Press Release

GDS Holdings Limited Reports First Quarter 2017 Results

Date:May 10,2017
Image

GDS Holdings Limited (“GDS Holdings” 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 quarter ended March 31, 2017.

First Quarter 2017 Financial Highlights

• Net revenue increased by 65.8% year-over-year (“Y-o-Y”) to RMB350.0 million (US$50.9 million) in the first quarter of 2017 (1Q2016: RMB211.1 million).

• Service revenue increased by 69.8% Y-o-Y to RMB343.7 million (US$49.9 million) in the first quarter of 2017 (1Q2016: RMB202.4 million).

• Net loss was RMB44.3 million (US$6.4 million) in the first quarter of 2017, compared with a net loss of RMB38.8 million in the first quarter of 2016.

• Adjusted EBITDA (non-GAAP) increased by 132.3% Y-o-Y to RMB123.9 million (US$18.0 million) in the first quarter of 2017 (1Q2016: RMB53.4 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 35.4% in the first quarter of 2017 (1Q2016: 25.3%).

Operating Highlights

• Total area committed increased by 84.8% Y-o-Y to 68,313 sqm as of March 31, 2017 (March 31, 2016: 36,959 sqm).

• Area utilized (or revenue generating space) increased by 58.2% Y-o-Y to 37,898 sqm as of March 31, 2017 (March 31, 2016: 23,957 sqm).

• Area in service increased by 61.3% Y-o-Y to 61,092 sqm as of March 31, 2017 (March 31, 2016: 37,869 sqm).

• Commitment rate for area in service was 90.0% as of March 31, 2017 (March 31, 2016: 88.8%) and utilization rate was 62.0% as of March 31, 2017 (March 31, 2016: 63.3%).

• Area under construction was 35,055 sqm as of March 31, 2017 (March 31, 2016: 35,525 sqm).

• Pre-commitment rate for area under construction was 37.9% as of March 31, 2017 (March 31, 2016: 9.4%).

“We continued to achieve robust growth in the first quarter 2017,” said Mr. William Huang, Chairman and Chief Executive Officer. “China’s Cloud adoption is taking off and driving demand for our high-performance data center solutions. As a result, we added over 7,000 sqm (net) to our total area committed in the first quarter of 2017. We have fully reallocated the space vacated by the churn customer mentioned in our previous announcement. We are completing the Shenzhen 5 (“SZ5”) data center acquisition which adds 10,000 sqm of capacity under construction with 50% pre-committed. Recently, we secured a new data center project in Beijing (“BJ3”) which will add over 4,000 sqm of capacity and strengthen our position in that market. We have taken steps to deepen our relationships with major customers, such as Alibaba and Tencent, by not only winning more of their business but also by partnering with them for future business growth. Together with our most valued customers, we look forward to maintaining our strong growth momentum and market leadership, and paving the path for future Cloud development in China.”

“We are pleased to report solid financial results for the first quarter 2017,” said Mr. Dan Newman, Chief Financial Officer of GDS Holdings. “Despite the churn event we mentioned, we have made up for the revenue loss and achieved the same level of service revenue, excluding the termination fee which we booked in the first quarter of 2017. Moreover, we have secured more financing facilities to further develop our projects to meet the increasing demand from our customers. In 2017, we will continue our rapid growth trajectory by delivering our huge contract backlog and continuing to expand our capacity.”

First Quarter 2017 Financial Results

Net revenue in the first quarter of 2017 was RMB350.0 million (US$50.9 million), a 65.8% increase over the first quarter of 2016 and a 12.3% increase over the fourth quarter of 2016. Service revenue in the first quarter of 2017 was RMB343.7 million (US$49.9 million), a 69.8% increase over the first quarter of 2016 and a 14.7% increase over the fourth quarter of 2016. The increase in service revenue over the previous quarter was mainly due to the termination fee of RMB44.1 million booked from the announced churn event. Excluding the termination fee, service revenue was RMB299.6 million (US$43.5 million), which was at the same level as the fourth quarter of 2016. Revenue from IT equipment sales was RMB6.4 million (US$0.9 million), compared with RMB8.7 million in the first quarter of 2016 and RMB11.9 million in the fourth quarter of 2016.

Cost of revenue in the first quarter of 2017 was RMB243.8 million (US$35.4 million), a 55.4% increase over the first quarter of 2016 and a 3.4% increase over the fourth quarter of 2016. The increase over the previous quarter was mainly due to an increase of 11.4% in depreciation and amortization costs to RMB71.3 million (US$10.4 million) related to data centers coming into service during the fourth quarter of 2016 which was booked for a full quarter in the first quarter of 2017, and an increase of 2.4% in utility cost to RMB71.2 million (US$10.3 million) due to higher power usage by customers, partially offset by a decrease in the costs of personnel as well as equipment cost. Equipment cost was RMB5.1 million (US$0.7 million), compared with RMB7.9 million in the first quarter of 2016 and RMB10.8 million in the fourth quarter of 2016.

Gross profit was RMB106.2 million (US$15.4 million) in the first quarter of 2017, a 95.9% increase over the first quarter of 2016 and a 39.9% increase over the fourth quarter of 2016. Gross profit margin was 30.3% in the first quarter of 2017, compared with 25.7% in the first quarter of 2016 and 24.4% in the fourth quarter of 2016. The increase over the previous quarter in gross profit margin was primarily due to the termination fee received for the churn event.

Adjusted Net Operating Income (“Adjusted NOI”) (non-GAAP) is defined as gross profit excluding depreciation and amortization, accretion expenses for asset retirement costs and share-based compensation expenses allocated to cost of revenue. Adjusted NOI was RMB179.4 million (US$26.1 million) in the first quarter of 2017, an 88.6% increase over the first quarter of 2016 of RMB95.1 million and a 27.2% increase over the fourth quarter of 2016 of RMB141.0 million. The sharp increase over the previous quarter was mainly due to the termination fee received for the churn event.

Adjusted NOI margin (non-GAAP) was 51.2% in the first quarter of 2017, compared with 45.1% in the first quarter of 2016 and 45.2% in the fourth quarter of 2016.

Selling and marketing expenses, excluding share-based compensation expenses of RMB4.4 million (US$0.6 million), were RMB16.9 million (US$2.5 million) in the first quarter of 2017, a 23.0% increase over the first quarter of 2016 of RMB13.7 million (with share-based compensation of RMB nil) and an 8.5% decrease from the fourth quarter of 2016 of RMB18.5 million (excluding share-based compensation of RMB1.4 million). The decrease over the previous quarter was primarily due to fewer marketing and promotion activities in the first quarter of 2017.

General and administrative expenses, excluding share-based compensation expenses of RMB7.3 million (US$1.1 million), were RMB41.5 million (US$6.0 million) in the first quarter of 2017, a 45.5% increase over the first quarter of 2016 of RMB28.5 million (with share-based compensation of RMB nil) and a 13.7% decrease from the fourth quarter of 2016 of RMB48.0 million (excluding share-based compensation of RMB4.6 million). The decrease over the previous quarter was primarily due to a decrease in professional fees as the Company completed its public listing in the fourth quarter of 2016.

Research and development costs were RMB1.5 million (US$0.2 million) in the first quarter of 2017, compared with RMB2.0 million in the first quarter 2016 and RMB2.2 million in the fourth quarter of 2016.

Net interest expenses for the first quarter of 2017 were RMB78.6 million (US$11.4 million), a 48.4% increase over the first quarter of 2016 of RMB53.0 million and a 5.8% decrease over the fourth quarter of 2016 of RMB83.5 million. The decrease over the previous quarter was mainly due to the repayment early in the quarter of a mezzanine loan of RMB199.6 million with higher interest rate.

Foreign currency exchange loss for the first quarter of 2017 was RMB2.6 million (US$0.4 million), compared with a loss of RMB1.4 million in the first quarter of 2016 and a gain of RMB11.6 million in the fourth quarter of 2016.

Adjusted EBITDA (non-GAAP) is defined as net loss excluding net interest expenses, income tax benefits, depreciation and amortization, accretion expenses for asset retirement costs and share-based compensation expenses. Adjusted EBITDA was RMB123.9 million (US$18.0 million) in the first quarter of 2017, a 132.3% increase over the first quarter of 2016 of RMB53.4 million and a 34.7% increase over the fourth quarter of 2016 of RMB92.0 million. The sharp increase over the previous quarter was mainly due to the termination fee received for the churn event.

Adjusted EBITDA margin (non-GAAP) was 35.4% in the first quarter of 2017, compared with 25.3% in the first quarter of 2016 and 29.5% in the fourth quarter of 2016.

Net loss in the first quarter of 2017 was RMB44.3 million (US$6.4 million), compared with a net loss of RMB38.8 million in the first quarter of 2016 and a net loss of RMB69.6 million in the fourth quarter of 2016.

Basic and diluted loss per ordinary share in the first quarter of 2017 was RMB0.06 (US$0.01), compared with RMB0.33 in the first quarter of 2016 and RMB0.19 in the fourth quarter of 2016.

Basic and diluted loss per American Depositary Share (“ADS”) in the first quarter of 2017 was RMB0.47 (US$0.07), compared with RMB2.60 in the first quarter of 2016 and RMB1.54 in the fourth quarter of 2016. Each ADS represents eight Class A ordinary shares.

Sales

Total area committed at the end of the first quarter of 2017 was 68,313 sqm, compared with 36,959 sqm at the end of the first quarter of 2016 and 61,043 sqm at the end of the fourth quarter of 2016, an increase of 84.8% Y-o-Y and 11.9% quarter-over-quarter (“Q-o-Q”). The sales increase was driven primarily by booming Cloud adoption in China leading to higher demand from Cloud service providers, as well as new commitments from Internet and financial service institution customers.

Data Center Resources

Area in service at the end of the first quarter of 2017 was 61,092 sqm, compared with 37,869 sqm at the end of the first quarter of 2016 and 60,982 sqm at the end of the fourth quarter of 2016, an increase of 61.3% Y-o-Y and 0.2% Q-o-Q.

Area under construction at the end of the first quarter of 2017 was 35,055 sqm, compared with 35,525 sqm at the end of the first quarter of 2016 and 25,055 sqm at the end of the fourth quarter of 2016, a decrease of 1.3% Y-o-Y and an increase of 39.9% Q-o-Q. The increase over the fourth quarter of 2016 was due to the inclusion of the acquired SZ5 data center which is under construction.

Commitment rate of area in service was 90.0% at the end of the first quarter of 2017, compared with 88.8% at the end of the first quarter of 2016 and 89.0% at the end of fourth quarter 2016. Pre-commitment rate of area under construction was 37.9% at the end of the first quarter of 2017, compared with 9.4% at the end of the first quarter of 2016 and 27.1% at the end of the fourth quarter 2016.

Area utilized at the end of the first quarter of 2017 was 37,898 sqm, compared with 23,957 sqm at the end of the first quarter of 2016 and 37,082 sqm at the end of the fourth quarter of 2016, an increase of 58.2% Y-o-Y and 2.2% Q-o-Q.

Utilization rate of area in service was 62.0% at the end of the first quarter of 2017, compared with 63.3% at the end of the first quarter of 2016 and 60.8% at the end of the fourth quarter 2016.

Balance Sheet

As of March 31, 2017, cash was RMB1,527.3 million (US$221.9 million). Total short-term debt was RMB551.7 million (US$80.2 million), comprised of short-term borrowings and the current portion of long-term borrowings of RMB438.2 million (US$63.7 million) and the current portion of capital lease and other financing obligations of RMB113.5 million (US$16.5 million). Total long-term debt was RMB3,918.5 million (US$569.3 million), comprised of long-term borrowings (excluding current portion) of RMB1,856.1 million (US$269.7 million), convertible bonds of RMB1,034.9 million (US$150.3 million) and the non-current portion of capital lease and other financing obligations of RMB1,027.5 million (US$149.3 million). During the first quarter of 2017, the Company obtained new debt facilities of RMB532.8 million (US$77.4 million).

Recent Development – New Project in Beijing

Recently, the Company added a new data center project in Beijing (“BJ3”), located adjacent to the existing Beijing 1 (“BJ1”) data center. It is an existing industrial building which is suitable for conversion into a data center. Based on current design, BJ3 has capacity for a net floor area of 4,260 sqm. Construction will commence during the current quarter, and BJ3 is expected to come into service during the first half of 2018. This new resource addition in Beijing helps strengthen the Company’s competitive position in the Beijing market where demand is high and supply is limited.

TypeInfo: latest news

Keywords for the information: