GDS Reports First Quarter 2018 Results
First Quarter 2018 Financial Highlights
- Net revenue increased by 83.7% year-over-year (“Y-o-Y”) to
RMB562.2 million (US$89.6 million ) in the first quarter of 2018 (1Q2017:RMB306.0 million , excluding the one-time termination fee ofRMB44.1 million ). - Service revenue increased by 84.1% Y-o-Y to
RMB551.5 million (US$87.9 million ) in the first quarter of 2018 (1Q2017:RMB299.6 million , excluding the one-time termination fee ofRMB44.1 million ). - Net loss was
RMB85.9 million (US$13.7 million ) in the first quarter of 2018, compared with a net loss ofRMB44.3 million in the first quarter of 2017. - Adjusted EBITDA (non-GAAP) increased by 127.0% Y-o-Y to
RMB181.3 million (US$28.9 million ) in the first quarter of 2018 (1Q2017:RMB79.9 million , excluding the one-time termination fee ofRMB44.1 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 32.2% in the first quarter of 2018 (1Q2017: 26.1%, excluding the one-time termination fee of
RMB44.1 million ).
Operating Highlights
- Total area committed increased by 79.8% Y-o-Y to 122,819 sqm as of
March 31, 2018 (March 31, 2017 : 68,313 sqm). - Area utilized (or revenue-generating space) increased by 76.5% Y-o-Y to 66,905 sqm as of
March 31, 2018 (March 31, 2017 : 37,898 sqm). - Area in service increased by 69.4% Y-o-Y to 103,475 sqm as of
March 31, 2018 (March 31, 2017 : 61,092 sqm). - Commitment rate for area in service was 93.8% as of
March 31, 2018 (March 31, 2017 : 90.0%) and utilization rate was 64.7% as ofMarch 31, 2018 (March 31, 2017 : 62.0%). - Area under construction was 40,357 sqm as of
March 31, 2018 (March 31, 2017 : 35,055 sqm). - Pre-commitment rate for area under construction was 63.8% as of
March 31, 2018 (March 31, 2017 : 37.9%).
“We delivered robust financial results in the first quarter of 2018 backed up by continued strong sales momentum,” said Mr.
“We achieved double-digit quarter-on-quarter growth rates for both revenue and adjusted EBITDA during the traditionally slow first quarter of the year,” said Mr.
First Quarter 2018 Financial Results
Net revenue in the first quarter of 2018 was
Cost of revenue in the first quarter of 2018 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 44.8% in the first quarter of 2018, compared with 44.2% (excluding the one-time termination fee of
Selling and marketing expenses, excluding share-based compensation expenses of
General and administrative expenses, excluding share-based compensation expenses of
Research and development expenses were
Net interest expenses for the first quarter of 2018 were
Foreign currency exchange loss for the first quarter of 2018 was
Net loss in the first quarter of 2018 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 32.2% in the first quarter of 2018, compared with 26.1% (excluding the one-time termination fee of
Basic and diluted loss per ordinary share in the first quarter of 2018 was
Basic and diluted loss per American Depositary Share (“ADS”) in the first quarter of 2018 was
Sales
Total area committed by customers at the end of the first quarter of 2018 was 122,819 sqm, compared with 68,313 sqm at the end of the first quarter of 2017 and 102,528 sqm at the end of the fourth quarter of 2017, an increase of 79.8% Y-o-Y and 19.8% Q-o-Q. In the first quarter of 2018, net additional area committed was 20,291 sqm, including contributions from significant pre-commitments by one of our largest customers for two new build-to-suit data centers. The sales increase was driven by rapid cloud adoption and data growth in
Data Center Resources
Area in service at the end of the first quarter of 2018 was 103,475 sqm, compared with 61,092 sqm at the end of the first quarter of 2017 and 101,258 sqm at the end of the fourth quarter of 2017, an increase of 69.4% Y-o-Y and 2.2% Q-o-Q. During the first quarter of 2018, the Company completed the construction of the SH5 Phase 1 data center.
Area under construction at the end of the first quarter of 2018 was 40,357 sqm, compared with 35,055 sqm at the end of the first quarter of 2017 and 24,505 sqm at the end of the fourth quarter of 2017. In the first quarter of 2018, as disclosed previously, the Company started construction of the
Commitment rate of area in service was 93.8% at the end of the first quarter of 2018, compared with 90.0% at the end of the first quarter of 2017 and 91.8% at the end of fourth quarter 2017. Pre-commitment rate of area under construction was 63.8% at the end of the first quarter of 2018, compared with 37.9% at the end of the first quarter of 2017 and 39.0% at the end of the fourth quarter of 2017. The significantly higher pre-commitment rate reflected the strong sales momentum and higher visibility of future requirements by the hyper-scale customers.
Area utilized at the end of the first quarter of 2018 was 66,905 sqm, compared with 37,898 sqm at the end of the first quarter of 2017 and 61,713 sqm at the end of the fourth quarter of 2017, an increase of 76.5% Y-o-Y and 8.4% Q-o-Q.
Utilization rate of area in service was 64.7% at the end of the first quarter of 2018, compared with 62.0% at the end of the first quarter of 2017 and 60.9% at the end of the fourth quarter of 2017.
Liquidity
As of
Recent Developments
Data Center Acquisition in
On
The Company recently initiated the construction of two new projects in the
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: | 7399323 |
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: | 7399323 |
A live and archived webcast of the conference call will be available on the Company's investor relation website at 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 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 gross profit, 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, 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 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, 2017 |
As of March 31, 2018 |
||||||
RMB | RMB | US$ | |||||
Assets | |||||||
Current assets | |||||||
Cash | 1,873,446 | 2,978,627 | 474,863 | ||||
Accounts receivable, net of allowance for doubtful accounts | 364,654 | 469,173 | 74,797 | ||||
Value-added-tax (“VAT”) recoverable | 112,067 | 118,106 | 18,829 | ||||
Prepaid expenses and other current assets | 103,861 | 144,357 | 23,014 | ||||
Total current assets | 2,454,028 | 3,710,263 | 591,503 | ||||
Property and equipment, net | 8,165,601 | 8,817,797 | 1,405,764 | ||||
Goodwill and intangible assets, net | 1,919,221 | 1,909,801 | 304,467 | ||||
Other non-current assets | 605,717 | 697,266 | 111,160 | ||||
Total assets | 13,144,567 | 15,135,127 | 2,412,894 | ||||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities | |||||||
Short-term borrowings and current portion of long-term borrowings | 790,484 | 905,495 | 144,357 | ||||
Accounts payable | 1,110,411 | 984,906 | 157,017 | ||||
Accrued expenses and other payables | 424,233 | 434,660 | 69,295 | ||||
Capital lease and other financing obligations, current | 97,943 | 120,718 | 19,245 | ||||
Total current liabilities | 2,423,071 | 2,445,779 | 389,914 | ||||
Long-term borrowings, excluding current portion | 3,459,765 | 4,244,884 | 676,734 | ||||
Capital lease and other financing obligations, non-current | 2,303,044 | 2,335,141 | 372,276 | ||||
Other long-term liabilities | 483,175 | 457,616 | 72,955 | ||||
Total liabilities | 8,669,055 | 9,483,420 | 1,511,879 | ||||
Shareholders' equity | |||||||
Ordinary shares | 320 | 341 | 54 | ||||
Additional paid-in capital | 5,861,445 | 7,163,225 | 1,141,987 | ||||
Accumulated other comprehensive loss | (200,688 | ) | (241,094 | ) | (38,436 | ) | |
Accumulated deficit | (1,185,565 | ) | (1,270,765 | ) | (202,590 | ) | |
Total shareholders’ equity | 4,475,512 | 5,651,707 | 901,015 | ||||
Total liabilities and shareholders' equity | 13,144,567 | 15,135,127 | 2,412,894 |
Note:
- The Company adopted Accounting Standards Codification (“ASC”) 606 Revenue from Contracts with Customers on
January 1, 2018 using the cumulative effect method and made an adjustment to decrease the opening balance of accumulated deficit atJanuary 1, 2018 byRMB0.7 million . Therefore, the comparative information was not adjusted.
GDS HOLDINGS LIMITED | ||||||||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||
(Amount in thousands of Renminbi ("RMB") and US dollars ("US$") | ||||||||||||||||||
except for number of shares and per share data) | ||||||||||||||||||
Three months ended | ||||||||||||||||||
March 31, 2017 |
December 31, 2017 |
March 31, 2018 |
||||||||||||||||
RMB | RMB | RMB | US$ | |||||||||||||||
Net revenue | ||||||||||||||||||
Service revenue | 343,665 | 493,663 | 551,473 | 87,918 | ||||||||||||||
Equipment sales | 6,378 | 11,813 | 10,752 | 1,714 | ||||||||||||||
Total net revenue | 350,043 | 505,476 | 562,225 | 89,632 | ||||||||||||||
Cost of revenue | (243,845 | ) | (387,287 | ) | (439,308 | ) | (70,036 | ) | ||||||||||
Gross profit | 106,198 | 118,189 | 122,917 | 19,596 | ||||||||||||||
Operating expenses | ||||||||||||||||||
Selling and marketing expenses | (21,256 | ) | (22,500 | ) | (26,849 | ) | (4,280 | ) | ||||||||||
General and administrative expenses | (48,768 | ) | (68,391 | ) | (62,936 | ) | (10,033 | ) | ||||||||||
Research and development expenses | (1,458 | ) | (2,541 | ) | (2,672 | ) | (426 | ) | ||||||||||
Income from operations | 34,716 | 24,757 | 30,460 | 4,857 | ||||||||||||||
Other income (expenses): | ||||||||||||||||||
Net interest expenses | (78,608 | ) | (136,307 | ) | (115,054 | ) | (18,342 | ) | ||||||||||
Foreign currency exchange gain (loss), net | (2,606 | ) | (6,826 | ) | (3,219 | ) | (513 | ) | ||||||||||
Others, net | 826 | 795 | 609 | 97 | ||||||||||||||
Loss before income taxes | (45,672 | ) | (117,581 | ) | (87,204 | ) | (13,901 | ) | ||||||||||
Income tax benefits | 1,367 | 1,038 | 1,278 | 204 | ||||||||||||||
Net loss | (44,305 | ) | (116,543 | ) | (85,926 | ) | (13,697 | ) | ||||||||||
Net loss attributable to ordinary shareholders | (44,305 | ) | (116,543 | ) | (85,926 | ) | (13,697 | ) | ||||||||||
Loss per ordinary share | ||||||||||||||||||
Basic and diluted | (0.06 | ) | (0.14 | ) | (0.09 | ) | (0.01 | ) | ||||||||||
Weighted average number of ordinary share outstanding | ||||||||||||||||||
Basic and diluted | 760,009,043 | 855,104,727 | 969,747,050 | 969,747,050 | ||||||||||||||
GDS HOLDINGS LIMITED | ||||||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | ||||||||||||||||
(Amount in thousands of Renminbi ("RMB") and US dollars ("US$")) | ||||||||||||||||
Three months ended |
||||||||||||||||
March 31, 2017 |
December 31, 2017 |
March 31, 2018 |
||||||||||||||
RMB | RMB | RMB | US$ | |||||||||||||
Net loss | (44,305 | ) | (116,543 | ) | (85,926 | ) | (13,697 | ) | ||||||||
Foreign currency translation adjustments, net of nil tax | (6,274 | ) | (10,325 | ) | (40,406 | ) | (6,442 | ) | ||||||||
Comprehensive loss | (50,579 | ) | (126,868 | ) | (126,332 | ) | (20,139 | ) | ||||||||
GDS HOLDINGS LIMITED | ||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Amount in thousands of Renminbi ("RMB") and US dollars ("US$")) | ||||||||
Three months ended | ||||||||
March 31, 2017 | December 31, 2017 |
March 31, 2018 | ||||||
RMB | RMB | RMB | US$ | |||||
Adjusted | Adjusted | |||||||
Net loss | (44,305 | ) | (116,543 | ) | (85,926 | ) | (13,697 | ) |
Depreciation and amortization | 77,324 | 117,392 | 137,488 | 21,919 | ||||
Amortization of debt issuance cost and debt discount | 4,530 | 30,675 | 7,928 | 1,264 | ||||
Share-based compensation expense | 13,506 | 18,449 | 15,633 | 2,492 | ||||
Others | (4,131 | ) | (184 | ) | (2,777 | ) | (443 | ) |
Changes in operating assets and liabilities | (70,615 | ) | (78,412 | ) | (215,775 | ) | (34,399 | ) |
Net cash used in operating activities | (23,691 | ) | (28,623 | ) | (143,429 | ) | (22,864 | ) |
Purchase of property and equipment | (379,970 | ) | (584,694 | ) | (762,972 | ) | (121,636 | ) |
Payments related to acquisitions | - | (194,571 | ) | (43,807 | ) | (6,984 | ) | |
Net cash used in investing activities | (379,970 | ) | (779,265 | ) | (806,779 | ) | (128,620 | ) |
Net proceeds from financing activities | 146,352 | 1,550,620 | 2,113,003 | 336,863 | ||||
Net cash provided by financing activities | 146,352 | 1,550,620 | 2,113,003 | 336,863 | ||||
Effect of exchange rate changes on cash and restricted cash | (11,929 | ) | (22,366 | ) | (57,636 | ) | (9,191 | ) |
Net increase (decrease) of cash and restricted cash | (269,238 | ) | 720,366 | 1,105,159 | 176,188 | |||
Cash and restricted cash at the beginning of period | 1,838,992 | 1,227,234 | 1,947,600 | 310,493 | ||||
Cash and restricted cash at end of period | 1,569,754 | 1,947,600 | 3,052,759 | 486,681 |
Notes:
- The Company adopted Accounting Standards Update (“ASU”) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash on
January 1, 2018 and retrospectively adjusted the unaudited condensed consolidated statements of cash flows for the three months endedMarch 31, 2017 andDecember 31, 2017 by excluding the movement of restricted cash ofRMB14.8 million andRMB21.0 million , respectively.
- The Company adopted ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments on
January 1, 2018 . As a result, the unaudited condensed consolidated statement of cash flows for the three months endedDecember 31, 2017 was retrospectively adjusted by reclassifying the payments of contingent considerations for acquisition of subsidiaries amounted toRMB27.1 million from investing activities to operating activities (RMB3.0 million ) and financing activities (RMB24.1 million ), respectively. The adoption of ASU 2016-15 does not have impact to the unaudited consolidated statement of cash flows for the three months endedMarch 31, 2017 .
GDS HOLDINGS LIMITED | |||||||||||||
UNAUDITED RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS | |||||||||||||
(Amount in thousands of Renminbi ("RMB") and US dollars ("US$") | |||||||||||||
except for percentage data) | |||||||||||||
Three months ended | |||||||||||||
March 31, 2017 |
December 31, 2017 |
March 31, 2018 |
|||||||||||
RMB | RMB | RMB | US$ | ||||||||||
Gross profit | 106,198 | 118,189 | 122,917 | 19,596 | |||||||||
Depreciation and amortization | 71,288 | 106,095 | 125,888 | 20,069 | |||||||||
Accretion expenses for asset retirement costs | 153 | 324 | 309 | 49 | |||||||||
Share-based compensation expenses | 1,730 | 2,576 | 2,893 | 461 | |||||||||
Adjusted NOI | 179,369 | 227,184 | 252,007 | 40,175 | |||||||||
Adjusted NOI margin | 51.2% | 44.9% | 44.8% | 44.8% | |||||||||
Three months ended | |||||||||||||
March 31, 2017 |
December 31, 2017 |
March 31, 2018 |
|||||||||||
RMB | RMB | RMB | US$ | ||||||||||
Net loss | (44,305 | ) | (116,543 | ) | (85,926 | ) | (13,697 | ) | |||||
Net interest expenses | 78,608 | 136,307 | 115,054 | 18,342 | |||||||||
Income tax benefits | (1,367 | ) | (1,038 | ) | (1,278 | ) | (204 | ) | |||||
Depreciation and amortization | 77,324 | 117,392 | 137,488 | 21,919 | |||||||||
Accretion expenses for asset retirement costs | 153 | 324 | 309 | 49 | |||||||||
Share-based compensation expenses | 13,506 | 18,449 | 15,633 | 2,492 | |||||||||
Adjusted EBITDA | 123,919 | 154,891 | 181,280 | 28,901 | |||||||||
Adjusted EBITDA margin | 35.4% | 30.6% | 32.2% | 32.2% |