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

 

August 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 Second Quarter 2019 Results

 


 

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: August 13, 2019

By:

/s/ William Wei Huang

 

Name:

William Wei Huang

 

Title:

Chief Executive Officer

 


Exhibit 99.1

 

 

GDS Reports

 

Second Quarter 2019 Results

 

1


 

GDS Reports Second Quarter 2019 Results

 

Shanghai, China, August 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 second quarter ended June 30, 2019.

 

Second Quarter 2019 Financial Highlights

 

·                  Net revenue increased by 54.5% year-over-year (“Y-o-Y”) to RMB985.2 million (US$143.5 million) in the second quarter of 2019 (2Q2018: RMB637.5 million).

 

·                  Service revenue increased by 57.3% Y-o-Y to RMB985.1 million (US$143.5 million) in the second quarter of 2019 (2Q2018: RMB626.3 million).

 

·                  Net loss was RMB93.2 million (US$13.6 million) in the second quarter of 2019, compared with a net loss of RMB102.1 million in the second quarter of 2018.

 

·                  Adjusted EBITDA (non-GAAP) increased by 84.5% Y-o-Y to RMB428.4 million (US$62.4 million) in the second quarter of 2019 (2Q2018: RMB232.3 million). See “Non-GAAP Disclosure” and “Reconciliations of GAAP and non-GAAP results” elsewhere in this earnings release.

 

·                  Adjusted EBITDA margin (non-GAAP) increased to 43.5% in the second quarter of 2019 (2Q2018: 36.4%).

 

Operating Highlights

 

·                      Total area committed increased by 54.3% Y-o-Y to 220,818 square meters (“sqm”) as of June 30, 2019 (June 30, 2018: 143,065 sqm).

 

·                      Area utilized (or revenue generating space) increased by 46.7% Y-o-Y to 127,107 sqm as of June 30, 2019 (June 30, 2018: 86,665 sqm).

 

·                      Area in service increased by 41.0% Y-o-Y to 180,441 sqm as of June 30, 2019 (June 30, 2018: 127,984 sqm).

 

·                      Commitment rate for area in service was 93.7% as of June 30, 2019 (June 30, 2018: 95.6%), and utilization rate was 70.4% as of June 30, 2019 (June 30, 2018: 67.7%).

 

·                      Area under construction was 78,373 sqm as of June 30, 2019 (June 30, 2018: 41,023 sqm).

 

·                      Pre-commitment rate for area under construction was 66.1% as of June 30, 2019 (June 30, 2018: 50.6%).

 

2


 

“We had another solid second quarter fueled by broad-based gains,” said Mr. William Huang, Chairman and Chief Executive Officer. “We added approximately 21,000 sqm or 52 MW of new business during the quarter and are on track for our sales target for the full year. We continue to make progress in adding highly marketable data center capacity in Tier 1 markets, organically and inorganically, which sets us up to maintain our resource advantage. In particular, we are excited about a new strategic partnership with GIC, Singapore’s sovereign wealth fund, which will focus on developing and operating build-to-suit data centers outside of Tier 1 markets to fulfil the broader requirements of our strategic customer. This partnership will enable to us do more for our customers, add a unique capability to our platform, and create more long-term value for our shareholders.”

 

“We are pleased to report 54.5% year-over-year revenue growth for the second quarter,” said Mr. Dan Newman, Chief Financial Officer. “Our adjusted EBITDA grew by 84.5% year-over-year and adjusted EBITDA margin hit 43.5%, representing a 7.1 percentage point improvement from the same period a year ago, which has put us well ahead of the guidance track. As a result, we are revising up our EBITDA guidance by 6.6% at the mid-point to reflect such strong performance. On the funding side, the new partnership with GIC marks another milestone of our evolving financing approach. It brings equity capital from a world class investor directly in to the project level, which opens up new possibilities for us as we continuously seek optimal funding solutions for our rapidly expanding business.”

 

Second quarter 2019 Financial Results

 

Net revenue in the second quarter of 2019 was RMB985.2 million (US$143.5 million), a 54.5% increase over the second quarter of 2018 of RMB637.5 million and a 10.5% increase over the first quarter of 2019 of RMB891.8 million. Service revenue in the second quarter of 2019 was RMB985.1 million (US$143.5 million), a 57.3% increase over the second quarter of 2018 of RMB626.3 million and a 10.6% increase over the first quarter of 2019 of RMB890.9 million. The increase was mainly due to full quarter revenue contribution from additional area utilized in the previous quarter and the contribution from 9,057 sqm of net additional area utilized in the second quarter of 2019 which mainly related to Shanghai 4 (“SH4”), Shanghai 6 (“SH6”), Shanghai 9 (“SH9”) and Shenzhen 4 (“SZ4”) Phase 1 data centers. Revenue from IT equipment sales was RMB0.1 million (US$14.0 thousand), compared with RMB11.2 million in the second quarter of 2018.

 

3


 

Cost of revenue in the second quarter of 2019 was RMB723.4 million (US$105.4 million), a 44.7% increase over the second quarter of 2018 of RMB500.0 million and a 6.4% increase over the first quarter of 2019 of RMB679.8 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 Shanghai 9 (“SH9”) and BJ5 Phase 2 data centers which came into service late in the first quarter of 2019, and the completion of the Shanghai 10 (“SH10”) and Beijing 4 (“BJ4”) data centers which came into service during the second quarter of 2019.

 

Gross profit was RMB261.8 million (US$38.1 million) in the second quarter of 2019, a 90.3% increase over the second quarter of 2018 of RMB137.5 million, and a 23.5% increase over the first quarter of 2019 of RMB212.0 million. Gross profit margin was 26.6% in the second quarter of 2019, compared with 21.6% in the second quarter of 2018, and 23.8% in the first quarter of 2019. The increase in gross profit margin over the previous quarter was primarily due to the leverage effect realized on fixed-cost components of cost of revenue, 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 RMB521.9 million (US$76.0 million) in the second quarter of 2019, a 79.5% increase over the second quarter of 2018 of RMB290.8 million, and a 14.1% increase over the first quarter of 2019 of RMB457.3 million.

 

Adjusted NOI margin (non-GAAP) was 53.0% in the second quarter of 2019, compared with 45.6% in the second quarter of 2018, and 51.3% in the first quarter of 2019. The increase over the previous quarter was mainly due to the leverage effect realized on fixed-cost components of cost of revenue.

 

4


 

Selling and marketing expenses, excluding share-based compensation expenses of RMB7.2 million (US$1.0 million), were RMB22.6 million (US$3.3 million) in the second quarter of 2019, a 26.8% increase from the second quarter of 2018 of RMB17.8 million (excluding share-based compensation of RMB4.3 million) and a 11.2% increase from the first quarter of 2019 of RMB20.3 million (excluding share-based compensation of RMB7.5 million). The increase over the previous quarter was primarily due to less sales and marketing activity during the first quarter of the year due to the Chinese New Year.

 

General and administrative expenses, excluding share-based compensation expenses of RMB16.0 million (US$2.3 million) and depreciation and amortization expenses of RMB16.8 million (US$2.5 million), were RMB61.9 million (US$9.0 million) in the second quarter of 2019, a 25.5% increase over the second quarter of 2018 of RMB49.3 million (excluding share-based compensation expenses of RMB21.8 million and depreciation and amortization expenses of RMB15.6 million) and an 8.4% increase from the first quarter of 2019 of RMB57.1 million (excluding share-based compensation of RMB16.6 million and depreciation and amortization expenses of RMB16.7 million). The increase in general and administrative expenses over the previous quarter was primarily due to less travelling and general office expenses in the first quarter of the year due to the Chinese New Year, as well as the higher personnel cost as a result of the annual salary revision during the second quarter of the year.

 

Research and development costs were RMB4.2 million (US$0.6 million) in the second quarter of 2019, compared with RMB3.2 million in the second quarter of 2018 and RMB4.6 million in the first quarter of 2019.

 

Net interest expenses for the second quarter of 2019 were RMB221.9 million (US$32.3 million), a 61.7% increase over the second quarter of 2018 of RMB137.3 million and an 1.3% increase over the first quarter of 2019 of RMB219.1 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 loss for the second quarter of 2019 was RMB7.5 million (US$1.1 million), compared with a gain of RMB9.8 million in the second quarter of 2018 and a gain of RMB4.8 million in the first quarter of 2019.

 

Net loss in the second quarter of 2019 was RMB93.2 million (US$13.6 million), compared with a net loss of RMB102.1 million in the second quarter of 2018 and a net loss of RMB136.6 million in the first quarter of 2019.

 

5


 

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 RMB428.4 million (US$62.4 million) in the second quarter of 2019, an 84.5% increase over the second quarter of 2018 of RMB232.3 million and an 11.8% increase over the first quarter of 2019 of RMB383.2 million.

 

Adjusted EBITDA margin (non-GAAP) was 43.5% in the second quarter of 2019, compared with 36.4% in the second quarter of 2018, and 43.0% in the first quarter of 2019. The increase over the previous quarter was mainly due to the leverage effect realized on fixed-cost components of cost of revenue, partially offset by the negative impact from foreign currency exchange loss.

 

Basic and diluted loss per ordinary share in the second quarter of 2019 was RMB0.10 (US$0.01), compared with RMB0.10 in the second quarter of 2018, and RMB0.15 in the first quarter of 2019.

 

Basic and diluted loss per American Depositary Share (“ADS”) in the second quarter of 2019 was RMB0.76 (US$0.11), compared with RMB0.82 in the second quarter of 2018, and RMB1.21 in the first quarter of 2019. Each ADS represents eight Class A ordinary shares.

 

Sales

 

Total area committed at the end of the second quarter of 2019 was 220,818 sqm, compared with 143,065 sqm at the end of the second quarter of 2018 and 199,831 sqm at the end of the first quarter of 2019, an increase of 54.3% Y-o-Y and 10.5% quarter-over-quarter (“Q-o-Q”). In the second quarter of 2019, net additional total area committed was 20,987 sqm, including significant contributions from the SH6, Shanghai 7 (“SH7”), Beijing 4 (“BJ4”), Beijing 8 (“BJ8”) and Langfang 1 (“LF1”) 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.

 

6


 

Data Center Resources

 

Area in service at the end of the second quarter of 2019 was 180,441 sqm, compared with 127,984 sqm at the end of the second quarter of 2018 and 171,515 sqm at the end of the first quarter of 2019, an increase of 41.0% Y-o-Y and 5.2% Q-o-Q. In the second quarter of 2019, SH10 (3,745 sqm) and BJ4 (4,695 sqm) data centers came into service.

 

Area under construction at the end of the second quarter of 2019 was 78,373 sqm, compared with 41,023 sqm at the end of the second quarter of 2018 and 65,736 sqm at the end of the first quarter of 2019, an increase of 91.0% Y-o-Y and 19.2% Q-o-Q. In the second quarter of 2019, construction commenced on BJ8, LF1 and Langfang 2 (“LF2”) data centers. As previously disclosed, BJ8 is located next to the existing Beijing 7 (“BJ7”) data center. BJ8 will yield around 10,911 sqm of IT area and has been fully pre-committed. LF1 and LF2 are two buildings on the same site that we leased in the previous quarter. Both data centers are now under construction and will yield an IT area of 4,858 sqm and 4,859 sqm, respectively. LF1 has already been fully pre-committed.

 

Commitment rate of area in service was 93.7% at the end of the second quarter of 2019, compared with 95.6% at the end of the second quarter of 2018 and 96.1% at the end of first quarter of 2019. Pre-commitment rate of area under construction was 66.1% at the end of the second quarter of 2019, compared with 50.6% at the end of the second quarter of 2018 and 53.4% at the end of the first quarter of 2019.

 

Area utilized at the end of the second quarter of 2019 was 127,107 sqm, compared with 86,665 sqm at the end of the second quarter of 2018 and 118,050 sqm at the end of the first quarter of 2019, an increase of 46.7% Y-o-Y and 7.7% Q-o-Q. Net additional area utilized was 9,057 sqm in the second quarter, which mainly came from the additional area utilized in SH4, SH6, SH9 and SZ4 Phase 1 data centers.

 

Utilization rate of area in service was 70.4% at the end of the second quarter of 2019, compared with 67.7% at the end of the second quarter of 2018 and 68.8% at the end of the first quarter of 2019.

 

7


 

Liquidity

 

As of June 30, 2019, cash was RMB5,730.6 million (US$834.8 million). Total short-term debt was RMB1,016.9 million (US$148.1 million), comprised of short-term borrowings and the current portion of long-term borrowings of RMB900.4 million (US$131.2 million) and the current portion of finance lease and other financing obligations of RMB116.6 million (US$17.0 million). Total long-term debt was RMB13,106.3 million (US$1,909.1 million), comprised of long-term borrowings (excluding current portion) of RMB6,711.0 million (US$977.6 million), convertible bonds of RMB2,013.9 million (US$293.4 million) and the non-current portion of finance lease and other financing obligations of RMB4,381.3 million (US$638.2 million). During the second quarter of 2019, the Company obtained new debt financing and re-financing facilities of RMB1,451.8 million (US$211.5 million).

 

Recent Developments

 

Strategic Partnership with GIC

 

The Company announced today that it has signed a strategic cooperation framework agreement (the “Agreement”) with GIC, Singapore’s sovereign wealth fund, to develop and operate hyperscale build-to-suit (“BTS”) data centers outside of Tier 1 cities in China. GDS and GIC will focus initially on a BTS data center program for a leading internet and cloud service provider, which is a strategic customer of GDS (the “Customer”). In parallel with the Agreement, GDS has also signed a Memorandum of Understanding with the Customer for multiple build-to-suit data centers at several of its campuses serving different regions of China.

 

Under the terms of the Agreement with GIC, GDS will enter into contractual commitments with the Customer for BTS data centers. GDS will set up individual project companies to undertake the development of each data center and own 100% during the construction phase. Upon completion of each data center, GDS will sell a 90% equity interest in the project company to GIC at development plus financing cost, subject to certain conditions. GDS will continue to hold the remaining 10% equity interest of the project company and provide management and operating services to the joint venture. GDS will earn a return over the life of the project from its equity investment plus recurring service fees. The first project covered by the Agreement, a data center under construction by GDS at the Customer’s campus in Jiangsu province, is nearly complete and a 90% equity interest in the relevant project company will be offered to GIC shortly. GDS has previously completed 3 build-to-suit data centers for the Customer at its campus in Hebei province, which will remain outside of the GIC partnership.

 

GDS is strategically positioned to fulfil the requirements of the most demanding customers for outsourced data center capacity in Tier 1 markets, where there is a high barrier to entry and supply is scarce. However, GDS recognizes that its large internet and cloud service provider customers also require substantial capacity at locations outside of Tier 1 markets to host their less latency-sensitive data and applications. In the past, customers typically developed such capacity in-house, but are now actively seeking ways to outsource this part of their requirement as well. By partnering with GIC, GDS will be uniquely positioned to offer customers a solution for outsourcing their hyperscale data centers outside of Tier 1 markets, with deep capital-backing, and assured operational excellence. The partnership will enable GDS to broaden its addressable market, strengthen key customer relationships, and generate a new stream of recurring fee income, while maintaining strategic focus and equity returns.

 

For additional details, please see the press release of “GDS and GIC Form Unique Strategic Partnership to Develop and Operate Hyperscale Build-to-Suit Data Centers in China” issued on August 13, 2019.

 

8


 

Beijing 9 Data Center Acquisition

 

The Company recently entered into an agreement for the acquisition of a data center, Beijing 9 (“BJ9”), in the Daxing district of Beijing, a primary data center hub in the Beijing market. The data center is located close to the Company’s existing Beijing 1, Beijing 2, and Beijing 3 data center cluster. BJ9 has an IT area of 8,029 sqm and has been in operation for over 2 years. It is fully committed and stabilized. A majority of the data center is committed by 3 internet customers, which the Company considers to be strategic accounts with high growth potential. With growing demand for data center capacity within the metro Beijing area and restrictions on new data center project approvals, the Company believes that this acquisition will further strengthen its position in the largest Tier 1 market in China, where supply is becoming increasingly scarce and colocation pricing is firming up. The Company targets to close the acquisition by the year end.

 

Updated Business Outlook

 

For the full year of 2019, the Company now expects its total revenues to be in the range of RMB4,000 million to RMB4,100 million, increasing the low end of the original guidance of RMB3,900 by approximately 2.6% and keeping the high end of the original guidance of RMB4,100 million unchanged. For the full year of 2019, the Company now expects its adjusted EBITDA to be in the range of RMB1,760 million to RMB1,800 million, increasing the low end of the original guidance of RMB1,640 million by approximately 7.3% and the high end of the original guidance of RMB1,700 million by approximately 5.9%. The updated estimates imply an increase of 43.3% to 46.8% year-over-year in total revenues and 68.2% to 72.0% year-over-year in adjusted EBITDA. The original guidance of capital expenditures for the full year of 2019 of RMB4,500 million to RMB5,000 million remains unchanged.

 

This forecast reflects the Company’s current and preliminary view on the current business situation and market conditions, which are subject to change.

 

9


 

Conference Call

 

Management will hold a conference call at 8:00 AM Eastern Time on August 13, 2019 (8:00 PM Beijing Time on August 13, 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:

7993415

 

A telephone replay will be available approximately two hours after the call until August 21, 2019 09:59 AM U.S. ET by dialing:

 

United States:

1-646-254-3697

International:

Hong Kong:

China:

+61-2-8199-0299

+852-3051-2780

400-632-2162

Replay Access Code:

7993415

 

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

 

10


 

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 provided by (used in) operating activities or other consolidated statements of operation and cash flow data prepared in accordance with U.S. GAAP. Second, other companies may calculate these non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of these non-GAAP financial measures as tools for comparison. Finally, these non-GAAP financial measures do not reflect the impact of net interest expenses, incomes tax benefits (expenses), depreciation and amortization, accretion expenses for asset retirement costs, and share-based compensation expenses, each of which have been and may continue to be incurred in our business.

 

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

 

For more information on these non-GAAP financial measures, please see the table captioned “Reconciliations of GAAP and non-GAAP results” set forth at the end of this press release.

 

11


 

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 RMB6.8650 to US$1.00, the noon buying rate in effect on June 28, 2019 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.

 

12


 

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.

 

13


 

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) 6508-0677

Email: GDS@tpg-ir.com

 

Brandi Piacente

Phone: +1 (212) 481-2050

Email: GDS@tpg-ir.com

 

14


 

GDS HOLDINGS LIMITED

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

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

 

 

 

As of
December 31,
2018

 

As of June 30, 2019

 

 

 

RMB

 

RMB

 

US$

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash

 

2,161,622

 

5,730,578

 

834,753

 

Accounts receivable, net of allowance for doubtful accounts

 

536,842

 

855,203

 

124,574

 

Value-added-tax (“VAT”) recoverable

 

163,476

 

235,423

 

34,293

 

Prepaid expenses and other current assets

 

175,456

 

230,345

 

33,554

 

Total current assets

 

3,037,396

 

7,051,549

 

1,027,174

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

13,994,945

 

15,535,295

 

2,262,971

 

Operating lease right-of-use assets

 

0

 

483,531

 

70,434

 

Goodwill and intangible assets, net

 

2,234,462

 

2,160,947

 

314,777

 

Other non-current assets

 

1,618,440

 

1,733,199

 

252,469

 

Total assets

 

20,885,243

 

26,964,521

 

3,927,825

 

 

 

 

 

 

 

 

 

Liabilities, Redeemable Preferred Shares and Shareholders’ Equity

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

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

 

1,283,320

 

900,354

 

131,151

 

Accounts payable

 

1,508,020

 

1,769,997

 

257,829

 

Accrued expenses and other payables

 

549,641

 

648,933

 

94,528

 

Operating lease liabilities, current

 

0

 

65,352

 

9,520

 

Finance lease and other financing obligations, current

 

166,898

 

116,577

 

16,981

 

Total current liabilities

 

3,507,879

 

3,501,213

 

510,009

 

 

 

 

 

 

 

 

 

Long-term borrowings, excluding current portion

 

5,203,708

 

6,711,013

 

977,569

 

Convertible bonds payable

 

2,004,714

 

2,013,914

 

293,360

 

Operating lease liabilities, non-current

 

0

 

392,345

 

57,151

 

Finance lease and other financing obligations, non-current

 

4,134,327

 

4,381,340

 

638,214

 

Other long-term liabilities

 

512,690

 

512,088

 

74,594

 

Total liabilities

 

15,363,318

 

17,511,913

 

2,550,897

 

 

 

 

 

 

 

 

 

Redeemable preferred shares

 

0

 

1,033,353

 

150,525

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

Ordinary shares

 

341

 

394

 

57

 

Additional paid-in capital

 

7,275,945

 

10,336,129

 

1,505,627

 

Accumulated other comprehensive loss

 

(139,254

)

(72,382

)

(10,543

)

Accumulated deficit

 

(1,615,107

)

(1,844,886

)

(268,738

)

Total shareholders’ equity

 

5,521,925

 

8,419,255

 

1,226,403

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities, redeemable preferred shares and shareholders’ equity

 

20,885,243

 

26,964,521

 

3,927,825

 

 

Note: Effective January 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) 842 Leases using a modified retrospective method, under which prior period results were not retrospectively adjusted. Upon adoption, the Company recognized operating lease liabilities and right of use assets of RMB483.6 million and RMB514.0 million, respectively, and derecognized intangible assets of RMB44.6 million for operating leases, and derecognized other financing obligations and construction in progress of RMB331.9 million and RMB336.7 million, respectively, for assets under construction in build-to-suit lease arrangements on January 1, 2019.

 

15


 

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

 

Six months ended

 

 

 

June 30,
2018

 

March 31,
2019

 

June 30, 2019

 

June 30, 2018

 

June 30, 2019

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenue

 

626,347

 

890,946

 

985,094

 

143,495

 

1,177,820

 

1,876,040

 

273,276

 

Equipment sales

 

11,163

 

895

 

95

 

14

 

21,915

 

990

 

144

 

Total net revenue

 

637,510

 

891,841

 

985,189

 

143,509

 

1,199,735

 

1,877,030

 

273,420

 

Cost of revenue

 

(499,989

)

(679,832

)

(723,420

)

(105,378

)

(939,297

)

(1,403,252

)

(204,407

)

Gross profit

 

137,521

 

212,009

 

261,769

 

38,131

 

260,438

 

473,778

 

69,013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing expenses

 

(22,132

)

(27,832

)

(29,805

)

(4,342

)

(48,981

)

(57,637

)

(8,396

)

General and administrative expenses

 

(86,737

)

(90,301

)

(94,702

)

(13,795

)

(149,673

)

(185,003

)

(26,949

)

Research and development expenses

 

(3,201

)

(4,639

)

(4,200

)

(612

)

(5,873

)

(8,839

)

(1,288

)

Income from operations

 

25,451

 

89,237

 

133,062

 

19,382

 

55,911

 

222,299

 

32,380

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest expenses

 

(137,274

)

(219,117

)

(221,906

)

(32,324

)

(252,328

)

(441,023

)

(64,242

)

Foreign currency exchange gain (loss), net

 

9,778

 

4,772

 

(7,530

)

(1,097

)

6,559

 

(2,758

)

(402

)

Others, net

 

1,903

 

2,503

 

2,017

 

294

 

2,512

 

4,520

 

658

 

Loss before income taxes

 

(100,142

)

(122,605

)

(94,357

)

(13,745

)

(187,346

)

(216,962

)

(31,606

)

Income tax (expenses) benefits

 

(1,935

)

(14,015

)

1,198

 

175

 

(657

)

(12,817

)

(1,867

)

Net loss

 

(102,077

)

(136,620

)

(93,159

)

(13,570

)

(188,003

)

(229,779

)

(33,473

)

Change in redemption value of redeemable preferred shares

 

0

 

(17,760

)

0

 

0

 

0

 

(17,760

)

(2,587

)

Cumulative dividend on preferred shares

 

0

 

(559

)

(12,913

)

(1,881

)

0

 

(13,472

)

(1,962

)

Net loss attributable to ordinary shareholders

 

(102,077

)

(154,939

)

(106,072

)

(15,451

)

(188,003

)

(261,011

)

(38,022

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per ordinary share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

(0.10

)

(0.15

)

(0.10

)

(0.01

)

(0.19

)

(0.24

)

(0.04

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of ordinary share outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

992,452,334

 

1,025,055,553

 

1,115,624,250

 

1,115,624,250

 

981,162,414

 

1,070,590,091

 

1,070,590,091

 

 

16


 

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

 

Six months ended

 

 

 

June 30,
2018

 

March 31,
2019

 

June 30, 2019

 

June 30, 2018

 

June 30, 2019

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

(102,077

)

(136,620

)

(93,159

)

(13,570

)

(188,003

)

(229,779

)

(33,473

)

Foreign currency translation adjustments, net of nil tax

 

71,907

 

19,353

 

47,519

 

6,922

 

31,501

 

66,872

 

9,741

 

Comprehensive loss

 

(30,170

)

(117,267

)

(45,640

)

(6,648

)

(156,502

)

(162,907

)

(23,732

)

 

17


 

GDS HOLDINGS LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

 

 

 

Three months ended

 

Six months ended

 

 

 

June 30, 2018

 

March 31,
2019

 

June 30, 2019

 

June 30, 2018

 

June 30, 2019

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

(102,077

)

(136,620

)

(93,159

)

(13,570

)

(188,003

)

(229,779

)

(33,473

)

Depreciation and amortization

 

166,759

 

254,037

 

269,176

 

39,210

 

304,247

 

523,213

 

76,215

 

Amortization of debt issuance cost and debt discount

 

9,339

 

16,990

 

36,522

 

5,320

 

17,267

 

53,512

 

7,795

 

Share-based compensation expense

 

27,954

 

31,957

 

30,977

 

4,512

 

43,587

 

62,934

 

9,167

 

Others

 

1,318

 

(5,160

)

(15,913

)

(2,318

)

(1,459

)

(21,073

)

(3,069

)

Changes in operating assets and liabilities

 

(121,601

)

(221,010

)

(111,693

)

(16,271

)

(337,376

)

(332,703

)

(48,463

)

Net cash (used in) provided by operating activities

 

(18,308

)

(59,806

)

115,910

 

16,883

 

(161,737

)

56,104

 

8,172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

(867,965

)

(829,446

)

(517,034

)

(75,314

)

(1,630,937

)

(1,346,480

)

(196,137

)

Payments related to acquisitions and investments

 

(289,487

)

(5,000

)

(22,113

)

(3,221

)

(333,294

)

(27,113

)

(3,949

)

Net cash used in investing activities

 

(1,157,452

)

(834,446

)

(539,147

)

(78,535

)

(1,964,231

)

(1,373,593

)

(200,086

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net proceeds from financing activities

 

2,499,137

 

4,789,711

 

(20,334

)

(2,962

)

4,612,140

 

4,769,377

 

694,739

 

Net cash provided by (used in) financing activities

 

2,499,137

 

4,789,711

 

(20,334

)

(2,962

)

4,612,140

 

4,769,377

 

694,739

 

Effect of exchange rate changes on cash and restricted cash

 

153,167

 

(9,215

)

122,535

 

17,851

 

95,531

 

113,320

 

16,507

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) of cash and restricted cash

 

1,476,544

 

3,886,244

 

(321,036

)

(46,763

)

2,581,703

 

3,565,208

 

519,332

 

Cash and restricted cash at beginning of period

 

3,052,759

 

2,284,748

 

6,170,992

 

898,906

 

1,947,600

 

2,284,748

 

332,811

 

Cash and restricted cash at end of period

 

4,529,303

 

6,170,992

 

5,849,956

 

852,143

 

4,529,303

 

5,849,956

 

852,143

 

 

18


 

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

 

Six months ended

 

 

 

June 30, 2018

 

March 31, 2019

 

June 30, 2019

 

June 30, 2018

 

June 30, 2019

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

(102,077

)

(136,620

)

(93,159

)

(13,570

)

(188,003

)

(229,779

)

(33,473

)

Net interest expenses

 

137,274

 

219,117

 

221,906

 

32,324

 

252,328

 

441,023

 

64,242

 

Income tax expenses (benefits)

 

1,935

 

14,015

 

(1,198

)

(175

)

657

 

12,817

 

1,867

 

Depreciation and amortization

 

166,759

 

254,037

 

269,176

 

39,210

 

304,247

 

523,213

 

76,215

 

Accretion expenses for asset retirement costs

 

407

 

711

 

723

 

105

 

716

 

1,434

 

209

 

Share-based compensation expenses

 

27,954

 

31,957

 

30,977

 

4,512

 

43,587

 

62,934

 

9,167

 

Selling and marketing expenses (1)

 

17,835

 

20,330

 

22,610

 

3,294

 

39,654

 

42,940

 

6,255

 

General and administrative expenses (1)

 

49,318

 

57,090

 

61,898

 

9,016

 

93,276

 

118,988

 

17,333

 

Research and development expenses (1)

 

3,093

 

3,970

 

3,477

 

506

 

5,433

 

7,447

 

1,085

 

Foreign currency exchange loss (gain), net

 

(9,778

)

(4,772

)

7,530

 

1,097

 

(6,559

)

2,758

 

402

 

Others, net

 

(1,903

)

(2,503

)

(2,017

)

(294

)

(2,512

)

(4,520

)

(658

)

Adjusted NOI

 

290,817

 

457,332

 

521,923

 

76,025

 

542,824

 

979,255

 

142,644

 

Adjusted NOI margin

 

45.6

%

51.3

%

53.0

%

53.0

%

45.2

%

52.2

%

52.2

%

 

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

 

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

 

Six months ended

 

 

 

June 30, 2018

 

March 31,
2019

 

June 30, 2019

 

June 30, 2018

 

June 30, 2019

 

 

 

RMB

 

RMB

 

RMB

 

US$

 

RMB

 

RMB

 

US$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

(102,077

)

(136,620

)

(93,159

)

(13,570

)

(188,003

)

(229,779

)

(33,473

)

Net interest expenses

 

137,274

 

219,117

 

221,906

 

32,324

 

252,328

 

441,023

 

64,242

 

Income tax expenses (benefits)

 

1,935

 

14,015

 

(1,198

)

(175

)

657

 

12,817

 

1,867

 

Depreciation and amortization

 

166,759

 

254,037

 

269,176

 

39,210

 

304,247

 

523,213

 

76,215

 

Accretion expenses for asset retirement costs

 

407

 

711

 

723

 

105

 

716

 

1,434

 

209

 

Share-based compensation expenses

 

27,954

 

31,957

 

30,977

 

4,512

 

43,587

 

62,934

 

9,167

 

Adjusted EBITDA

 

232,252

 

383,217

 

428,425

 

62,406

 

413,532

 

811,642

 

118,227

 

Adjusted EBITDA margin

 

36.4

%

43.0

%

43.5

%

43.5

%

34.5

%

43.2

%

43.2

%

 

20