GDS (GDS) Q2 2025 Earnings Call August 20, 2025 08:00 AM ET Company ParticipantsLaura Chen - Head Investor RelationsWilliam Huang - Founder, Chairman of the Board & CEODaniel Newman - CFOYang Liu - Executive DirectorFrank Louthan - Managing DirectorEdison Lee - Head - HK/China Tech, Telecom & Software ResearchGokul Hariharan - Managing DirectorConference Call ParticipantsXinyi Wang - Equity Research Analyst - Greater China Telecom & Data CenterOperatorHello, ladies and gentlemen. Thank you for standing by f ...

GDS (GDS) Q2 2025 Earnings Call August 20, 2025 08:00 AM ET Speaker0Hello, ladies and gentlemen. Thank you for standing by for GDS Holdings Limited's Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in listen only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded.I will now turn the call over to your host, Ms. Laura Chen, Head of Investor Relations for the company. Please go ahead, L ...

Financial Data and Key Metrics Changes - TELUS achieved total mobile and fixed customer growth of 198,000 in Q2 2025, driven by mobile phone and connected device additions of 167,000 and fixed customer additions of 31,000 [5][6] - TTEC EBITDA growth, including TELUS Health, was up 4%, consistent with Q1 results, while mobile phone net additions were 55,000 and connected device net additions were 112,000 [6][7] - Free cash flow increased by CAD 535 million, an 11% rise compared to the same period last year, driven by higher EBITDA and lower capital expenditures [21][23] Business Line Data and Key Metrics Changes - TELUS Health reported an extraordinary growth in operating revenue and adjusted EBITDA of 1629% respectively, with a significant increase in global lives covered to almost 160 million [8][19] - Fixed data services revenue grew by 3%, marking the eighteenth consecutive quarter of positive growth, supported by subscriber ARPU growth in Internet and security services [18][19] - Mobile network revenue saw a slight decline due to lower mobile phone ARPU, which decreased by 3.3% amid competitive pressures [17] Market Data and Key Metrics Changes - The Canadian market is showing signs of stabilization, with improvements in ARPU trends across new activations and customer renewals [17][39] - TELUS is committed to expanding broadband services in Ontario and Quebec with a CAD 2 billion investment, reflecting confidence in the Canadian market [4][5] Company Strategy and Development Direction - TELUS is focusing on bundling wireless and wireline broadband services, aiming to differentiate itself through innovative offerings such as AI-driven smart home solutions and next-generation healthcare [4][5] - The company is pursuing a strategy of monetizing its tower infrastructure through a partnership with Akeis, which will enhance financial flexibility and support balance sheet deleveraging [11][24] - TELUS is leveraging its existing assets for new opportunities, particularly in AI and data centers, to drive long-term value creation [79][99] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the operating environment, noting that the market is transitioning from irrational pricing to more sustainable pricing models [39][41] - The company anticipates continued improvements in its leverage ratio, aiming for a net debt to EBITDA ratio of three times by 2027 [22][24] - Management emphasized the importance of customer experience and product differentiation as key drivers for future growth [44][46] Other Important Information - TELUS Friendly Future Foundation raised over CAD 2.6 million to support student bursaries, reflecting the company's commitment to community support [15] - The company is actively working on real estate rationalization and copper monetization, with significant opportunities identified in these areas [71][73] Q&A Session Summary Question: Strategic shift regarding the proposed privatization of TIAXT - Management clarified that the move is related to supporting deleveraging goals and should not be interpreted as a change in monetization strategy for other tech ventures [28][29] Question: Financial details on the tower entity - Management did not disclose specific EBITDA figures but confirmed that all towers will operate at fair market value rent, ensuring positive cash flow [30][31] Question: Long-term impact of tower deal and deployment of more towers - The demand for data is increasing, and the partnership with Terion will allow for continued tower construction and co-location opportunities, enhancing cash flow [36][38] Question: Sustainability of recent pricing improvements in wireless - Management noted that while certainty is not guaranteed, the current trend is encouraging, and the market must shift from irrational pricing to rational pricing for sustainability [39][41] Question: Update on fixed data growth sustainability - Management expressed confidence in the sustainability of fixed data growth, supported by diverse service offerings and strong customer experience [66][68] Question: Plans for new data center construction - TELUS has already invested in world-class data centers and is leveraging these assets for AI initiatives, minimizing the need for additional capital investment [97][99]

Financial Data and Key Metrics Changes - In Q1 2025, the company achieved a revenue growth of 12% year on year and adjusted EBITDA growth of 16%, marking the highest growth rate in the past two years [8][19] - The adjusted EBITDA margin for Q1 2025 was 48.6%, compared to 46.9% in Q1 2024, primarily due to lower operating costs [19][68] - The company realized a gain on deconsolidation of subsidiaries sold to the ABS of over RMB1 billion, which was not included in adjusted EBITDA [19] Business Line Data and Key Metrics Changes - The gross move-in during Q1 2025 was approximately 20,000 square meters, all in Tier one markets, with a utilization rate of 75.7% [8] - The company added 70 MW of new commitments in Q1 2025, bringing the total power committed to over 530 MW, with expectations to exceed 750 MW soon [15][25] Market Data and Key Metrics Changes - The demand environment has improved significantly due to AI developments, particularly in Tier one markets, with a notable mega deal signed in Q1 2025 [9][10] - The company holds around 900 MW of capacity for future developments in Tier one markets, indicating strong positioning to capture upcoming AI demand [12][13] Company Strategy and Development Direction - The company is focused on backlog delivery and new orders with faster-moving schedules, anticipating that around 40% of the current backlog will be delivered by year-end [9] - The asset monetization program is progressing well, providing financing flexibility and options to capitalize on new projects [14][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for AI-related services, particularly in Tier one markets, and noted that the demand for AI inferencing is expected to grow significantly [9][33] - There are uncertainties regarding AI chip supply in China in the short term, but management believes that as supply stabilizes, demand will increase [11][12] Other Important Information - The company is making good progress with the establishment of an onshore listed Sea REIT, which is expected to create a valuation benchmark for stabilized data centers in China [21][64] - The company maintains its guidance for total revenue and adjusted EBITDA unchanged despite the ABS deconsolidation [23] Q&A Session Summary Question: Update on China demand from hyperscalers and chipset supply - Management noted that demand remains strong, particularly driven by AI inference, and they are well-positioned with 900 MW held for future development [33][34] Question: Financial guidance expectations post-ABS deconsolidation - The impact of the ABS transaction closing at the end of Q1 is expected to reduce full-year EBITDA by around RMB130 million, adjusting the growth rate from 11% to 8.5% [35][36] Question: Comparison of IRR profile or EBITDA yield across different markets - The development yield in new markets is in the low teens, which is higher than current yields in China, indicating a different supply-demand balance [42][43] Question: When will the China business be self-funding? - The company is currently break-even in terms of free cash flow before financing and expects to generate sufficient cash flow to cover annual CapEx [46] Question: Pricing outlook for the China business - The pricing for new business in China is stable across major markets, with confidence in maintaining this stability [68]

Financial Data and Key Metrics Changes - For Q4 2024, the company expects net income available to common shareholders to be between $48 million and $68 million, including approximately $236 million to $247 million from discontinued operations related to the divestiture of Great American businesses [30][31] - Diluted net income per share is projected to be between $1.57 and $2.22, with a net loss from continuing operations estimated at $178 million to $187 million, primarily due to impairment charges and trading losses [31][32] - Operating adjusted EBITDA from continuing operations is expected to be between $12 million and $14 million, with total debt reported at $1.78 billion, a decline of $221 million from the previous quarter [32][33] Business Line Data and Key Metrics Changes - The company established a joint venture with Oaktree Capital Management, contributing its appraisal and valuation services, which resulted in approximately $203 million in cash and a 44% ownership interest in the new entity [9][10] - The Wealth Management business is expected to manage approximately $15 billion in client assets after the sale of a portion of its traditional W-2 business to Stifel Financial Corp [12][23] - GlassRatner, the advisory services business, had a record year in 2024, indicating strong performance in its core expertise areas [24][42] Market Data and Key Metrics Changes - The company reported a strong December for its broker-dealer segment, which is positioned as a top provider to the middle market segment, with expectations of substantial operating EBITDA in a normalized environment [20][21] - The telecom business continues to provide steady cash flow and EBITDA, contributing positively to the overall financial health of the company [46] Company Strategy and Development Direction - The company aims to focus on its core businesses, including B. Riley Securities, Wealth Management, and advisory services, while monetizing non-core assets to strengthen its balance sheet [17][16] - The strategic partnership with Oaktree is expected to enhance the company's ability to deliver financial products and services, leveraging Oaktree's expertise and scale [10][11] - The company plans to continue exploring strategic opportunities to unlock value within its core business segments [22][42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about emerging from a period of asset monetization and debt reduction, positioning the company as a more nimble and focused entity [17][66] - The management acknowledged the challenges faced due to principal investments but emphasized the potential for recovery and growth in core operations [27][66] - The company is committed to investing in its business and addressing outstanding debt maturities while limiting dilution for shareholders [36][38] Other Important Information - The company completed the full redemption of its February 2025 senior notes, retiring its only significant maturity for that year [14] - A new $160 million senior secured credit facility was established with Oaktree, providing greater financial flexibility [15] Q&A Session Summary Question: What are the plans for liquidity and balance sheet improvement in the next six months? - Management indicated a focus on investing in core businesses and proactively aligning the balance sheet, with ongoing asset monetization efforts [36][37] Question: Can you provide insights on the core business's EBITDA and cash flow potential? - Management highlighted the historical performance of core businesses and expressed confidence in their ability to generate operating EBITDA, despite recent challenges [38][42] Question: What is the current state of the Wealth Management business after the recent sale? - The remaining Wealth Management group now manages approximately $15 billion in assets, down from $24 billion prior to the sale [58] Question: Will future asset monetization primarily come from the Principal Investment Group? - Management confirmed a careful approach to monetizing non-core assets while focusing on growing core businesses [60][61]