of 2016. - Adjusted EBITDA (non-GAAP) increased by 71.4% Y-o-Y to
RMB133.7 million (US$20.1 million ) in the third quarter of 2017 (3Q2016:RMB78.0 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 31.5% in the third quarter of 2017 (3Q2016: 26.2%).
Operating Highlights
- Total area committed increased by 41.3% Y-o-Y to 82,850 sqm as of
September 30, 2017 (September 30, 2016 : 58,627 sqm). - Area utilized (or revenue generating space) increased by 47.2% Y-o-Y to 50,579 sqm as of
September 30, 2017 (September 30, 2016 : 34,369 sqm). - Area in service increased by 59.4% Y-o-Y to 77,832 sqm as of
September 30, 2017 (September 30, 2016 : 48,822 sqm). - Commitment rate for area in service was 89.8% as of
September 30, 2017 (September 30, 2016 : 93.8%) and utilization rate was 65.0% as ofSeptember 30, 2017 (September 30, 2016 : 70.4%). - Area under construction was 37,478 sqm as of
September 30, 2017 (September 30, 2016 : 37,194 sqm) - Pre-commitment rate for area under construction was 34.6% as of
September 30, 2017 (September 30, 2016 : 34.5%).
“We are delighted to celebrate the one-year anniversary of our public listing with excellent financial and operational achievements,” said Mr.
“In the third quarter of 2017, we continued to execute on our plans and achieved strong financial results,” said Mr.
Third Quarter 2017 Financial Results
Net revenue in the third quarter of 2017 was
Cost of revenue in the third quarter of 2017 was
Gross profit was
Adjusted Net Operating Income (“Adjusted NOI”) (non-GAAP) is defined as gross profit excluding depreciation and amortization, accretion expenses for asset retirement costs and share-based compensation expenses allocated to cost of revenue. Adjusted NOI was
Adjusted NOI margin (non-GAAP) was 47.6% in the third quarter of 2017, compared with 44.3% in the third quarter of 2016, and 46.5% in the second quarter of 2017. The increase over the previous quarter was mainly due to a leverage effect realized on personnel, rent and other fixed-cost components of cost of revenue as data centers ramp up.
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 third quarter of 2017 were
Foreign currency exchange loss for the third quarter of 2017 was
Adjusted EBITDA (non-GAAP) is defined as net loss excluding net interest expenses, income tax benefits, depreciation and amortization, accretion expenses for asset retirement costs and share-based compensation expenses. Adjusted EBITDA was
Adjusted EBITDA margin (non-GAAP) was 31.5% in the third quarter of 2017, compared with 26.2% in the third quarter of 2016, and 29.7% in the second quarter of 2017. The increase over the previous quarter was mainly due to a leverage effect realized on general and administrative expenses as well as on personnel, rent and other fixed cost components of cost of revenue as data centers ramp up.
Net loss in the third quarter of 2017 was
Basic and diluted loss per ordinary share in the third quarter of 2017 was
Basic and diluted loss per American Depositary Share (“ADS”) in the third quarter of 2017 was
Sales
Total area committed at the end of the third quarter of 2017 was 82,850 sqm, compared with 58,627 sqm at the end of the third quarter of 2016 and 76,541 sqm at the end of the second quarter of 2017, an increase of 41.3% Y-o-Y and 8.2% quarter-over-quarter (“Q-o-Q”). The sales increase was driven primarily by booming Cloud adoption in
Data Center Resources
Area in service at the end of the third quarter of 2017 was 77,832 sqm, compared with 48,822 sqm at the end of the third quarter of 2016 and 71,577 sqm at the end of the second quarter of 2017, an increase of 59.4% Y-o-Y and 8.7% Q-o-Q. During the third quarter of 2017, the
Area under construction at the end of the third quarter of 2017 was 37,478 sqm, compared with 37,194 sqm at the end of the third quarter of 2016 and 38,028 sqm at the end of the second quarter of 2017. During the third quarter of 2017, Phase 1 of the
Commitment rate of area in service was 89.8% at the end of the third quarter of 2017, compared with 93.8% at the end of the third quarter of 2016 and 92.2% at the end of second quarter 2017. Pre-commitment rate of area under construction was 34.6% at the end of the third quarter of 2017, compared with 34.5% at the end of the third quarter of 2016 and 27.7% at the end of the second quarter 2017.
Area utilized at the end of the third quarter of 2017 was 50,579 sqm, compared with 34,369 sqm at the end of the third quarter of 2016 and 42,470 sqm at the end of the second quarter of 2017, an increase of 47.2% Y-o-Y and 19.1% Q-o-Q.
Utilization rate of area in service was 65.0% at the end of the third quarter of 2017, compared with 70.4% at the end of the third quarter of 2016 and 59.3% at the end of the second quarter 2017.
Liquidity
As of
Updated Business Outlook
For the full year of 2017, the Company now expects its total revenues to be between
In addition, in an effort to meet the strong market demand, the Company has initiated new projects at a faster rate than previously expected with accelerated development timelines. As such, the Company now expects to incur capital expenditures of approximately
This forecast reflects the Company's current and preliminary view on the current business situation and market conditions, which are subject to change.
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: | 4696669 | |
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: | 4696669 | |
A live and archived webcast of the conference call will be available on the Company's investor relations website at http://investors.gds-services.com.
Non-GAAP Disclosure
Our management and board of directors use adjusted NOI, adjust 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 loss, cash flows used in operating activities or other consolidated statements of operations and cash flow data prepared in accordance with U.S. GAAP.
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 ext. 401
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, 2016 |
As of September 30, 2017 |
|||||
| RMB | RMB | US$ | ||||
| Assets | ||||||
| Current assets | ||||||
| Cash | 1,811,319 | 1,174,079 | 176,466 | |||
| Accounts receivable, net of allowance for doubtful accounts | 198,851 | 306,308 | 46,039 | |||
| Value-added-tax (“VAT”) recoverable | 72,958 | 87,377 | 13,133 | |||
| Prepaid expenses and other current assets | 127,185 | 143,205 | 21,523 | |||
| Total current assets | 2,210,313 | 1,710,969 | 257,161 | |||
| Property and equipment, net | 4,322,891 | 6,368,830 | 957,244 | |||
| Goodwill and intangible assets, net | 1,433,656 | 1,757,017 | 264,082 | |||
| Other non-current assets | 237,006 | 417,485 | 62,749 | |||
| Total assets | 8,203,866 | 10,254,301 | 1,541,236 | |||
| Liabilities and Shareholders’ Equity | ||||||
| Current liabilities | ||||||
| Short-term borrowings and current portion of long-term borrowings | 628,478 | 952,734 | 143,197 | |||
| Accounts payable | 513,543 | 579,333 | 87,074 | |||
| Accrued expenses and other payables | 248,607 | 335,785 | 50,469 | |||
| Capital lease and other financing obligations, current | 88,593 | 38,594 | 5,801 | |||
| Total current liabilities | 1,479,221 | 1,906,446 | 286,541 | |||
| Long-term borrowings, excluding current portion | 1,509,676 | 2,241,895 | 336,960 | |||
| Convertible bonds payable | 1,040,550 | 995,535 | 149,630 | |||
| Capital lease and other financing obligations, non-current | 1,022,959 | 1,713,262 | 257,506 | |||
| Other long-term liabilities | 164,986 | 573,047 | 86,130 | |||
| Total liabilities | 5,217,392 | 7,430,185 | 1,116,767 | |||
| Shareholders' equity | ||||||
| Ordinary shares | 260 | 267 | 40 | |||
| Additional paid-in capital | 4,036,959 | 4,083,234 | 613,716 | |||
| Accumulated other comprehensive loss | (192,080 | ) | (190,363 | ) | (28,612 | ) |
| Accumulated deficit | (858,665 | ) | (1,069,022 | ) | (160,675 | ) |
| Total shareholders’ equity | 2,986,474 | 2,824,116 | 424,469 | |||
| Commitments and contingencies | ||||||
| Total liabilities and shareholders' equity | 8,203,866 | 10,254,301 | 1,541,236 | |||
| GDS HOLDINGS LIMITED | |||||||||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
| (Amount in thousands of Renminbi ("RMB") and US dollars ("US$") | |||||||||||||||
| except for number of shares and per share data) | |||||||||||||||
| Three months ended | Nine months ended | ||||||||||||||
| September 30, 2016 |
June 30, 2017 | September 30, 2017 | September 30, 2016 |
September 30, 2017 | |||||||||||
| RMB | RMB | RMB | US$ | RMB | RMB | US$ | |||||||||
| Net revenue | |||||||||||||||
| Service revenue | 266,890 | 331,490 | 423,042 | 63,584 | 703,284 | 1,098,197 | 165,060 | ||||||||
| Equipment sales | 30,266 | 4,724 | 1,391 | 209 | 41,007 | 12,493 | 1,878 | ||||||||
| Total net revenue | 297,156 | 336,214 | 424,433 | 63,793 | 744,291 | 1,110,690 | 166,938 | ||||||||
| Cost of revenue | (222,514 | ) | (254,853 | ) | (321,709 | ) | (48,353 | ) | (554,548 | ) | (820,407 | ) | (123,308 | ) | |
| Gross profit | 74,642 | 81,361 | 102,724 | 15,440 | 189,743 | 290,283 | 43,630 | ||||||||
| Operating expenses | |||||||||||||||
| Selling and marketing expenses | (17,109 | ) | (23,508 | ) | (22,854 | ) | (3,435 | ) | (51,672 | ) | (67,618 | ) | (10,163 | ) | |
| General and administrative expenses | (43,323 | ) | (47,733 | ) | (63,972 | ) | (9,615 | ) | (174,775 | ) | (160,473 | ) | (24,119 | ) | |
| Research and development expenses | (2,156 | ) | (1,203 | ) | (2,059 | ) | (309 | ) | (6,921 | ) | (4,720 | ) | (709 | ) | |
| Income (loss) from operations | 12,054 | 8,917 | 13,839 | 2,081 | (43,625 | ) | 57,472 | 8,639 | |||||||
| Other income (expenses): | |||||||||||||||
| Net interest expenses | (69,404 | ) | (85,755 | ) | (105,733 | ) | (15,892 | ) | (179,696 | ) | (270,096 | ) | (40,596 | ) | |
| Foreign currency exchange gain (loss), net | 2,645 | (1,229 | ) | (1,638 | ) | (246 | ) | 6,746 | (5,473 | ) | (823 | ) | |||
| Others, net | 503 | 1,010 | 866 | 130 | 1,712 | 2,702 | 406 | ||||||||
| Loss before income taxes | (54,202 | ) | (77,057 | ) | (92,666 | ) | (13,927 | ) | (214,863 | ) | (215,395 | ) | (32,374 | ) | |
| Income tax benefits | 1,626 | 1,334 | 2,337 | 351 | 8,090 | 5,038 | 757 | ||||||||
| Net loss | (52,576 | ) | (75,723 | ) | (90,329 | ) | (13,576 | ) | (206,773 | ) | (210,357 | ) | (31,617 | ) | |
| Change in redemption value of redeemable preferred shares | (29,441 | ) | 0 | 0 | 0 | (87,310 | ) | 0 | 0 | ||||||
| (Cumulative) Dividend on preferred shares | (1,863 | ) | 0 | 0 | 0 | (5,588 | ) | 0 | 0 | ||||||
| Net loss attributable to ordinary shareholders | (83,880 | ) | (75,723 | ) | (90,329 | ) | (13,576 | ) | (299,671 | ) | (210,357 | ) | (31,617 | ) | |
| Loss per ordinary share | |||||||||||||||
| Basic and diluted | (0.38 | ) | (0.10 | ) | (0.12 | ) | (0.02 | ) | (1.37 | ) | (0.28 | ) | (0.04 | ) | |
| Weighted average number of ordinary share outstanding | |||||||||||||||
| Basic and diluted | 217,987,922 | 760,619,962 | 761,737,609 | 761,737,609 | 217,987,922 | 760,795,203 | 760,795,203 | ||||||||
| GDS HOLDINGS LIMITED | |||||||||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | |||||||||||||||
| (Amount in thousands of Renminbi ("RMB") and US dollars ("US$")) | |||||||||||||||
| Three months ended | Nine months ended | ||||||||||||||
| September 30, 2016 |
June 30, 2017 | September 30, 2017 | September 30, 2016 |
September 30, 2017 | |||||||||||
| RMB | RMB | RMB | US$ | RMB | RMB | US$ | |||||||||
| Net loss | (52,576 | ) | (75,723 | ) | (90,329 | ) | (13,576 | ) | (206,773 | ) | (210,357 | ) | (31,617 | ) | |
| Foreign currency translation adjustments, net of nil tax | (14,158 | ) | 3,577 | 4,414 | 663 | (64,734 | ) | 1,717 | 258 | ||||||
| Comprehensive loss | (66,734 | ) | (72,146 | ) | (85,915 | ) | (12,913 | ) | (271,507 | ) | (208,640 | ) | (31,359 | ) | |
| GDS HOLDINGS LIMITED | ||||||||||||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||||
| (Amount in thousands of Renminbi ("RMB") and US dollars ("US$")) | ||||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||||
| September 30, 2016 |
June 30, 2017 | September 30, 2017 | September 30, 2016 |
September 30, 2017 | ||||||||||||||
| RMB | RMB | RMB | US$ | RMB | RMB | US$ | ||||||||||||
| Net loss | (52,576 | ) | (75,723 | ) | (90,329 | ) | (13,576 | ) | (206,773 | ) | (210,357 | ) | (31,617 | ) | ||||
| Depreciation and amortization | 62,617 | 78,692 | 104,722 | 15,740 | 156,086 | 260,738 | 39,189 | |||||||||||
| Amortization of debt issuance cost and debt discount | - | 4,459 | 8,436 | 1,268 | 422 | 17,425 | 2,619 | |||||||||||
| Share-based compensation expense | - | 12,294 | 15,594 | 2,344 | 57,187 | 41,394 | 6,222 | |||||||||||
| Others | (1,854 | ) | (1,829 | ) | (5,478 | ) | (824 | ) | (11,431 | ) | (11,438 | ) | (1,719 | ) | ||||
| Changes in operating assets and liabilities | (108,688 | ) | (85,463 | ) | (87,977 | ) | (13,223 | ) | (118,061 | ) | (258,818 | ) | (38,900 | ) | ||||
| Net cash used in operating activities | (100,501 | ) | (67,570 | ) | (55,032 | ) | (8,271 | ) | (122,570 | ) | (161,056 | ) | (24,206 | ) | ||||
| Purchase of property and equipment | (386,874 | ) | (362,149 | ) | (433,352 | ) | (65,133 | ) | (704,429 | ) | (1,175,471 | ) | (176,675 | ) | ||||
| Payments related to acquisitions | - | (43,599 | ) | (10,338 | ) | (1,554 | ) | (159,363 | ) | (53,937 | ) | (8,107 | ) | |||||
| Net cash used in investing activities | (386,874 | ) | (405,748 | ) | (443,690 | ) | (66,687 | ) | (863,792 | ) | (1,229,408 | ) | (184,782 | ) | ||||
| Net proceeds from financing activities | 451,976 | 432,498 | 226,258 | 34,007 | 847,322 | 805,108 | 121,009 | |||||||||||
| Net cash provided by financing activities | 451,976 | 432,498 | 226,258 | 34,007 | 847,322 | 805,108 | 121,009 | |||||||||||
| Effect of exchange rate changes on cash | (346 | ) | (20,485 | ) | (19,470 | ) | (2,927 | ) | 13,274 | (51,884 | ) | (7,799 | ) | |||||
| Net decrease of cash | (35,745 | ) | (61,305 | ) | (291,934 | ) | (43,878 | ) | (125,766 | ) | (637,240 | ) | (95,778 | ) | ||||
| Cash at beginning of period | 834,477 | 1,527,318 | 1,466,013 | 220,344 | 924,498 | 1,811,319 | 272,244 | |||||||||||
| Cash at end of period | 798,732 | 1,466,013 | 1,174,079 | 176,466 | 798,732 | 1,174,079 | 176,466 | |||||||||||
| GDS HOLDINGS LIMITED | |||||||||||||||
| UNAUDITED RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS | |||||||||||||||
| (Amount in thousands of Renminbi ("RMB") and US dollars ("US$") | |||||||||||||||
| except for percentage data) | |||||||||||||||
| Three months ended | Nine months ended | ||||||||||||||
| September 30, 2016 |
June 30, 2017 | September 30, 2017 | September 30, 2016 |
September 30, 2017 | |||||||||||
| RMB | RMB | RMB | US$ | RMB | RMB | US$ | |||||||||
| Gross profit | 74,642 | 81,361 | 102,724 | 15,440 | 189,743 | 290,283 | 43,630 | ||||||||
| Depreciation and amortization | 56,916 | 72,609 | 95,372 | 14,335 | 142,722 | 239,269 | 35,962 | ||||||||
| Accretion expenses for asset retirement costs | 165 | 203 | 269 | 40 | 435 | 625 | 94 | ||||||||
| Share-based compensation expenses | - | 2,108 | 3,527 | 530 | 1,169 | 7,365 | 1,107 | ||||||||
| Adjusted NOI | 131,723 | 156,281 | 201,892 | 30,345 | 334,069 | 537,542 | 80,793 | ||||||||
| Adjusted NOI margin | 44.3% | 46.5% | 47.6% | 47.6% | 44.9% | 48.4% | 48.4% | ||||||||
| Three months ended | Nine months ended | ||||||||||||||
| September 30, 2016 |
June 30, 2017 | September 30, 2017 | September 30, 2016 |
September 30, 2017 | |||||||||||
| RMB | RMB | RMB | US$ | RMB | RMB | US$ | |||||||||
| Net loss | (52,576 | ) | (75,723 | ) | (90,329 | ) | (13,576 | ) | (206,773 | ) | (210,357 | ) | (31,617 | ) | |
| Net interest expenses | 69,404 | 85,755 | 105,733 | 15,892 | 179,696 | 270,096 | 40,596 | ||||||||
| Income tax benefits | (1,626 | ) | (1,334 | ) | (2,337 | ) | (351 | ) | (8,090 | ) | (5,038 | ) | (757 | ) | |
| Depreciation and amortization | 62,617 | 78,692 | 104,722 | 15,740 | 156,086 | 260,738 | 39,189 | ||||||||
| Accretion expenses for asset retirement costs | 165 | 203 | 269 | 40 | 435 | 625 | 94 | ||||||||
| Share-based compensation expenses | - | 12,294 | 15,594 | 2,344 | 57,187 | 41,394 | 6,222 | ||||||||
| Adjusted EBITDA | 77,984 | 99,887 | 133,652 | 20,089 | 178,541 | 357,458 | 53,727 | ||||||||
| Adjusted EBITDA margin | 26.2% | 29.7% | 31.5% | 31.5% | 24.0% | 32.2% | 32.2% | ||||||||