GDS Holdings Ltd. Q3 FY2024 earnings call

• Business Performance: In 3Q 2024, revenue grew 18% and adjusted EBITDA grew 15% year-on-year. Move-in rate stepped up, with gross additional area utilized over 25,000 square meters in 3Q 2024, the highest ever, organic and in tier 1 markets. AI demand is driving move-in, with first wave for machine learning in remote areas and second wave for inferencing in tier 1 markets. Full year 2024 net additional area utilized is expected to be around 60,000 square meters, with sustained move-in anticipated.
• International Business: Established GDSI as a standalone entity to maximize shareholder value. GDSI aims to be a leading international data center platform, with 431 megawatts of total customer commitment, a strong sales pipeline, and entry into the Thailand market with land acquisition for a data center campus.
• China REIT Strategy: Approaching China REITs with two transactions: a listed C-REIT for stabilized data centers and an asset-backed security (ABS) as a 'pre-REIT' for ramping up data centers. The C-REIT application is at the national level review, aiming for approvals by mid-2025, and the pre-REIT is near final approvals.

China Segment: In 3Q 2024, GDSH segment revenue increased by 6.1% and adjusted EBITDA by 3.6% year-on-year. Revenue growth was driven by an 11.6% year-over-year increase in total area utilized. MSR per square meter declined moderately, and adjusted EBITDA margin for 3Q 2024 was down 1 percentage point compared to 3Q 2023 due to higher power tariffs. For the full year 2024, net additional area utilized is expected to be around 60,000 square meters. China CapEx for the full year 2024 was revised up to around RMB3 billion, with a base case for 2025 in the RMB2 billion to RMB3 billion range. Cash flow before financing for the full year is expected to be positive.

International Segment: In 3Q 2024, GDSI revenue increased by 42% and adjusted EBITDA by 15% quarter-on-quarter. As of 3Q 2024, there was 431 megawatts of total customer commitment. The segment signed a contract with a leading global tech company for 34 megawatts committed and 38 megawatts reserved in Batam and entered the Thailand market with land acquisition for around 120 megawatts of total IT power capacity. International CapEx for the full year 2024 was revised up to around RMB8 billion. GDSI raised $1 billion via Series B convertible preferred shares, and post-closing, GDSH will own approximately 37.6% of GDSI.

• Maintained FY’2024 consolidated revenue and adjusted EBITDA guidance. - Raised CapEx guidance to RMB11 billion, with RMB3 billion for China and RMB8 billion for international. - Expect net additional area utilized of around 60,000 square meters in 2024 and to be sustained at a similar level in 2025. - International CapEx revised up to RMB8 billion due to accelerated expansion.

• Forward-looking statements involve inherent risks and uncertainties. - Risks related to execution of China REIT strategy, challenges in international expansion, and market fluctuations affecting AI demand.

Q: About China strategy, upward revision of CapEx, link to REIT strategy A: Sticking to stabilizing China business, recycling capital to create value. If REITs are successful, can invest more aggressively in China.

Q: Thailand market development, GDSI financial commitment A: Thailand has 80 million population, growing digital economy, government support. GDSI's $400 million investment in international, aim to make it valuable, GDSH won't exercise preemption rights.

Q: China move-in outlook, CapEx next year A: Expect 60,000 square meters net additional area utilized next year, similar to 2024. CapEx next year around RMB2.5 billion base case, potential new campus development if attractive.

Q: China unit pricing, CapEx impact on free cash flow A: MSR expected to decline ~2% year-on-year. Higher China CapEx this year is bring forward, base case cash flow before financing positive next year.

Q: China business outlook, international new orders, new markets A: Cost to complete for existing backlog ~RMB6 billion. International new orders aim for 200 megawatts next year, SIJORI main focus, targeting new markets like Japan, Europe