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

 

March 2019

 

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 x       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 — Press release — GDS Reports Fourth Quarter and Full Year 2018 Results

 

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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: March 13, 2019

By:

/s/ William Wei Huang

 

Name:

William Wei Huang

 

Title:

Chief Executive Officer

 

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Exhibit 99.1

 

 

 

GDS Reports

 

Fourth Quarter and Full Year 2018

Results

 


 

GDS Holdings Limited Reports Fourth Quarter and Full Year 2018 Results

 

Shanghai, China, March 13, 2019 — GDS Holdings Limited (“GDS Holdings”, “GDS” or the “Company”) (NASDAQ: GDS), a leading developer and operator of high-performance data centers in China, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2018.

 

Fourth Quarter 2018 Financial Highlights

 

·                  Net revenue increased by 64.1% year-over-year (“Y-o-Y”) to RMB829.5 million (US$120.6 million) in the fourth quarter of 2018 (4Q2017: RMB505.5 million).

 

·                  Service revenue increased by 67.9% Y-o-Y to RMB829.1 million (US$120.6 million) in the fourth quarter of 2018 (4Q2017: RMB493.7 million).

 

·                  Net loss was RMB122.9 million (US$17.9 million) in the fourth quarter of 2018, compared with a net loss of RMB116.5 million in the fourth quarter of 2017.

 

·                  Adjusted EBITDA (non-GAAP) increased by 114.2% Y-o-Y to RMB331.8 million (US$48.3 million) in the fourth quarter of 2018 (4Q2017: RMB154.9 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 40.0% in the fourth quarter of 2018 (4Q2017: 30.6%).

 

Full Year 2018 Financial Highlights

 

·                  Net revenue increased by 72.8% to RMB2,792.1 million (US$406.1 million) in 2018 (2017: RMB1,616.2 million).

 

·                  Service revenue increased by 73.4% to RMB2,759.5 million (US$401.4 million) in 2018 (2017: RMB1,591.9 million).

 

·                  Net loss was RMB430.3 million (US$62.6 million) in 2018 (2017: RMB326.9 million).

 

·                  Adjusted EBITDA (non-GAAP) increased by 104.3% to RMB1,046.5 million (US$152.2 million) in 2018 (2017: RMB512.3 million).

 

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·                  Adjusted EBITDA margin (non-GAAP) increased to 37.5% in 2018 (2017: 31.7%).

 

Operating Highlights

 

·                      Total area committed increased by 79.2% Y-o-Y to 183,743 square meters (“sqm”) as of December 31, 2018 (December 31, 2017: 102,528 sqm).

 

·                      Area utilized (or revenue generating space) increased by 75.5% Y-o-Y to 108,326 sqm as of December 31, 2018 (December 31, 2017: 61,713 sqm).

 

·                      Area in service increased by 58.4% Y-o-Y to 160,356 sqm as of December 31, 2018 (December 31, 2017: 101,258 sqm).

 

·                      Commitment rate for area in service was 94.9% as of December 31, 2018 (December 31, 2017: 91.8%), and utilization rate was 67.6% as of December 31, 2018 (December 31, 2017: 60.9%).

 

·                      Area under construction was 65,201 sqm as of December 31, 2018 (December 31, 2017: 24,505 sqm).

 

·                      Pre-commitment rate for area under construction was 48.4% as of December 31, 2018 (December 31, 2017: 39.0%).

 

“2018 was an outstanding year for GDS marked by accelerated growth and robust results across our organization,” said Mr. William Huang, Chairman and Chief Executive Officer. “Notably, we added over 80,000 sqm of net additional area committed, or over 180 MW of IT power capacity, for the year of 2018, double last year’s achievements. We have further diversified our customer base, with new strategic names contributing over 30% to our new bookings in 2018. A key to our success in 2018 was our proven ability to expand capacity in key markets. We added 15 new data centers with a total capacity of around 100,000 sqm and ended the year with 35 data centers in our portfolio. With multi-year growth from cloud and other technologies fueling demand, we see a compelling opportunity before us. Looking forward, we are well-positioned and confident in our ability to continue to deliver strong results and shareholder value.”

 

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“We are pleased to report over 70% revenue and over 100% adjusted EBITDA growth for 2018, beating our revised guidance.” commented Mr. Dan Newman, Chief Financial Officer. “Our adjusted EBITDA margin hit a milestone of 40% in 4Q18. Our FY18 adjusted EBITDA margin reached 37.5%, around 6 percentage points increase from FY17, as a result of our operating leverage. During 2018, we successfully raised US$500 million through a follow-on offering and a convertible bond offering, and obtained debt financing and refinancing facilities of around RMB3.8 billion, evidencing our strong ability to secure the financial resources required to grow our business.”

 

Fourth Quarter 2018 Financial Results

 

Net revenue in the fourth quarter of 2018 was RMB829.5 million (US$120.6 million), a 64.1% increase over the fourth quarter of 2017 of RMB505.5 million and an 8.7% increase over the third quarter of 2018 of RMB762.8 million. Service revenue in the fourth quarter of 2018 was RMB829.1 million (US$120.6 million), a 67.9% increase over the fourth quarter of 2017 of RMB493.7 million and a 10.2% increase over the third quarter of 2018 of RMB752.6 million. The increase was mainly due to full quarter revenue contribution from additional area utilized in the previous quarter and the contribution from 7,647 sqm of net additional area utilized in the fourth quarter of 2018 which mainly related to the Shanghai 8 (“SH8”) and Shenzhen 5 (“SZ5”) Phase 2 data centers. Revenue from IT equipment sales was RMB0.5 million (US$69 thousand), compared with RMB11.8 million in the fourth quarter of 2017 and RMB10.2 million in the third quarter of 2018.

 

Cost of revenue in the fourth quarter of 2018 was RMB639.4 million (US$93.0 million), a 65.1% increase over the fourth quarter of 2017 of RMB387.3 million and an 8.2% increase over the third quarter of 2018 of RMB591.0 million. The increase over the previous quarter was mainly due to an increase in utility cost as a result of higher area utilized, as well as an increase in depreciation and amortization costs as a result of the completion of the SH8 and Chengdu 2 (“CD2”) Phase 1 data centers which came into service in the previous quarter, and the completion of the Shanghai 6 (“SH6”) and Beijing 5 (“BJ5”) Phase 1 data centers which came into service during the fourth quarter.

 

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Gross profit was RMB190.1 million (US$27.7 million) in the fourth quarter of 2018, a 60.9% increase over the fourth quarter of 2017 of RMB118.2 million, and a 10.6% increase over the third quarter of 2018 of RMB171.9 million. Gross profit margin was 22.9% in the fourth quarter of 2018, compared with 23.4% in the fourth quarter of 2017, and 22.5% in the third quarter of 2018. The increase in gross profit margin over the previous quarter was primarily due to improved power efficiency achieved in the winter and less business coming from IT equipment sales with lower profit margin, partially offset by higher depreciation and amortization related to new projects coming into service.

 

Adjusted Net Operating Income (“Adjusted NOI”) (non-GAAP) is defined as net loss (computed in accordance with GAAP), excluding net interest expenses, income tax expenses (benefits), depreciation and amortization, accretion expenses for asset retirement costs, share-based compensation expenses, selling and marketing expenses, general and administrative expenses, research and development expenses, foreign currency exchange loss (gain) and others. Adjusted NOI was RMB412.9 million (US$60.0 million) in the fourth quarter of 2018, an 81.7% increase over the fourth quarter of 2017 of RMB227.2 million and a 12.5% increase over the third quarter of 2018 of RMB366.9 million.

 

Adjusted NOI margin (non-GAAP) was 49.8% in the fourth quarter of 2018, compared with 44.9% in the fourth quarter of 2017, and 48.1% in the third quarter of 2018. The increase over the previous quarter was mainly due to improved power efficiency achieved in the winter and less business coming from lower-margin IT equipment sales.

 

Selling and marketing expenses, excluding share-based compensation expenses of RMB8.8 million (US$1.3 million), were RMB23.5 million (US$3.4 million) in the fourth quarter of 2018, a 39.1% increase from the fourth quarter of 2017 of RMB16.9 million (excluding share-based compensation of RMB5.6 million) and a 5.8% increase from the third quarter of 2018 of RMB22.2 million (excluding share-based compensation of RMB7.1 million). The increase over the previous quarter was primarily due to an increase in personnel costs as a result of business expansion and adjustments for year-end performance bonus.

 

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General and administrative expenses, excluding share-based compensation expenses of RMB18.2 million (US$2.6 million) and depreciation and amortization expenses of RMB15.8 million (US$2.3 million), were RMB56.7 million (US$8.2 million) in the fourth quarter of 2018, a 20.0% increase over the fourth quarter of 2017 of RMB47.2 million (excluding share-based compensation expenses of RMB10.0 million and depreciation and amortization expenses of RMB11.2 million) and a 1.1% decrease from the third quarter of 2018 of RMB57.3 million (excluding share-based compensation of RMB14.1 million and depreciation and amortization expenses of RMB17.8 million). The decrease over the previous quarter was primarily due to a decrease in professional fees and other office expenses.

 

Research and development costs were RMB4.7 million (US$0.7 million) in the fourth quarter of 2018, compared with RMB2.5 million in the fourth quarter 2017 and RMB3.3 million in the third quarter of 2018.

 

Net interest expenses for the fourth quarter of 2018 were RMB202.5 million (US$29.5 million), a 48.6% increase over the fourth quarter of 2017 of RMB136.3 million and a 11.2% increase over the third quarter of 2018 of RMB182.2 million. The increase over the previous quarter was mainly due to an increase of total debt to finance data center capacity expansion.

 

Foreign currency exchange gain for the fourth quarter of 2018 was RMB0.3 million (US$48 thousand), compared with a loss of RMB6.8 million in the fourth quarter of 2017 and a gain of RMB13.4 million in the third quarter of 2018.

 

Net loss in the fourth quarter of 2018 was RMB122.9 million (US$17.9 million), compared with a net loss of RMB116.5 million in the fourth quarter of 2017 and a net loss of RMB119.4 million in the third quarter of 2018.

 

Adjusted EBITDA (non-GAAP) is defined as net loss excluding net interest expenses, income tax expenses (benefits), depreciation and amortization, accretion expenses for asset retirement costs and share-based compensation expenses. Adjusted EBITDA was RMB331.8 million (US$48.3 million) in the fourth quarter of 2018, a 114.2% increase over the fourth quarter of 2017 of RMB154.9 million and a 10.2% increase over the third quarter of 2018 of RMB301.2 million.

 

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Adjusted EBITDA margin (non-GAAP) was 40.0% in the fourth quarter of 2018, compared with 30.6% in the fourth quarter of 2017, and 39.5% in the third quarter of 2018. The increase over the previous quarter was mainly due to improved power efficiency achieved in the winter and less business coming from lower-margin IT equipment sales, as well as leverage effect realized on general and administrative expenses, partially offset by less positive impact from foreign currency exchange gain.

 

Basic and diluted loss per ordinary share in the fourth quarter of 2018 was RMB0.12 (US$0.02), compared with RMB0.14 in the fourth quarter of 2017, and RMB0.12 in the third quarter of 2018.

 

Basic and diluted loss per American Depositary Share (“ADS”) in the fourth quarter of 2018 was RMB0.98 (US$0.14), compared with RMB1.09 in the fourth quarter of 2017, and RMB0.96 in the third quarter of 2018. Each ADS represents eight Class A ordinary shares.

 

Full Year 2018 Financial Results

 

Net revenue in 2018 was RMB2,792.1 million (US$406.1 million), a 72.8% increase from 2017. Service revenue in 2018 was RMB2,759.5 million (US$401.4 million), a 73.4% increase from 2017. Revenue from IT equipment sales was RMB32.6 million (US$4.7 million), compared with RMB24.3 million in 2017.

 

Cost of revenue in 2018 was RMB2,169.6 million (US$315.6 million), a 79.7% increase from 2017.

 

Gross profit was RMB622.4 million (US$90.5 million) in 2018, a 52.4% increase from 2017. Gross profit margin was 22.3% in 2018, compared with 25.3% in 2017.

 

Sales and marketing expenses, excluding share-based compensation expenses of RMB25.2 million (US$3.7 million), were RMB85.4 million (US$12.4 million) in 2018, a 19.0% increase from RMB71.7  million (excluding share-based compensation of RMB18.4 million) in 2017. General and administrative expenses, excluding share-based compensation expenses of RMB61.7 million (US$9.0 million) and depreciation and amortization expenses of RMB60.6 million (US$8.8 million), were RMB207.3 million (US$30.1 million) in 2018, a 25.0% increase from RMB165.8 million (excluding share-based compensation of RMB30.9 million and depreciation and amortization expenses of RMB32.2 million) in 2017.

 

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Research and development costs were RMB13.9 million (US$2.0 million) in 2018, compared with RMB7.3 million in 2017.

 

Net interest expenses in 2018 were RMB637.0 million (US$92.6 million), a 56.7% increase from 2017.

 

Adjusted EBITDA was RMB1,046.5 million (US$152.2 million) in 2018, an 104.3% increase from 2017. Adjusted EBITDA margin (non-GAAP) was 37.5% in 2018, compared with 31.7% in 2017.

 

Net loss in 2018 was RMB430.3 million (US$62.6 million), compared with a net loss of RMB326.9 million in 2017.

 

Basic and diluted loss per ordinary share in 2018 was RMB0.43 (US$0.06), compared with RMB0.42 in 2017. Basic and diluted loss per ADS in 2018 was RMB3.48 (US$0.51), compared with RMB3.33 in 2017. Each ADS represents eight Class A ordinary shares.

 

Sales

 

Total area committed at the end of the fourth quarter of 2018 was 183,743 sqm, compared with 102,528 sqm at the end of the fourth quarter of 2017 and 161,799 sqm at the end of the third quarter of 2018, an increase of 79.2% Y-o-Y and 13.6% quarter-over-quarter (“Q-o-Q”). In the fourth quarter of 2018, net additional total area committed was 21,944 sqm, including significant contributions from the SH8, Shanghai 12 (“SH12”), Beijing 7 (“BJ7”) and Kunshan 2 (“KS2”) & Kunshan 3 (“KS3”) data centers. The sales increase was driven primarily by booming Cloud adoption in China leading to higher  demand from Cloud service providers, as well as significant new commitments from large Internet and financial service institution customers.

 

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Data Center Resources

 

Area in service at the end of the fourth quarter of 2018 was 160,356 sqm, compared with 101,258 sqm at the end of the fourth quarter of 2017 and 147,342 sqm at the end of the third quarter of 2018, an increase of 58.4% Y-o-Y and 8.8% Q-o-Q. In the fourth quarter of 2018, SH6 and BJ5 Phase 1 centers came into service.

 

Area under construction at the end of the fourth quarter of 2018 was 65,201 sqm, compared with 24,505 sqm at the end of the fourth quarter of 2017 and 43,718 sqm at the end of the third quarter of 2018, an increase of 166.1% Y-o-Y and 49.1% Q-o-Q. In the fourth quarter of 2018, as previously disclosed, construction has commenced on KS2 & KS3 data centers. In addition, the Company has initiated construction on Shanghai 7 (“SH7”), the second building on the same campus as SH6, as well as SH12 and BJ7 data centers.

 

Commitment rate of area in service was 94.9% at the end of the fourth quarter of 2018, compared with 91.8% at the end of the fourth quarter of 2017 and 96.3% at the end of third quarter 2018. Pre-commitment rate of area under construction was 48.4% at the end of the fourth quarter of 2018, compared with 39.0% at the end of the fourth quarter of 2017 and 45.4% at the end of the third quarter of 2018.

 

Area utilized at the end of the fourth quarter of 2018 was 108,326 sqm, compared with 61,713 sqm at the end of the fourth quarter of 2017 and 100,679 sqm at the end of the third quarter of 2018, an increase of 75.5% Y-o-Y and 7.6% Q-o-Q. Net additional area utilized was 7,647 sqm in the fourth quarter, which mainly came from the additional area utilized in the SH8 and SZ5 Phase 2 data centers.

 

Utilization rate of area in service was 67.6% at the end of the fourth quarter of 2018, compared with 60.9% at the end of the fourth quarter of 2017 and 68.3% at the end of the third quarter of 2018.

 

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Liquidity

 

As of December 31, 2018, cash was RMB2,161.6 million (US$314.4 million). Total short-term debt was RMB1,450.2 million (US$210.9 million), comprised of short-term borrowings and the current portion of long-term borrowings of RMB1,283.3 million (US$186.7 million) and the current portion of capital lease and other financing obligations of RMB166.9 million (US$24.3 million). Total long-term debt was RMB11,342.7 million (US$1,649.7 million), comprised of long-term borrowings (excluding current portion) of RMB5,203.7 million (US$756.8 million), convertible bonds of RMB2,004.7 million (US$291.6 million) and the non-current portion of capital lease and other financing obligations of RMB4,134.3 million (US$601.3 million). During the fourth quarter of 2018, the Company obtained new debt financing and re-financing facilities of RMB1,111.8 million (US$161.7 million). For the full year of 2018, the Company obtained new debt financing and re-financing facilities of RMB3,803.5 million (US$553.2) million).

 

Recent Development

 

Land Acquisition

 

In January 2019, the Company acquired the land use right for a parcel of land in Guangzhou for the development of three data centers with additional data center net floor area of approximately 34,200 sqm.

 

Business Outlook

 

For the full year of 2019, the Company expects its total revenues to be between RMB3,900 million and RMB4,100 million, implying a year-on-year increase of between approximately 39.7% to 46.8%; and adjusted EBITDA to be between RMB1,640 million to RMB1,700 million, implying a year-on-year increase of between approximately 56.7% to 62.4%. In addition, the Company expects capex to be between RMB4,500 million and RMB5,000 million for the full year of 2019.

 

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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 6:00 p.m. Eastern Time on March 13, 2019 (6:00 a.m. Beijing Time on March 14, 2019) to discuss financial results and answer questions from investors and analysts. Listeners may access the call by dialing:

 

United States:

 

1-845-675-0437

International:

 

+65-6713-5090

Hong Kong:

 

+852-3018-6771

China:

 

400-620-8038

Conference ID:

 

7727028

 

A telephone replay will be available approximately two hours after the call until March 21, 2019 08:59 AM U.S. ET by dialing:

 

United States:

 

1-646-254-3697

International:

 

+61-2-8199-0299

Hong Kong:

 

+852-3051-2780

China:

 

400-632-2162

Replay Access Code:

 

7727028

 

A live and archived webcast of the conference call will be available on the Company’s investor relations website at investors.gds-services.com.

 

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Non-GAAP Disclosure

 

Our management and board of directors use adjusted NOI, adjusted NOI margin, adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures, to evaluate our operating performance, establish budgets and develop operational goals for managing our business. In particular, we believe that the exclusion of the expenses eliminated in calculating adjusted NOI and adjusted EBITDA can provide a useful measure of our core operating performance.

 

We also present these non-GAAP measures because we believe these non-GAAP measures are frequently used by securities analysts, investors and other interested parties as measures of the financial performance of companies in our industry.

 

These non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. These non-GAAP financial measures have limitations as analytical tools, and when assessing our operating performance, cash flows or our liquidity, investors should not consider them in isolation, or as a substitute for net income (loss), cash flows used in operating activities or other consolidated statements of operations and cash flow data prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of these non-GAAP financial measures instead of their nearest GAAP equivalent. First, adjusted EBITDA, adjusted EBITDA margin, adjusted NOI, and adjusted NOI margin are not substitutes for net income (loss), cash flows used in operating activities or other consolidated statements of operation and cash flow data prepared in accordance with U.S. GAAP. Second, other companies may calculate these non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of these non-GAAP financial measures as tools for comparison. Finally, these non-GAAP financial measures do not reflect the impact of net interest expenses, incomes tax benefits (expenses), depreciation and amortization, accretion expenses for asset retirement costs, and share-based compensation expenses, each of which have been and may continue to be incurred in our business.

 

We mitigate these limitations by reconciling the non-GAAP financial measure to the most comparable U.S. GAAP performance measure, all of which should be considered when evaluating our performance.

 

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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 RMB6.8755 to US$1.00, the noon buying rate in effect on December 31, 2018 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or USD amounts referred could be converted into USD or RMB, as the case may be, at any particular rate or at all.

 

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 GDS Holdings Limited

 

GDS Holdings Limited (Nasdaq: GDS) is a leading developer and operator of high-performance data centers in China. The Company’s facilities are strategically located in China’s primary economic hubs where demand for high-performance data center services is concentrated. The Company’s data centers have large net floor area, high power capacity, density and efficiency, and multiple redundancy across all critical systems. GDS is carrier and cloud neutral, which enables customers to connect directly to all major PRC telecommunications carriers and to the largest PRC and global cloud service providers hosted by GDS in many of its facilities. The Company has an 18-year track record of service delivery, successfully fulfilling the requirements of some of the largest and most demanding customers for outsourced data center services in China. The Company’s base of customers consists predominantly of hyper-scale cloud service providers, large internet companies, financial institutions, telecommunications and IT service providers, and large domestic private sector and multinational corporations.

 

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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. GDS Holdings may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”) on Forms 20-F and 6-K, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause GDS Holdings’ actual results or financial performance to differ materially from those contained in any forward-looking statement, including but not limited to the following: GDS Holdings’ goals and strategies; GDS Holdings’ future business development, financial condition and results of operations; the expected growth of the market for high-performance data centers, data center solutions and related services in China; GDS Holdings’ expectations regarding demand for and market acceptance of its high-performance data centers, data center solutions and related services; GDS Holdings’ expectations regarding building, strengthening and maintaining its relationships with new and existing customers; the continued adoption of cloud computing and cloud service providers in China; risks and uncertainties associated with increased investments in GDS Holdings’ business and new data center initiatives; risks and uncertainties associated with strategic acquisitions and investments; GDS Holdings’ ability to maintain or grow its revenue or business; fluctuations in GDS Holdings’ operating results; changes in laws, regulations and regulatory environment that affect GDS Holdings’ business operations; competition in GDS Holdings’ industry in China; security breaches; power outages; and fluctuations in general economic and business conditions in China and globally and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks, uncertainties or factors is included in the GDS Holdings’ filings with the SEC, including its registration statement on Form F-1, as amended. All information provided in this press release is as of the date of this press release and are based on assumptions that GDS Holdings believes to be reasonable as of such date, and GDS Holdings does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

 

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For investor and media inquiries, please contact:

 

GDS Holdings Limited

Laura Chen

Phone: +86 (21) 2033-0295

Email: ir@gds-services.com

 

The Piacente Group, Inc.

Ross Warner

Phone: +86 (10) 5730-6200

Email: GDS@tpg-ir.com

 

Brandi Piacente

Phone: +1 (212) 481-2050

Email: GDS@tpg-ir.com

 

15


 

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
December 31, 2018

 

 

 

RMB

 

RMB

 

US$

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash

 

1,873,446

 

2,161,622

 

314,395

 

Accounts receivable, net of allowance for doubtful accounts

 

364,654

 

536,842

 

78,080

 

Value-added-tax (“VAT”) recoverable

 

112,067

 

163,476

 

23,777

 

Prepaid expenses and other current assets

 

103,861

 

175,456

 

25,519

 

Total current assets

 

2,454,028

 

3,037,396

 

441,771

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

8,165,601

 

13,994,945

 

2,035,480

 

Goodwill and intangible assets, net

 

1,919,221

 

2,234,462

 

324,989

 

Other non-current assets

 

605,717

 

1,618,440

 

235,392

 

Total assets

 

13,144,567

 

20,885,243

 

3,037,632

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Short-term borrowings and current portion of long-term borrowings

 

790,484

 

1,283,320

 

186,651

 

Accounts payable

 

1,110,411

 

1,508,020

 

219,332

 

Accrued expenses and other payables

 

424,233

 

549,641

 

79,942

 

Capital lease and other financing obligations, current

 

97,943

 

166,898

 

24,274

 

Total current liabilities

 

2,423,071

 

3,507,879

 

510,199

 

 

 

 

 

 

 

 

 

Long-term borrowings, excluding current portion

 

3,459,765

 

5,203,708

 

756,848

 

Convertible bonds payable

 

0

 

2,004,714

 

291,574

 

Capital lease and other financing obligations, non-current

 

2,303,044

 

4,134,327

 

601,313

 

Other long-term liabilities

 

483,175

 

512,690

 

74,568

 

Total liabilities

 

8,669,055

 

15,363,318

 

2,234,502

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

Ordinary shares

 

320

 

341

 

50

 

Additional paid-in capital

 

5,861,445

 

7,275,945

 

1,058,242

 

Accumulated other comprehensive loss

 

(200,688

)

(139,254

)

(20,254

)

Accumulated deficit

 

(1,185,565

)

(1,615,107

)

(234,908

)

Total shareholders’ equity

 

4,475,512

 

5,521,925

 

803,130

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

13,144,567

 

20,885,243

 

3,037,632

 

 


Note:

(1)                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 the opening balance of accumulated deficit at January 1, 2018 of RMB0.7 million. Therefore, the comparative information was not adjusted.

 

16


 

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

 

Year ended

 

 

 

December 31,
2017

 

September 30,
2018

 

December 31, 2018

 

December 31, 2017

 

December 31, 2018

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenue

 

493,663

 

752,620

 

829,050

 

120,580

 

1,591,860

 

2,759,490

 

401,351

 

Equipment sales

 

11,813

 

10,201

 

471

 

69

 

24,306

 

32,587

 

4,740

 

Total net revenue

 

505,476

 

762,821

 

829,521

 

120,649

 

1,616,166

 

2,792,077

 

406,091

 

Cost of revenue

 

(387,287

)

(590,956

)

(639,383

)

(92,994

)

(1,207,694

)

(2,169,636

)

(315,560

)

Gross profit

 

118,189

 

171,865

 

190,138

 

27,655

 

408,472

 

622,441

 

90,531

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing expenses

 

(22,500

)

(29,320

)

(32,269

)

(4,693

)

(90,118

)

(110,570

)

(16,082

)

General and administrative expenses

 

(68,391

)

(89,267

)

(90,661

)

(13,186

)

(228,864

)

(329,601

)

(47,938

)

Research and development expenses

 

(2,541

)

(3,318

)

(4,724

)

(687

)

(7,261

)

(13,915

)

(2,024

)

Income from operations

 

24,757

 

49,960

 

62,484

 

9,089

 

82,229

 

168,355

 

24,487

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest expenses

 

(136,307

)

(182,152

)

(202,493

)

(29,451

)

(406,403

)

(636,973

)

(92,644

)

Foreign currency exchange (loss) gain, net

 

(6,826

)

13,420

 

327

 

48

 

(12,299

)

20,306

 

2,953

 

Others, net

 

795

 

3,197

 

2,944

 

428

 

3,497

 

8,653

 

1,259

 

Loss before income taxes

 

(117,581

)

(115,575

)

(136,738

)

(19,886

)

(332,976

)

(439,659

)

(63,945

)

Income tax benefits (expenses)

 

1,038

 

(3,779

)

13,827

 

2,011

 

6,076

 

9,391

 

1,366

 

Net loss

 

(116,543

)

(119,354

)

(122,911

)

(17,875

)

(326,900

)

(430,268

)

(62,579

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to ordinary shareholders

 

(116,543

)

(119,354

)

(122,911

)

(17,875

)

(326,900

)

(430,268

)

(62,579

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per ordinary share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

(0.14

)

(0.12

)

(0.12

)

(0.02

)

(0.42

)

(0.43

)

(0.06

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of ordinary share outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

855,104,727

 

997,967,316

 

1,000,435,164

 

1,000,435,164

 

784,566,371

 

990,255,959

 

990,255,959

 

 

17


 

GDS HOLDINGS LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”)

except for number of shares and per share data)

 

 

 

Three months ended

 

Year ended

 

 

 

December 31,
2017

 

September 30,
2018

 

December 31, 2018

 

December 31, 2017

 

December 31, 2018

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

(116,543

)

(119,354

)

(122,911

)

(17,875

)

(326,900

)

(430,268

)

(62,579

)

Foreign currency translation adjustments, net of nil tax

 

(10,325

)

26,602

 

3,331

 

484

 

(8,608

)

61,434

 

8,935

 

Comprehensive loss

 

(126,868

)

(92,752

)

(119,580

)

(17,391

)

(335,508

)

(368,834

)

(53,644

)

 

18


 

GDS HOLDINGS LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))

 

 

 

Three months ended

 

Year ended

 

 

 

December 31,
2017

 

September
30, 2018

 

December 31, 2018

 

December 31,
2017

 

December 31, 2018

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

Adjusted

 

 

 

 

 

 

 

Adjusted

 

 

 

 

 

Net loss

 

(116,543

)

(119,354

)

(122,911

)

(17,875

)

(326,900

)

(430,268

)

(62,579

)

Depreciation and amortization

 

117,392

 

206,661

 

230,599

 

33,539

 

378,130

 

741,507

 

107,848

 

Amortization of debt issuance cost and debt discount

 

30,675

 

15,956

 

28,150

 

4,094

 

48,100

 

61,373

 

8,926

 

Share-based compensation expense

 

18,449

 

27,358

 

34,932

 

5,081

 

59,843

 

105,877

 

15,400

 

Others

 

(184

)

(2,411

)

(30,274

)

(4,403

)

(11,622

)

(34,144

)

(4,966

)

Changes in operating assets and liabilities

 

(78,412

)

(90,750

)

(29,129

)

(4,238

)

(315,367

)

(457,255

)

(66,506

)

Net cash (used in) provided by operating activities

 

(28,623

)

37,460

 

111,367

 

16,198

 

(167,816

)

(12,910

)

(1,877

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

(584,694

)

(965,555

)

(1,661,485

)

(241,653

)

(1,760,165

)

(4,257,977

)

(619,297

)

Payments related to acquisitions

 

(194,571

)

(110,556

)

(31,223

)

(4,541

)

(244,889

)

(475,073

)

(69,096

)

Net cash used in investing activities

 

(779,265

)

(1,076,111

)

(1,692,708

)

(246,194

)

(2,005,054

)

(4,733,050

)

(688,393

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net proceeds from financing activities

 

1,550,620

 

1,066

 

263,600

 

38,339

 

2,355,728

 

4,876,806

 

709,301

 

Net cash provided by financing activities

 

1,550,620

 

1,066

 

263,600

 

38,339

 

2,355,728

 

4,876,806

 

709,301

 

Effect of exchange rate changes on cash and restricted cash

 

(22,366

)

115,650

 

(4,879

)

(710

)

(74,250

)

206,302

 

30,005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) of cash and restricted cash

 

720,366

 

(921,935

)

(1,322,620

)

(192,367

)

108,608

 

337,148

 

49,036

 

Cash and restricted cash at the beginning of period

 

1,227,234

 

4,529,303

 

3,607,368

 

524,670

 

1,838,992

 

1,947,600

 

283,267

 

Cash and restricted cash at end of period

 

1,947,600

 

3,607,368

 

2,284,748

 

332,303

 

1,947,600

 

2,284,748

 

332,303

 

 


Notes:

 

(1)                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 month and full year ended December 31, 2017 by excluding the movement of restricted cash of RMB21.0 million and RMB46.5 million, respectively.

 

(2)                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 and the year ended December 31, 2017 was retrospectively adjusted by reclassifying the payments of contingent considerations for acquisition of subsidiaries amounted to RMB27.1 million from investing activities to operating activities (RMB3.0 million) and financing activities (RMB24.1 million), respectively.

 

19


 

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

 

Year ended

 

 

 

December 31, 2017

 

September 30, 2018

 

December 31, 2018

 

December 31, 2017

 

December 31, 2018

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

(116,543

)

(119,354

)

(122,911

)

(17,875

)

(326,900

)

(430,268

)

(62,579

)

Net interest expenses

 

136,307

 

182,152

 

202,493

 

29,451

 

406,403

 

636,973

 

92,644

 

Income tax (benefits) expenses

 

(1,038

)

3,779

 

(13,827

)

(2,011

)

(6,076

)

(9,391

)

(1,366

)

Depreciation and amortization

 

117,392

 

206,661

 

230,599

 

33,539

 

378,130

 

741,507

 

107,848

 

Accretion expenses for asset retirement costs

 

324

 

569

 

555

 

81

 

949

 

1,840

 

268

 

Share-based compensation expenses

 

18,449

 

27,358

 

34,932

 

5,081

 

59,843

 

105,877

 

15,400

 

Selling and marketing expenses (1)

 

16,889

 

22,206

 

23,497

 

3,417

 

71,728

 

85,357

 

12,415

 

General and administrative expenses (1)

 

47,201

 

57,319

 

56,660

 

8,241

 

165,785

 

207,255

 

30,142

 

Research and development expenses (1)

 

2,172

 

2,829

 

4,132

 

601

 

6,062

 

12,394

 

1,803

 

Foreign currency exchange loss (gain), net

 

6,826

 

(13,420

)

(327

)

(48

)

12,299

 

(20,306

)

(2,953

)

Others, net

 

(795

)

(3,197

)

(2,944

)

(428

)

(3,497

)

(8,653

)

(1,259

)

Adjusted NOI

 

227,184

 

366,902

 

412,859

 

60,049

 

764,726

 

1,322,585

 

192,363

 

Adjusted NOI margin

 

44.9

%

48.1

%

49.8

%

49.8

%

47.3

%

47.4

%

47.4

%

 

Note 1:
Selling and marketing expenses, general and administrative expenses and research and development expenses exclude depreciation, amortization and share-based compensation expenses.

 

20


 

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

 

Year ended

 

 

 

December 31, 2017

 

September 30,
2018

 

December 31, 2018

 

December 31, 2017

 

December 31, 2018

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

(116,543

)

(119,354

)

(122,911

)

(17,875

)

(326,900

)

(430,268

)

(62,579

)

Net interest expenses

 

136,307

 

182,152

 

202,493

 

29,451

 

406,403

 

636,973

 

92,644

 

Income tax (benefits) expenses

 

(1,038

)

3,779

 

(13,827

)

(2,011

)

(6,076

)

(9,391

)

(1,366

)

Depreciation and amortization

 

117,392

 

206,661

 

230,599

 

33,539

 

378,130

 

741,507

 

107,848

 

Accretion expenses for asset retirement costs

 

324

 

569

 

555

 

81

 

949

 

1,840

 

268

 

Share-based compensation expenses

 

18,449

 

27,358

 

34,932

 

5,081

 

59,843

 

105,877

 

15,400

 

Adjusted EBITDA

 

154,891

 

301,165

 

331,841

 

48,266

 

512,349

 

1,046,538

 

152,215

 

Adjusted EBITDA margin

 

30.6

%

39.5

%

40.0

%

40.0

%

31.7

%

37.5

%

37.5

%

 

21