Financial Performance - For Q1 2024, GDS Holdings reported a net revenue of RMB 2,627.4 million (USD 363.9 million), representing a year-over-year increase of 9.1% from RMB 2,409.0 million in Q1 2023[4]. - The net loss for Q1 2024 was RMB 344.9 million (USD 47.8 million), an improvement from a net loss of RMB 474.6 million in Q1 2023[4]. - Adjusted EBITDA for Q1 2024 grew by 4.7% year-over-year to RMB 1,183.4 million (USD 163.9 million), with an adjusted EBITDA margin of 45.0%[4][6]. - The gross profit for Q1 2024 was RMB 573.7 million (USD 79.5 million), a 16.7% increase from RMB 491.7 million in Q1 2023[7]. - The adjusted gross profit for Q1 2024 was RMB 1,368.1 million (USD 189.5 million), up 8.6% from RMB 1,259.4 million in Q1 2023[8]. - The cost of sales for Q1 2024 was RMB 2,053.7 million (USD 284.4 million), a 7.1% increase from RMB 1,917.3 million in Q1 2023[7]. - In Q1 2024, the adjusted gross margin was 52.1%, compared to 52.3% in Q1 2023 and 49.7% in Q4 2023, primarily due to a decrease in maintenance and other operating costs[9]. - The company confirmed its revenue guidance for 2024 to be between RMB 11,340 million and RMB 11,760 million, with adjusted EBITDA expected to be between RMB 4,950 million and RMB 5,150 million[18]. Operational Metrics - The total contracted and pre-contracted area as of March 31, 2024, was 668,012 square meters, a 5.4% increase from 633,611 square meters a year earlier[5]. - The operational area increased by 12.5% year-over-year to 583,229 square meters, with a utilization rate of 74.9%[5]. - The total signed and pre-signed area at the end of Q1 2024 was 668,012 square meters, a 5.4% increase from 633,611 square meters at the end of Q1 2023, but a 0.4% decrease from 670,975 square meters at the end of Q4 2023[12]. - The operational area at the end of Q1 2024 was 583,229 square meters, a 12.5% increase from 518,517 square meters at the end of Q1 2023 and a 1.9% increase from 572,555 square meters at the end of Q4 2023[14]. - The billing area at the end of Q1 2024 was 436,875 square meters, a 16.0% increase from 376,632 square meters at the end of Q1 2023 and a 4.3% increase from 418,748 square meters at the end of Q4 2023[15]. - The operational area billing rate in Q1 2024 was 74.9%, compared to 72.6% in Q1 2023 and 73.1% in Q4 2023[15]. Expenses and Investments - Sales and marketing expenses in Q1 2024 were RMB 26.7 million (USD 3.7 million), a 5.3% increase from RMB 25.3 million in Q1 2023 and a 2.9% increase from RMB 25.9 million in Q4 2023, mainly due to increased marketing activities[9]. - General and administrative expenses in Q1 2024 were RMB 153.4 million (USD 21.2 million), a 30.6% increase from RMB 117.4 million in Q1 2023 and a 13.5% increase from RMB 135.1 million in Q4 2023, driven by international business expansion[9]. - R&D expenses in Q1 2024 were RMB 10.0 million (USD 1.4 million), compared to RMB 9.8 million in Q1 2023 and RMB 12.8 million in Q4 2023[9]. - GDS Holdings increased its private equity financing for GDSI from USD 587 million to USD 672 million to support accelerated customer demand[6]. - The company obtained new debt financing and refinancing credit amounting to RMB 4,294.0 million (USD 594.7 million) in the first quarter of 2024[16]. - The company plans to focus on expanding its market presence and investing in new technologies to drive future growth[30]. Debt and Cash Position - As of March 31, 2024, cash amounted to RMB 7,641.4 million (USD 1,058.3 million) while total short-term debt was RMB 5,893.5 million (USD 816.2 million)[16]. - The total long-term debt reached RMB 42,207.0 million (USD 5,845.6 million), including long-term loans of RMB 26,806.8 million (USD 3,712.7 million)[16]. - The company's cash and cash equivalents as of March 31, 2024, were RMB 7,641,439 thousand, a decrease of 0.9% from RMB 7,710,711 thousand as of December 31, 2023[29]. Market Outlook and Strategy - GDS Holdings is focused on maintaining and enhancing relationships with new and existing customers to support its business growth[27]. - The company is exploring strategic acquisitions and investments to expand its operations and market presence[27]. - GDS Holdings anticipates continued growth in the high-performance data center market in China and Southeast Asia, driven by increasing adoption of cloud computing and cloud service providers[27]. - The future outlook remains positive with expectations of continued revenue growth and improved margins[39]. - The company is committed to investing in new technologies to stay competitive in the market[39]. Risks and Compliance - GDS Holdings faces inherent risks and uncertainties that may impact its actual performance compared to forward-looking statements, including competition and regulatory changes in the industry[27]. - The company is committed to providing accurate and timely updates regarding its business outlook and operational strategies[27].

Revenue and Financial Performance - In 2023, the revenue contribution from the VIE and its subsidiaries accounted for 95.3% of the total revenue, down from 96.1% in both 2021 and 2022[5]. - The company's net revenue increased from RMB 7,818.7 million in 2021 to RMB 9,956.5 million in 2023, representing a growth of 6.8%[20]. - Adjusted EBITDA rose from RMB 3,703.4 million in 2021 to RMB 4,624.1 million in 2023, indicating a continuous improvement in operational efficiency[20]. - The company's cumulative losses increased from RMB 3,910.8 million in 2021 to RMB 9,469.8 million in 2023[198]. - Revenue from colocation services accounted for 87.1% of total net revenue in 2023, up from 83.3% in 2021[198]. - The company reported a significant increase in revenue, reaching $1.2 billion, representing a 15% year-over-year growth[103]. - The company anticipates a revenue growth of 10% for the next fiscal year, projecting total revenue to reach approximately $660 million[134]. Operational Structure and Governance - The company operates primarily through contractual arrangements with the VIE, which may not provide control as effective as direct ownership, posing potential risks[8]. - The company has established a series of contractual arrangements with its VIE and its shareholders, including exclusive technology licenses and service agreements[8]. - The management holding company is controlled through a series of contractual arrangements, with five designated management shareholders holding 20% equity each[7]. - GDS Investment Company directly and indirectly holds equity in 60 subsidiaries in mainland China[180]. - The company has established contractual arrangements to control VIE and its subsidiaries, ensuring effective operational governance and economic benefits[184]. Regulatory and Compliance Risks - There is uncertainty regarding the interpretation and application of current and future Chinese laws affecting the company's contractual rights[9]. - The company is subject to significant regulatory risks due to its reliance on contractual arrangements for operating in the value-added telecommunications sector[9]. - The Foreign Company Accountability Act (HFCA) poses a risk as the company may be classified as a "covered issuer" if its auditor is unable to be inspected due to foreign jurisdiction issues, which could lead to trading restrictions on its securities[13]. - The company may face severe penalties if its corporate structure and contractual arrangements are found to violate any current or future Chinese laws or regulations[9]. - The company is subject to capital control measures for profit remittance as per the regulations issued by the State Administration of Foreign Exchange (SAFE) on January 26, 2017, which require compliance with real transaction principles[107]. Market and Competitive Landscape - The Chinese high-performance data center services market continues to grow at a strong fundamental growth rate, driven by digital transformation trends and the application of new technologies[17]. - The company faces competition from both domestic and international network-neutral data center service providers, leveraging its operational track record and market share[60]. - The company is expanding its market presence in Southeast Asia, targeting a 25% market share by the end of 2024[103]. Data Center Operations and Development - The total net floor area in operation as of December 31, 2023, is 572,555 square meters, with 92.8% contracted by customers[17]. - The total net floor area under construction is 182,746 square meters, with 76.4% pre-contracted by customers[17]. - The company operates 93 self-developed data centers with a total net operating area of 565,062 square meters as of December 31, 2023[30]. - The company has a total estimated potential development area of approximately 458,330 square meters for future projects[20]. - The company has begun planning for potential future developments several years in advance, including securing land for new data centers[32]. Sustainability and Energy Efficiency - In 2023, over 38% of the company's electricity consumption came from renewable energy sources[62]. - The average Power Usage Effectiveness (PUE) for data centers with an IT load rate of 30% or more reached approximately 1.28 in 2023, indicating high energy efficiency[31]. - The company is committed to sustainability, with plans to implement eco-friendly practices in all new data center developments[138]. Customer Relationships and Satisfaction - The average customer satisfaction score was 9.647 out of 10, with a net promoter score of 85% based on a survey conducted by NielsenIQ[54]. - The company has successfully attracted major cloud service providers to host their public cloud platforms in its data centers, enabling direct private connections for enterprise clients[42]. - The average quarterly customer churn rate increased from 0.4% in 2021 to 1.9% in 2023, reflecting potential challenges in customer retention[26]. International Expansion and Strategic Partnerships - The company has established a long-term strategic partnership with STT GDC, which is its largest shareholder, providing industry expertise and governance guidance[174]. - The company established a joint venture with Indonesia Investment Authority (INA) in October 2023 to develop and expand data center operations in Indonesia[176]. - The company has expanded its footprint in Southeast Asia by acquiring land in Johor, Malaysia, and Batam, Indonesia, as part of its strategic plan to serve the region[175]. Legal and Litigation Matters - The company is involved in a pending class action lawsuit in California, alleging violations of the Securities Exchange Act[66]. - The company must comply with the requirements set forth in the Building (Planning) Regulations regarding the development intensity of buildings used as data centers[121]. Employee and Workforce Management - As of December 31, 2023, the company had 2,345 employees, an increase from 2,185 in 2022, representing a growth of approximately 7.3%[63]. - The annual employee turnover rate was reported at 16.5%[62]. - The company provides an average of 32.1 hours of training per employee annually[62].

Investment Rating - The report maintains an "Outperform" rating for GDS Holdings [3][4][10] Core Views - The company's net loss has expanded due to non-cash asset impairment, reflecting weak industry demand [4][9] - The company achieved total revenue of approximately RMB 9.957 billion in 2023, a year-on-year increase of 6.8%, with adjusted EBITDA of RMB 4.624 billion, up 8.8% [4][10] - The company is focusing on international business expansion, having secured a total of USD 587 million in convertible preferred stock subscriptions to support operations [4][10] - Revenue growth is expected to improve in 2024, with projections indicating a growth rate of over 12% [4][10] Financial Summary - Revenue projections for 2024-2026 are RMB 11.151 billion (+12%), RMB 12.824 billion (+15%), and RMB 15.004 billion (+17%) respectively [4][10] - Adjusted EBITDA for the same period is expected to be RMB 5.046 billion (+0.16%), RMB 5.667 billion (-2.0%), and RMB 6.332 billion [4][10] - The target price is set at HKD 19.09, reflecting a target market cap of RMB 26.892 billion based on a 13x EV/EBITDA multiple for 2024 [4][10]

Financial Performance - In Q4 2023, net revenue increased by 6.3% year-over-year to RMB 2,556.5 million (USD 360.1 million) compared to RMB 2,404.0 million in Q4 2022[5] - The net loss for Q4 2023 was RMB 3,164.6 million (USD 445.7 million), a significant increase from a net loss of RMB 177.9 million in Q4 2022[5] - Adjusted EBITDA for Q4 2023 grew by 5.7% year-over-year to RMB 1,132.6 million (USD 159.5 million), with an adjusted EBITDA margin of 44.3%[5] - For the full year 2023, net revenue rose by 6.8% to RMB 9,956.5 million (USD 1,402.3 million) from RMB 9,325.6 million in 2022[6] - The net loss for 2023 was RMB 4,285.4 million (USD 603.6 million), compared to a net loss of RMB 1,266.1 million in 2022[6] - Adjusted EBITDA for 2023 increased by 8.8% to RMB 4,624.1 million (USD 651.3 million), with an adjusted EBITDA margin of 46.4%[6] - The total revenue for the year ended December 31, 2023, was RMB 8,034,051,000, representing a significant increase compared to RMB 7,389,774,000 for the previous year, marking a growth of approximately 8.7%[32] - The net loss attributable to the shareholders of the company for the year ended December 31, 2023, was RMB 4,290,053,000, compared to a net loss of RMB 1,509,885,000 for the previous year, indicating a deterioration in financial performance[32] - The gross profit for the year ended December 31, 2023, was RMB 1,467,200,367, slightly down from RMB 1,469,982,015 in the previous year, reflecting a marginal decline[32] - The company’s operating loss for the year ended December 31, 2023, was RMB 4,300,170,000, compared to an operating loss of RMB 1,268,890,000 in the previous year, highlighting increased operational challenges[32] Revenue and Growth - The company achieved a net increase of 20,074 square meters in billing area in Q4 2023, contributing to revenue growth[8] - The company expects total revenue for 2024 to be between RMB 11,340 million and RMB 11,760 million, representing a year-over-year growth of approximately 13.9% to 18.1%[20] - The expected adjusted EBITDA for 2024 is projected to be between RMB 4,950 million and RMB 5,150 million, with a year-over-year growth of approximately 7.0% to 11.4%[20] - The company reported a significant increase in service revenue, contributing RMB 3,013,416,000 for the year ended December 31, 2023, compared to RMB 2,404,034,000 in the previous year, which is an increase of approximately 25.3%[32] Costs and Expenses - In Q4 2023, the cost of sales was RMB 2,124.2 million (USD 299.2 million), an increase of 10.9% year-over-year and 2.5% quarter-over-quarter[9] - Q4 2023 gross profit was RMB 432.3 million (USD 60.9 million), down 11.4% from Q4 2022 and down 3.4% from Q3 2023[9] - The adjusted gross profit for Q4 2023 was RMB 1,270.9 million (USD 179.0 million), an increase of 3.8% year-over-year and 1.9% quarter-over-quarter[9] - The sales cost for 2023 was RMB 8,034.1 million (USD 1,131.6 million), an increase of 8.7% compared to RMB 7,389.8 million in 2022[14] - Research and development expenses in Q4 2023 were RMB 12.8 million (USD 1.8 million), up from RMB 10.0 million in Q4 2022 and RMB 10.5 million in Q3 2023[10] - Research and development expenses for the year ended December 31, 2023, totaled RMB 1,402,264,000, which is a slight increase from RMB 1,272,000,000 in the previous year, indicating continued investment in innovation[32] Assets and Liabilities - Total assets as of December 31, 2023, amounted to RMB 74.81 billion, a slight increase from RMB 74.45 billion as of December 31, 2022[31] - Cash and cash equivalents reached RMB 8.61 billion, compared to RMB 7.71 billion in the previous year, reflecting a growth of approximately 11.5%[31] - Total current assets increased to RMB 11.95 billion from RMB 10.98 billion, representing a year-over-year growth of about 8.8%[31] - Total liabilities decreased to RMB 50.63 billion from RMB 54.32 billion, indicating a reduction of approximately 6.2%[31] - The company's total equity attributable to shareholders rose to RMB 23.02 billion from RMB 18.89 billion, marking an increase of around 21.2%[31] - The total current liabilities increased to RMB 10.60 billion from RMB 8.31 billion, representing a growth of approximately 27.5%[31] Operational Metrics - Total contracted and pre-contracted area increased by 6.4% year-over-year to 670,975 square meters as of December 31, 2023[7] - Operating area increased by 11.0% year-over-year to 572,555 square meters as of December 31, 2023, with a contracted rate of 92.8%[7] - The adjusted gross profit margin for Q4 2023 was 49.7%, compared to 50.9% in Q4 2022 and 49.5% in Q3 2023[9] - The company is a leading developer and operator of high-performance data centers in China and Southeast Asia, strategically located in major economic centers[28] - The customer base primarily includes large cloud service providers, reflecting the company's capability to meet high-demand outsourcing requirements[28] Future Outlook - The company plans to expand its market presence and invest in new technologies to enhance service offerings and improve financial performance in the upcoming fiscal year[32] - The company plans to expand its market presence and invest in new product development to drive future growth[36] - The company is focusing on enhancing its operational efficiency and reducing costs to improve profitability in the upcoming quarters[36] Non-GAAP Metrics - The company utilizes adjusted EBITDA and adjusted gross margin as non-GAAP financial metrics to assess operational performance and set business targets[22] - The adjusted EBITDA and adjusted gross margin metrics are not defined by GAAP and should not be solely relied upon for assessing operational performance or cash flows[24] - The company does not provide forward-looking guidance on several financial metrics, including depreciation and amortization, due to their significant impact[25] Miscellaneous - The exchange rate used for converting RMB to USD is 7.0999 RMB per 1.00 USD, effective as of December 29, 2023[26] - Preliminary unaudited financial data may undergo adjustments during the year-end audit, potentially leading to significant differences[27] - The company reported a foreign exchange loss of RMB 53,625,000 for the year ended December 31, 2023, compared to a gain in the previous year, indicating increased volatility in currency markets affecting financial results[32] - The company reported a total of RMB 2.08 billion in convertible bonds due within one year, which was not present in the previous year's figures[31] - The company has made adjustments related to acquisition price adjustments, which positively impacted its financial results[36] - The company experienced a cash outflow from operating activities amounting to RMB 1,572,410 thousand for the year[36] - Cash and restricted cash at the end of the period was RMB 3,013,416 thousand, a decrease from RMB 4,856,318 thousand at the beginning of the year[36] - The company reported a net loss of RMB 1,266,118 thousand for the year ending December 31, 2023, compared to a net loss of RMB 4,285,393 thousand for the previous year, indicating a significant improvement[36] - The company reported a significant increase in user data, with a total of 1,270,922 users, representing a growth rate of 49.7%[35]

Financial Performance - For Q3 2023, GDS Holdings reported a net revenue of RMB 2,519.0 million (USD 345.3 million), representing a year-over-year increase of 6.4% from RMB 2,367.6 million in Q3 2022[5]. - The adjusted EBITDA for Q3 2023 was RMB 1,126.3 million (USD 154.4 million), reflecting a 5.6% increase compared to RMB 1,066.6 million in Q3 2022, with an adjusted EBITDA margin of 44.7%[5][8]. - The company recorded a net loss of RMB 420.8 million (USD 57.7 million) in Q3 2023, compared to a net loss of RMB 339.7 million in Q3 2022[5]. - The gross profit for Q3 2023 was RMB 447.4 million (USD 61.3 million), a decrease of 9.2% from RMB 492.8 million in Q3 2022[8]. - The gross margin for Q3 2023 was 17.8%, down from 20.8% in Q3 2022, primarily due to increased utility costs[8]. - Adjusted gross margin for Q3 2023 was 49.5%, down from 50.7% in Q3 2022 and 53.4% in Q2 2023, primarily due to increased utility costs[9]. - The company confirmed its revenue guidance for 2023 to be between RMB 9,940 million and RMB 10,320 million, with adjusted EBITDA expected between RMB 4,430 million and RMB 4,600 million[15]. - The net loss for the nine months ended September 30, 2023, was RMB 1,120,749 thousand, compared to RMB 1,088,223 thousand for the same period in 2022, an increase in loss of approximately 3%[30]. Operational Metrics - The total contracted and pre-contracted area increased by 16,072 square meters to 653,732 square meters as of September 30, 2023, a year-over-year growth of 5.7%[6]. - The operational area increased by 22,994 square meters to 554,210 square meters, marking an 8.6% year-over-year increase[6]. - The utilization rate of the operational area was 91.9% as of September 30, 2023, down from 95.6% a year earlier[6]. - The billing area increased by 15,878 square meters to 398,674 square meters, a 10.8% year-over-year increase[6]. - Total signed and pre-signed area at the end of Q3 2023 was 653,732 square meters, a year-over-year increase of 5.7% and a quarter-over-quarter increase of 2.5%[13]. - Operating area at the end of Q3 2023 was 554,210 square meters, an 8.6% year-over-year increase and a 4.3% quarter-over-quarter increase[14]. Expenses and Costs - Sales and marketing expenses for Q3 2023 were RMB 26.3 million (USD 3.6 million), a decrease of 9.7% year-over-year and an increase of 14.7% quarter-over-quarter[9]. - R&D expenses in Q3 2023 amounted to RMB 10.5 million (USD 1.4 million), up from RMB 6.7 million in Q3 2022 and RMB 5.0 million in Q2 2023[10]. - The company incurred net interest expenses of RMB 503,156 thousand for the three months ended September 30, 2023, compared to RMB 444,328 thousand for the same period in 2022, an increase of approximately 13%[29]. - The interest expense for the nine months ended September 30, 2023, was RMB 1,457,055 thousand, an increase from RMB 1,368,647 thousand in the same period of 2022[33]. - The company incurred share-based compensation expenses of RMB 255,851 thousand for the nine months ended September 30, 2023[33]. Cash and Debt Position - As of September 30, 2023, cash was RMB 7,524.9 million (USD 1,031.4 million) and total short-term debt was RMB 3,024.4 million (USD 414.5 million)[16]. - The company obtained new debt financing and refinancing credit of RMB 6,255.1 million during Q3 2023[16]. - The company's cash position was RMB 8,608,131 thousand as of September 30, 2023, compared to RMB 7,524,894 thousand at the end of 2022, marking an increase of around 14.4%[28]. - The total current liabilities increased to RMB 10,603,375 thousand as of September 30, 2023, from RMB 7,397,741 thousand at the end of 2022, representing a substantial rise of approximately 43.5%[28]. - The cash flow from financing activities for the nine months ended September 30, 2023, was RMB 2,765,599 thousand, compared to RMB 3,996,347 thousand in the same period of 2022[31]. Assets and Equity - The total current assets amounted to RMB 11,951,076 thousand, an increase from RMB 11,255,404 thousand as of December 31, 2022, representing a growth of approximately 6.2%[28]. - The total assets of GDS Holdings reached RMB 74,813,954 thousand as of September 30, 2023, compared to RMB 76,842,279 thousand at the end of 2022, indicating a decrease of about 2.7%[28]. - The total liabilities stood at RMB 50,629,299 thousand as of September 30, 2023, down from RMB 53,763,354 thousand at the end of 2022, reflecting a reduction of approximately 5.0%[28]. - GDS Holdings reported a total equity of RMB 23,137,643 thousand as of September 30, 2023, up from RMB 21,999,711 thousand at the end of 2022, which is an increase of approximately 5.2%[28]. - The company has a significant amount of goodwill and intangible assets valued at RMB 8,124,214 thousand as of September 30, 2023, compared to RMB 7,945,607 thousand at the end of 2022, showing an increase of about 2.3%[28]. Strategic Focus - The company is focusing on strengthening its financial position and advancing strategic initiatives to maximize return on invested capital and deliver long-term value to shareholders[7]. - The company is focused on expanding its high-performance data center solutions in China and Southeast Asia, anticipating growth in demand for cloud computing services[25]. - The management uses adjusted EBITDA and adjusted gross margin as key performance indicators to evaluate operational performance and set business goals[18]. - The company emphasizes that non-GAAP financial metrics should not be considered in isolation from GAAP metrics when assessing financial performance[19]. Conference and Forward-Looking Statements - The company will hold a conference call on November 22, 2023, at 8:00 AM ET to discuss financial performance and answer investor questions[17]. - Forward-looking statements are made in accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995[24].

Financial Reporting - The company reported unaudited interim consolidated financial information for the six months ended June 30, 2023, prepared in accordance with US GAAP[3]. - Significant differences between US GAAP and IFRS were identified, impacting the financial results[7]. - The interim report was published on August 22, 2023, detailing financial performance for the three and six months ended June 30, 2023[2]. - The board of directors is responsible for the preparation of the reconciliation statement, which outlines the financial impacts of the differences between accounting policies[4]. - KPMG was engaged to conduct limited assurance work on the reconciliation statement, ensuring compliance with relevant standards[6]. - The reconciliation process involved comparing financial data reported under US GAAP with corresponding figures disclosed in the interim report[5]. - The interim financial results are subject to review and may differ from the final audited results[3]. Financial Performance - For the six months ended June 30, 2023, the company reported a gross profit of $1,042.7 million, reflecting a gross margin of approximately 27.2%[9]. - The operating profit for the same period was $398.8 million, with operating expenses amounting to $559.0 million[9]. - The net loss attributable to the shareholders of the company was $729.1 million, compared to a net loss of $962.3 million for the previous period[9]. - Total assets as of June 30, 2023, were reported at $74.8 billion, with total liabilities of $50.6 billion[10]. - The company incurred interest expenses of $953.9 million during the six-month period, contributing to the overall net loss[9]. - The company’s cash and cash equivalents were reported at $1.5 billion as of June 30, 2023[10]. Market Strategy and Growth - The company plans to focus on expanding its market presence and enhancing its product offerings in the upcoming quarters[9]. - The company reported a significant increase in user data, with a total of 1.2 million new users added in the last quarter[9]. - The company is investing in new technology development, with a budget allocation of $200 million for R&D in the next fiscal year[9]. - The company anticipates a revenue growth of 15% year-over-year for the next quarter, driven by new product launches and market expansion strategies[9]. Asset and Liability Overview - Total assets reported at $77,054,564, with a decrease of $142,274 compared to the previous period[11]. - Total liabilities amount to $53,665,517, reflecting a decrease of $1,807,467 in convertible bonds[11]. - Shareholders' equity totals $22,172,987, down by $227,116 from the last reporting period[11]. - Net property and equipment valued at $48,741,000, with an increase of $5,447,856[11]. - Current assets stand at $12,180,331, showing a slight decrease of $1,223[11]. - The company reported a cumulative loss of $(5,882,623), which includes a decrease of $(226,864) in the current period[11]. - The goodwill and intangible assets net value is $8,027,083, with a decrease of $39,305[11]. - The company has a total of $1,086,128 in redeemable preferred stock, classified as mezzanine equity[11]. - Long-term asset impairment losses are calculated using a two-step method under US GAAP, affecting the reported values[16].

Financial Performance - For Q2 2023, GDS Holdings reported a net revenue of RMB 2,472.0 million (USD 340.9 million), representing a year-over-year increase of 7.0% from RMB 2,310.4 million in Q2 2022[4] - Service revenue for Q2 2023 also grew by 7.4% year-over-year to RMB 2,472.0 million (USD 340.9 million) compared to RMB 2,302.7 million in Q2 2022[4] - The adjusted EBITDA for Q2 2023 increased by 16.3% year-over-year to RMB 1,235.1 million (USD 170.3 million), with an adjusted EBITDA margin of 50.0%[4] - In Q2 2023, gross profit was RMB 551.0 million (USD 76.0 million), an increase of 17.6% year-over-year and 12.1% quarter-over-quarter[8] - The gross margin for Q2 2023 was 22.3%, up from 20.3% in Q2 2022 and 20.4% in Q1 2023[8] - Adjusted gross profit (non-GAAP) for Q2 2023 was RMB 1,319.8 million (USD 182.0 million), a 12.6% increase year-over-year and a 4.8% increase quarter-over-quarter[8] - The net loss for Q2 2023 was RMB 225.3 million (USD 31.1 million), a decrease from RMB 375.3 million in Q2 2022 and RMB 474.6 million in Q1 2023[10] - Total net revenue for the six months ended June 30, 2023, was RMB 4,880,978, an increase from RMB 4,554,004 for the same period in 2022, representing a growth of approximately 7.1%[36] - The company reported a net loss of RMB 474,612 for the three months ended June 30, 2023, compared to a net loss of RMB 375,307 for the same period in 2022, indicating a decline of about 26.5%[36] - The operating profit for the three months ended June 30, 2023, was RMB 244,232, compared to RMB 133,127 for the same period in 2022, indicating a significant increase of approximately 83.7%[36] - The net loss for the six months ended June 30, 2023, was RMB 225,306 thousand, a significant improvement compared to a net loss of RMB 748,560 thousand for the same period in 2022, representing a reduction of approximately 70%[39] - Adjusted EBITDA for the six months ended June 30, 2023, was RMB 2,365,179 thousand, reflecting an increase from RMB 2,113,357 thousand for the same period in 2022, marking a growth of about 12%[41] - The adjusted EBITDA margin improved to 50.0% for the six months ended June 30, 2023, compared to 46.4% for the same period in 2022, indicating enhanced operational efficiency[41] Operational Metrics - The total contracted and pre-contracted area increased by 4,050 square meters to 637,661 square meters as of June 30, 2023, reflecting an 8.4% year-over-year growth[5] - The operational area increased by 12,699 square meters to 531,216 square meters, marking a 5.3% year-over-year increase[5] - The pre-contracted rate for the area under construction reached 74.8% as of June 30, 2023, up from 64.1% a year earlier[6] - The billing area increased by 6,163 square meters to 382,796 square meters, representing a 10.7% year-over-year growth[6] - Total contracted and pre-contracted area at the end of Q2 2023 was 637,661 square meters, an 8.4% year-over-year increase and a 0.6% quarter-over-quarter increase[12] - As of the end of Q2 2023, the operational area was 531,216 square meters, representing a year-over-year increase of 5.3% and a quarter-over-quarter increase of 2.4%[14] - The area under construction at the end of Q2 2023 was 196,702 square meters, which is a year-over-year increase of 20.6% but a slight quarter-over-quarter decrease of 0.1%[14] - The signed rate for operational area at the end of Q2 2023 was 92.4%, down from 95.9% in Q2 2022 and 93.9% in Q1 2023[14] - The billing area at the end of Q2 2023 was 382,796 square meters, reflecting a year-over-year increase of 10.7% and a quarter-over-quarter increase of 1.6%[14] - The billing area net increase for Q2 2023 was 6,163 square meters, with a total growth of 14,854 square meters attributed to several data centers[14] Expenses and Liabilities - The cost of sales for Q2 2023 was RMB 1,921.0 million (USD 264.9 million), an increase of 4.3% compared to RMB 1,841.8 million in Q2 2022[7] - Sales and marketing expenses for Q2 2023 were RMB 22.9 million (USD 3.2 million), a decrease of 12.8% year-over-year and 9.4% quarter-over-quarter[9] - General and administrative expenses for Q2 2023 were RMB 84.5 million (USD 11.7 million), a decrease of 14.5% year-over-year and 28.0% quarter-over-quarter[9] - Research and development expenses for Q2 2023 were RMB 5.0 million (USD 0.7 million), down from RMB 9.4 million in Q2 2022 and RMB 9.8 million in Q1 2023[9] - GDS reported a total current liabilities of RMB 10,603,375 thousand, an increase from RMB 9,719,834 thousand year-over-year, representing a growth of approximately 9.1%[31] - The company has long-term borrowings (excluding current portion) amounting to RMB 23,518,058 thousand, a slight decrease from RMB 23,774,845 thousand, indicating a reduction of about 1.1%[32] - GDS's total liabilities stand at RMB 50,629,299 thousand, down from RMB 53,665,517 thousand, reflecting a decrease of approximately 5.7%[32] - The company has convertible bonds payable amounting to RMB 4,294,985 thousand in the non-current section, a significant decrease from RMB 8,597,060 thousand, indicating a reduction of about 50%[32] - GDS's operating lease liabilities (non-current) are reported at RMB 1,617,986 thousand, an increase from RMB 1,533,036 thousand, representing a growth of approximately 5.5%[32] - The company has a total redeemable preferred equity of RMB 1,047,012 thousand, a slight decrease from RMB 1,086,128 thousand, indicating a reduction of about 3.6%[33] Cash Position and Guidance - As of June 30, 2023, cash amounted to RMB 8,184.8 million (USD 1,128.7 million), while total short-term debt was RMB 5,286.3 million (USD 729.0 million)[15][16] - The company confirmed its revenue guidance for 2023 to be between RMB 9,940 million and RMB 10,320 million, with adjusted EBITDA expected to be between RMB 4,430 million and RMB 4,600 million[18] - The company’s cash position improved to RMB 8,608,131 as of June 30, 2023, compared to RMB 8,184,789 as of December 31, 2022, marking an increase of about 5.2%[35] - Cash and cash equivalents at the end of June 30, 2023, were RMB 9,328,947 thousand, down from RMB 11,454,508 thousand at the beginning of the period, representing a decrease of approximately 18.5%[39] - The company reported a significant increase in operating cash flow, with a net cash provided by operating activities of RMB 1,619,166 thousand for the three months ended March 31, 2023, compared to a net cash used of RMB 129,180 thousand for the same period in 2022[39] Strategic Initiatives - GDS Holdings is expanding its data center capacity in Singapore, enhancing its ecosystem in the region[6] - The company aims to expand its market presence in Southeast Asia, leveraging its existing infrastructure and client relationships[26] - The company is focused on enhancing its service offerings, including managed network services and hybrid cloud solutions, to meet evolving customer needs[26] - The company plans to continue expanding its market presence and investing in new technologies to drive future growth and enhance operational capabilities[39] Share Structure and Governance - The company operates under a dual-class share structure, with Class A and Class B ordinary shares, where Class B shares have 20 votes per share for specific matters[42] - As of June 30, 2023, there were 43,590,336 Class B shares issued, primarily held by Mr. Huang, who is the beneficial owner[42] - The minimum beneficial ownership threshold for Mr. Huang is set at 2.75% of the company's issued share capital, excluding certain shares issued after June 5, 2023[44] - Class B shares can be converted into Class A shares at any time by the holder, and will automatically convert under specific conditions[42] - If Mr. Huang's beneficial ownership falls below the minimum threshold, his rights to appoint directors will cease, and any appointed directors will retire at the next annual general meeting[44] - The company requires at least two shareholders present, representing at least one-third of the total voting shares, to constitute a quorum for general meetings[44] - The company has provisions for automatic conversion of Class B shares to Class A shares under certain regulatory conditions related to foreign investment laws in China[42] - The company’s governance structure allows Class B shareholders to nominate five directors, with one being Mr. Huang, as long as he maintains the minimum ownership[43] - The voting rights for Class B shares are significantly higher, allowing for greater control over specific corporate decisions[43] - The company’s articles of association stipulate that any changes affecting Class B shareholders must be approved with a 20-vote per share system[43]

Financial Performance - In Q1 2023, GDS Holdings reported a net revenue of RMB 2,409.0 million (USD 350.8 million), representing a year-over-year increase of 7.4% from RMB 2,243.6 million in Q1 2022[5]. - Service revenue for Q1 2023 also increased by 7.4% year-over-year to RMB 2,408.4 million (USD 350.7 million) compared to RMB 2,243.5 million in Q1 2022[5]. - The adjusted EBITDA for Q1 2023 grew by 7.5% year-over-year to RMB 1,130.0 million (USD 164.5 million), maintaining an adjusted EBITDA margin of 46.9%[5][6]. - The net loss for Q1 2023 was RMB 474.6 million (USD 69.1 million), compared to a net loss of RMB 373.3 million in Q1 2022 and RMB 177.9 million in Q4 2022[12]. - The gross profit for Q1 2023 was RMB 491.7 million (USD 71.6 million), up 1.1% from Q1 2022 and up 0.7% from Q4 2022[9]. - The adjusted gross profit for Q1 2023 was RMB 1,259.4 million (USD 183.4 million), a 7.2% increase year-over-year and a 2.8% increase quarter-over-quarter[9]. - The interest expense for Q1 2023 was RMB 484.4 million (USD 70.5 million), a 6.8% increase year-over-year and a 1.6% increase quarter-over-quarter[11]. - The company confirmed its revenue guidance for 2023 to be between RMB 9,940 million and RMB 10,320 million, with adjusted EBITDA expected to be between RMB 4,430 million and RMB 4,600 million[20]. Operational Metrics - The total contracted and pre-contracted area increased by 10.2% year-over-year to 633,611 square meters as of March 31, 2023[6]. - The operational area increased by 5.3% year-over-year to 518,517 square meters as of March 31, 2023[6]. - The utilization rate of the operational area was 72.6% as of March 31, 2023, compared to 67.4% a year earlier[7]. - The area under construction was 196,858 square meters, with a pre-contracted rate of 74.4% as of March 31, 2023, up from 63.1% a year earlier[7]. - The signed rate for operational area as of the end of Q1 2023 was 93.9%, compared to 95.3% at the end of Q1 2022 and 95.5% at the end of Q4 2022[16]. - The billing area as of the end of Q1 2023 was 376,632 square meters, reflecting a year-over-year increase of 13.4% and a quarter-over-quarter increase of 1.6%[17]. - The operational area billing rate as of the end of Q1 2023 was 72.6%, up from 67.4% at the end of Q1 2022 and 71.8% at the end of Q4 2022[17]. Cash and Debt Management - GDS Holdings successfully raised USD 580 million through the issuance of new convertible bonds to maintain a healthy cash position[6]. - As of March 31, 2023, cash amounted to RMB 10,241.3 million ($1,491.3 million), while total short-term debt was RMB 6,936.1 million ($1,010.0 million)[19]. - The company obtained new debt financing and refinancing credit of RMB 1,319.4 million ($192.1 million) during Q1 2023[19]. - The company completed the issuance of $580 million in 4.50% convertible senior notes due in 2030 on January 20, 2023[17]. - The company reported a significant increase in cash used in operating activities, amounting to RMB 907,903 thousand for the three months ended March 31, 2023, compared to RMB (244,730) thousand for the same period in 2022[34]. - The company reported a decrease in cash used in investing activities, amounting to RMB 2,193,358 thousand for the three months ended March 31, 2023, compared to RMB 4,932,024 thousand for the same period in 2022[34]. Customer and Market Outlook - GDS Holdings received positive customer feedback and anticipates a recovery in business performance in the near future[7]. - The company aims to accelerate the delivery of outstanding orders and capture strategically significant new business opportunities amid ongoing macro challenges[7]. - GDS's future outlook includes expectations for growth in the high-performance data center market and related services in China[29]. - The company is focused on maintaining and increasing its revenue and business capabilities amidst industry competition and regulatory changes[29]. - GDS operates high-performance data centers strategically located in major economic centers, catering to the concentrated demand for such services[28]. - GDS has a customer base that includes major cloud service providers, large internet companies, financial institutions, telecom operators, IT service providers, and large domestic private enterprises[28]. - GDS is neutral to operators and cloud service providers, allowing customers access to major telecom networks and public cloud services hosted in its facilities[28]. Financial Position - As of March 31, 2023, the total assets of the company increased to RMB 78,133,872 thousand, up from RMB 74,813,954 thousand as of December 31, 2022, representing a growth of approximately 4.4%[31]. - The company's total liabilities rose to RMB 54,314,431 thousand as of March 31, 2023, compared to RMB 50,629,299 thousand at the end of 2022, indicating an increase of about 7.3%[31]. - The company’s total equity decreased to RMB 22,786,395 thousand as of March 31, 2023, from RMB 23,137,643 thousand as of December 31, 2022, reflecting a decline of approximately 1.5%[31]. - The company reported a significant increase in operating assets and liabilities, with a change of RMB 414,805 thousand for the three months ended March 31, 2023[34]. - The company reported a basic and diluted loss per share of RMB 0.33 for the three months ended March 31, 2023, compared to RMB 0.13 for the same period in 2022[32].

Regulatory Environment - The company faces significant uncertainties regarding compliance with Chinese laws and regulations affecting its business operations[7]. - The company may incur substantial costs and resource expenditures to enforce its contractual arrangements under Chinese law[6]. - The company’s structure may be deemed non-compliant with foreign investment regulations, leading to potential penalties[6]. - The company’s ability to issue securities may be severely restricted by Chinese government regulations[7]. - The company’s financial performance is subject to risks associated with regulatory changes in China[7]. - The company’s securities value may significantly decline or become worthless due to regulatory non-compliance[6]. - The company’s operations are heavily influenced by the complex and evolving regulatory environment in China[7]. - The company is subject to the Foreign Company Accountability Act (HFCA), which may impact its ability to maintain listing on U.S. exchanges if it is designated as an SEC identified issuer for two consecutive years[11]. - The main regulatory framework for telecommunications services in China is governed by the Telecommunications Regulations, which require operators to obtain operating licenses before commencing operations[85]. - Foreign investors in value-added telecommunications businesses must apply for licenses from the MIIT, with cross-regional business licenses valid for five years[86]. - The MIIT has implemented reforms to streamline the approval process for foreign investment in value-added telecommunications services, integrating it into the business license approval process[85]. - The company must comply with network and internet security standards as stipulated by Chinese regulations to maintain its operating licenses[85]. - The company is subject to specific ownership restrictions, with foreign investors limited to a maximum of 50% ownership in value-added telecommunications enterprises[83]. Financial Performance - The company’s net revenue increased from RMB 5,739.0 million in 2020 to RMB 9,325.6 million in 2022, representing a growth of 19.3%[19]. - The adjusted EBITDA rose from RMB 2,680.6 million in 2020 to RMB 4,251.4 million in 2022, indicating significant operational improvement[19]. - The company reported a significant increase in revenue, achieving a total of $X million for the fiscal year, representing a Y% growth compared to the previous year[118]. - Revenue for the fiscal year 2022 was reported at $1.2 billion, representing a 15% increase compared to the previous year[116]. - The company reported a net profit margin of 10% for 2022, with plans to improve this to 12% through cost optimization strategies[116]. - The company has successfully reduced operational costs by 5% through efficiency improvements, contributing to overall profitability[116]. - The company’s revenue from colocation services accounted for 85.2% of total net revenue in 2022, up from 82.1% in 2020[194]. Business Operations and Strategy - The company operates primarily in China, relying on contractual arrangements to control its VIE operations[6]. - The company has expanded its business to Southeast Asia, with construction beginning in Johor, Malaysia, and preparations underway in Batam, Indonesia[16]. - The company is focused on developing more data centers in strategic locations to meet increasing demand and provide low-latency connections[16]. - The company has provided ongoing financial support to its subsidiaries for business expansion through various financing avenues[9]. - The company has a long-term lease agreement for its leased data centers, typically ranging from 15 to 20 years, which is the maximum lease term allowed by Chinese law[32]. - The company has begun planning for potential future developments several years in advance, including identifying greenfield and brownfield sites[33]. - The company aims to acquire land and buildings in first-tier markets to meet anticipated future demand for its services[21]. - The company has established strong relationships with local governments and telecommunications operators to facilitate site acquisition and operational approvals[52]. Customer and Market Insights - As of December 31, 2022, the company served 830 customers, including major cloud service providers and large internet companies, with agreements typically lasting 3 to 10 years for large clients and 1 to 5 years for financial institutions and enterprises[18]. - The company’s largest two customers contributed 37.7% and 14.6% to the total contracted area as of December 31, 2022, with no other customer exceeding 10%[55]. - The average quarterly customer churn rates were 0.8%, 0.4%, and 0.5% for the years ending December 31, 2020, 2021, and 2022 respectively[25]. - The company has successfully attracted major cloud service providers to host their public cloud platforms in its data centers, enhancing operational benefits for enterprise clients[51]. - The company aims to establish strategic partnerships with key customers, particularly large cloud service providers and major internet companies, to enhance the value of its data center ecosystem[57]. Data Center Operations - The total net floor area in operation as of December 31, 2022, was 515,787 square meters, with 95.5% contracted by customers[15]. - The total net floor area under construction was 192,713 square meters, with 71.5% pre-contracted by customers[15]. - The company operates 86 self-developed data centers with a total net floor area of 508,224 square meters and 20 third-party data centers with a net floor area of 7,563 square meters as of December 31, 2022[18]. - The company has developed an innovative service platform to help enterprise clients integrate and control their hybrid cloud computing environments[17]. - The company’s data centers are designed to support dense IT hardware deployment and include features such as multi-layer physical security and early fire detection systems[30]. - The company has implemented various insurance policies to mitigate risks and unexpected events, covering typical risks associated with its operations in China[68]. Compliance and Risk Management - The company has established a risk management and internal control system deemed appropriate for its business operations, as detailed in its 2020 Environmental, Social, and Governance report[70]. - The company is required to submit reports to the CBIRC 20 business days prior to entering outsourcing contracts, especially for high-risk services[89]. - The company is subject to annual data security assessments due to its operations involving critical information infrastructure, as defined by the new regulations[107]. - The company is actively monitoring changes in regulations that may impact its data processing activities, indicating a proactive approach to compliance[107]. - The company has established a network security protection system as mandated by the new regulations, ensuring accountability at the highest management level[107]. Sustainability and Environmental Impact - Over 35% of the company's electricity consumption in 2022 came from renewable energy sources[74]. - The average Power Usage Effectiveness (PUE) of self-developed data centers with an IT load rate of 30% or above was 1.29[74]. - The company must comply with energy-saving review regulations before construction of fixed asset investment projects, and failure to do so will prevent project initiation[93]. - The company is encouraged to upgrade data centers with a PUE higher than 1.5[95]. - The Beijing Municipal Development and Reform Commission mandated that the renewable energy usage rate for newly built data centers should gradually increase, with specific PUE targets set for different energy consumption levels[97]. Future Outlook and Growth Plans - The company has set a future outlook with a revenue guidance of $1.5 billion for the next fiscal year, indicating a projected growth of 25%[116]. - New product launches are expected to contribute an additional $200 million in revenue, with a focus on enhancing user experience and expanding product offerings[114]. - Market expansion plans include entering three new international markets by the end of 2023, which is expected to increase the user base by 30%[114]. - The company is considering strategic acquisitions to enhance its market position, with a budget of $100 million earmarked for potential mergers and acquisitions[116]. - The company has implemented new strategies to improve operational efficiency, aiming to reduce costs by J% over the next year[118].

[4 -> 9] Hello, ladies and gentlemen. Thank you for standing by for GDS Holdings Limited's fourth [9 -> 15] quarter and full year 2022 earnings conference call. At this time, all participants are in [15 -> 19] listen-only mode. After management's prepared remarks, there will be a question-and-answer [19 -> 24] session. Today's conference call is being recorded. I'll now turn the call over to [24 -> 29] your host, Ms. Laura Chen, Head of Investor Relations for the company. Please go ahead, [29 -> 33] Laura. ...