Hello, ladies and gentlemen. Thank you for standing by for GDS Holdings Limited's Third Quarter 2023 Earnings Conference Call. At this time, all participants are in listen only mode. After management's prepared remarks, there will be the question and answer session. Today's conference call is being recorded. I will now turn the call over to your host, Miss Laura Chen, Head of Investor Relations for the company. Please go ahead, Laura. Thank you. Hello, everyone. Welcome to the Third Quarter 2023 Earnings Conference Call of GDS Holdings Limited. The company's results were issued via Newswire Services earlier today and are posted online. A summary presentation, which we will refer to during this conference call, can be viewed and downloaded from our IR website at investors.gds-services.com. Leading today's call is Mr. William Huang, GDS Founder, Chairman, and CEO, who will provide an overview of our business strategy and performance. Mr. Dan Newman, GDS CFO, will then review the financial and operating results. Ms. Jamie Khoo, our COO, is also available to answer questions. Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risk uncertainties is included in the company's prospectus as filed with the U.S. SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please also note that GDS earnings press release and this conference call include discussions of unaudited GAAP financial information, as well as unaudited non-GAAP financial measures. GDS press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. I'll now turn the call over to GDS Founder, Chairman, and CEO, William Huang. Please go ahead, William. Okay. Hello, everyone. This is William. Thank you for joining us on today's call. The number one priority of GDS management is to create value for our shareholders and drive share price recovery. We are pursuing this goal by executing distinct strategies for our China and international business. For China, our financial objectives are to grow EBITDA at a steady rate, maintain positive cash flow before financing, and a deleverage, delever the balance sheet. We are getting there by, one, first, taking a highly selective approach to new bookings, which match our inventory and come with fast-moving rates. Second, delivering the backlog and increasing capacity, utilization, and setting a high bar for new CapEx to fulfill orders with first firm moving schedules. For international, our financial objectives are to create a second growth engine, which enhances our equity value valuation. We are leveraging our competitive strengths to build a leading presence in regional hub markets, win landmark commitments from global and the China customers, and finance the business independently. Now, let's dive into our progress towards achieving these objectives. In Q3 2023, we won 21,000 square meters or 54 MW of new customer commitments, all in China. The two largest orders were from internet companies in the live streaming and the short video vertical, which continues to perform strongly. The orders were for additional capacity at our campuses in Langfang, near Beijing, where they have already deployed. The moving periods are faster than usual. Market demand in China has not yet picked up noticeably, as large customers still have inventory to absorb. The data center market will recover when there is a broader-based recovery in the digital economy. We believe that AI demand, AI demand wave is coming. However, it will take more time for customers to further develop their models and applications, adapt to new regulations, and solve the chip supply issue. AI will require a lot of data center capacity in Tier One markets, which plays to our strengths. When this demand starts to materialize in size, we will be very well-positioned. Since the launch of our international strategy, new bookings from international have made up 40% of net additional area committed, committed. In order to maintain this success. We are putting a lot of effort into securing attractive resource supply, just like what we did before in China. Our gross, our gross move-in for the third quarter was nearly 21,000 square meters, comprising 17,000 square meters in China and nearly 4,000 square meters international. Throughout the current phase of market development, the gross move-in for our China data centers has been sustained at a consistent level. Meanwhile, 3Q 2023 was the first quarter in which international made a material contribution. We expect the contribution from international to ramp up significantly over the next few quarters. In 3Q 2023, we brought around 23,000 square meters of new capacity into service. 13,000 square meters was at two of our campuses in Langfang, China. The capacity is 100% committed to a single customer, which is redeploying from other data centers. The move-in period for this new capacity is faster than usual. The remaining 10,000 square meters is the first data center at our NTP campus in Johor, Malaysia. This data center is also 100% committed, with a move-in period of only a few months. In 4Q 2023, we expect to bring another 20,000 square meters into service, half in China and half international. Once again, all of this new capacity is 100% committed with fixed move-in schedules. Turning to slide 15. We are making good progress in the execution of our international strategy. Starting with Hong Kong, our first data center, Hong Kong One, has entered service and is almost sold out to global and China customers. Our second data center, Hong Kong Two, is under construction. During the current quarter, we expect to secure an anchor customer commitment for Hong Kong Two, more than 15 months ahead of project completion. Moving to Johor. Our NTP campus has 160 MW of power capacity across the first three phases, out of which 96 MW is already committed. In 3Q 2023, we delivered 23 MW, which is already fully revenue generating. Over the next few quarters, we will deliver the remaining 73 MW of committed capacity, which will also become fully revenue generating within a short period of time. While we still have room for campus expansion at NTP, we have enhanced our resource supply by acquiring land for a second campus in Johor. We refer to this new site as Kempas Tech Park or KTP. In the first phase of development, KTP will have 108 MW of power capacity. We are seeing strong demand for our capacity in Johor from global and China customers. We are the only player to have two complementary locations, both of which are only a few kilometers from Singapore. Across these sites, we have secured 268 MW of power supply over the next three years. This gives us time to market advantage and important considerations as customers are accelerating procurement to meet AI demand. Furthermore, we have already proven our execution capability in Johor by deploying our prefab technology, including liquid cooling modules, to successfully deliver hyperscale capacity in just over one year. In Singapore, following the award of power quota, we are finalizing the site selection for our first data center. We're on track to deliver capacity in 2026. In Indonesia, we are very pleased to finalize a JV agreement with INA, the Indonesia Sovereign Wealth Fund. We believe that INA will be a great partner for us because of their complementary strengths, unique relationships, and value add. The JV is for all of our developments in Indonesia. We continue to make progress with our first project in Batam. We are working with INA to put in place the essential infrastructure.... Finally, we are moving forward with the first round private equity capital raising for our international holdco. It is going well. I will now pass on to Dan for the financial and operating review. Thank you, William. Turning to slide 19. In 3Q 2023, revenue increased by 6.4%, and adjusted EBITDA increased by 5.6% year-on-year. For the quarter-on-quarter analysis, we've excluded the one-time items which arose in 2Q 2023, as previously disclosed. On this basis, revenue grew by 4.9% and adjusted EBITDA decreased by 1.4% quarter-on-quarter. The decrease was mainly due to higher utility costs, which I will come to in a minute. Turning to slide 20. During 3Q 2023, we achieved net additional area utilized of 16,000 square meters. During the past few quarters, our net add has been affected by higher than usual churn, which is mainly due to one customer's redeployment. This will continue into the fourth quarter. However, we are now seeing the impact partly offset by greater contribution from international. Monthly service revenue per square meter was RMB 2,149 in 3Q 2023. Compared with the third quarter of 2022, MSR decreased by 4% in line with our expectations. Turning to slide 21. Due to the seasonal fluctuations in PUE, we think it makes most sense to look at our margin trends by comparing with the same quarter in the prior year. For 3Q 2023, our adjusted gross profit margin was 49.5%, compared with 50.7% in 3Q 2022, a decrease of 1.2 percentage points. During 3Q 2023, utility cost as a percentage of revenue was 35.1%, compared with 31.6% in 3Q 2022, an increase of 3.5 percentage points. This reflects increase in power generation and more recently in power distribution tariffs. However, as you can see, we were able to mitigate some of the impact of higher utility cost with other cost savings. Adjusted EBITDA margin was 44.7% in 3Q 2023, which is only slightly down versus the same quarter of last year. Turning to slide 22. Over the first nine months of 2023, our China CapEx totaled CNY 3.1 billion. Our full year guidance was for CNY 3.5 billion, and we still expect to be within that figure. However, next year, we expect China CapEx to be materially lower at around CNY 2.5 billion. Over the first nine months of 2023, our international CapEx was around CNY 2 billion. Given the rapid pace of development in Johor to meet delivery schedules, we expect full year CapEx for international to be around CNY 4 billion, in line with our guidance. Our preliminary view is that international CapEx will be CNY 4 billion or higher next year. On slide 23, we plan to finance the international business independently. On the equity side, we are undertaking an equity private placement, the proceeds of which will be ring-fenced. On the debt side, we're aiming to finance international projects on a non-recourse basis. We should therefore look at our financial position in two distinct parts: GDS Holdings, excluding international, which is in effect, Listco plus the China business, and international standalone. Over the first nine months of 2023, GDS Holdings, excluding international, had negative cash flow before financing of CNY 1.8 billion. As William mentioned, our objective is to maintain positive cash flow before financing on an organic basis without assuming any asset monetization. Cash flow before financing for this segment was in fact positive in 3Q 2023, but it will take another year or so before it is consistently positive quarter after quarter. International standalone will have negative cash flow before financing of around CNY 4 billion this year and potentially a similar amount next year. We can finance this deficit with around 50% equity and 50% debt. For the equity requirement, we aim to raise at least $400 million or CNY 2.8 billion in the current funding round. We've received very strong interest from regional and global investors and expect to close the capital raise in 1Q 2024.... Looking at our financing position on slide 24. At the end of 3Q23, our consolidated net debt to last quarter annualized adjusted EBITDA was 8.6x. Excluding the net debt and negative adjusted EBITDA of international, the multiple was 7.4-5x. If we continue along the same path, the leverage of GDS Holdings, excluding international, falls to below 6 x within 3 years. However, we continue to work on various asset monetization initiatives, including two data center funds, the potential C-REIT and property sale leaseback. This could enable us to delever a bit faster. Turning to slide 25, we are showing the loan maturity schedule for the first time, with the debt of international separately identified. Over the next couple of years, we have, on average, CNY 2.7 billion per annum, the principal repayments, all of which is onshore RMB project loans. A large part of this can be refinanced, as we have been doing successfully for many years. Although we do intend to use part of our cash balance to pay down some debt where it is prudent and efficient. Turning to slide 26, we are not changing our formal guidance for FY 2023 revenue, adjusted EBITDA and CapEx. However, we note that FY 2023 revenue is tracking to the bottom end of our original guidance range, while FY 2023 adjusted EBITDA is tracking to the top end of the original guidance range. We'd now like to open the call to all, to questions. Operator? Thank you. Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star one one on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star one one again. For the benefit of all participants on today's call, please limit yourself to one question. If you have more questions, please reenter the queue. Thank you so much. Please stand by while we compile the queue in a roster. This will take a few moments. Now we're going to take our first question today, and it comes from the line of Jonathan Atkin from RBC. Your line is open. Please ask your question. Thank you. I wondered if you could remind us of your expectations around renewal pricing and renewal spreads inside of China over the coming year, as well as your overall expectations around the pace at which utilization could increase in your existing campuses. Thank you. Yeah, thank you, John. I always prefer to address this question in a more holistic way. We have a KPI of MSR per square meter per month, which reflects a number of different factors, including renewal spreads and changes in the product mix and location. I think this year we set expectations that it would decline by 4% year-on-year, which indeed it is doing so. I think next year it will decline by less than that. Our preliminary view is about 2% year-on-year, which indicates that it's bottoming out. That gives you some indication of what's happening with renewal spreads, although, as I say, it does also reflect a number of other factors. As regards utilization rate, it... That will increase gradually. It will take about three years to get from where we are today, which is around 71%-72%, to over 80%. I think we'll cross 80% during FY 2026. And then it will take another couple of years to get up into the high 80s. If I could just squeeze in additional part of my question. So KTP, is that a different part of Johor, or is that adjacent to Nusajaya? Maybe give us a little bit of color there. And then the demand signals in that you're seeing in Indonesia, in Batam, is the JV constrained to Batam, or would you look to potentially go elsewhere in Indonesia? Thank you. Yeah, I think the KTP actually is very close to Singapore as well. I mean, in there, if you look at it, it's around 10 kilometers from our NTP, right? 10 kilometers. So it's a typical, I mean, fit for a lot of the hyperscale guy, which is a cloud guy or some hyperscale deployment structure. So the good thing, the beautiful thing is that it's very close to Singapore, latency is not an issue, and also very close, 10 kilometers away from our current NTP. So this is perfect to can allow a lot of our customers, fit a lot of our customers deploy their IT in Singapore, KTP, and NTP. So we are, we cons- we are, we are working very close with the-... A lot of the potential customers. This structure is perfect fit for their future demand. This is Batam, so we have made a lot of progress there in terms of construction, and we saw a lot of the potential demand on our hands. So currently we are working on a lot of the potential demand. So we believe this is a sell to Batam is not a big issue for us. So I think because Batam has a unique position. Number one, it's it serves, not only serves the region, they also serve fully recognized by the Indonesian domestic market. And also the power cost is lower than any location in Southeast Asia. Potentially, the renewable energy will coming soon to come—we will, in the future, we will combine the renewable energy and the low power costs and serve more broad region. This is a very unique position for the whole region, so we are very confident to get a lot of demand for Batam data center. Last one. Thank you. INA. Yeah, yeah. Oh, okay. Yeah, so- So INA, INA is a very good partner, as I mentioned. I think because they are very, very actively to help GDS set up more advantage in Batam, and help us to introduce a lot of the renewable energy player in this region. And also they help us to find more, find a lot of the potential data center site in Jakarta as well. So we are very appreciative. They are real value-added partner. I think in the future, they can add more value in terms of bring us to some SOE customer, and also the government's potential demand. So I think we are looking forward to look more close with, and INA. Thank you. Thank you. Now we're going to take our next question. Just give us a moment. And the next question comes from the line of Yang Liu from Morgan Stanley. Your line is open. Please ask your question. Hi, thank you. My question is regarding the moving outlook, because we see a pretty big delivery of the overseas project in third quarter. Should we expect, starting from fourth quarter or maybe first quarter next year, we'll see Q on Q improvement of the moving speed? Thank you. Yeah, I think the, Yang Liu, I think the—you're right. I mean, we have very good deal term with our overseas customer, right? So I think the, from the Q4 and the next few quarter- Yeah. The ramp up is, we are very happy, this ramp up speed, right? So I think you will see the overseas will contribute more, right? Mm-hmm. In for our next year. Yeah. Mm-hmm. Yeah, so I think the third, the third quarter, we look net, net of churn was sixteen thousand square meters, which is, you know, higher than it's been for the last five or six quarters. Clearly, international started to make a contribution there. I did mention that in the fourth quarter, there will be another portion in which there's some exceptional churn. That's the completion of what we've been talking about over the last four quarters. Nonetheless, I think the net additional area utilized in the fourth quarter, net of that churn, will be higher than what it was in the third quarter. And next year, expect it to be significantly higher than what it is on a net basis in 2022, 2023. Yeah. Thank you. I just want to make sure that the previous single customer churn will end in 4Q this year, right? That's right. Maybe I'll just take this opportunity to give some statistics about churn. We talk about it in terms of square meters of area utilized. It's easier to track it that way. And we think that our normal churn rate going forward will be around 4% of area utilized, maybe 4%-5%, which I believe is low by global benchmarks. In past years, it was 2%-3%, but given the evolution of our business, it's natural, I think, to expect that to be higher. In the current year, I think the total churn will be around 28,000-29,000 square meters, which is around 7.5%. So it's clearly higher, and the difference is what we call exceptional churn. The redeployment is actually the majority of that. Yeah, this will happen from time to time, and it can set us back in the short term. It can affect our growth rate by small amount. But as it so happens, the redeploying customer has placed new orders with us, which are 1.5x the amount which they've terminated. So in effect, it's one step back and 1.5 steps forward, albeit with a timing difference. But hopefully, you know, that will be complete, and we will hopefully revert to just what I described as a normal level of churn. Yeah. Okay, thank you. Thank you. Now we're going to take our next question. Just give us a moment. The next question comes to the line of Frank Louthan from Raymond James. Your line is open. Please ask your question. Hey, guys. Good morning. This is Rob on for Frank. Are you seeing any demand for liquid cooling-based servers? And, if so, who pays the extra capital costs required for that? You know, do you guys pay it and adjust the pricing, or does the customer contribute some capital? Thank you. Yeah, I think we are, as I just mentioned, we deployed the liquid cooling already a couple of years ago in China already, right? We are very familiar with this technology. So, as I just mentioned, we are deploying now KTP, NTP one, right? So our customer also require liquid cooling. So given the future, I think for the AI guy, this will very normal. But not everybody, every AI customer use the liquid cooling. It depends, the different customer has different require profile. But number one, we are very familiar with that. Number two, I think the cost, in terms of cost, it's in our view, it's not significantly different, right? Than what we built before for the normal case, right? So I think the... Of course, it's costs increase, we definitely will charge from our customers, which we already get a mutual agreement with our customers. So this will not impact any of our return. Thank you. Now we're going to take our next question. Just a moment. The next question comes to the line of Sara Wang from UBS. Your line is open. Please ask your question. Thank you for the opportunity. I have a question on overseas business, especially for the Johor campus. Besides China customers, shall we expect meaningful new orders from either international customer, cloud customers, or local customers? Especially given there are a lot of other data center operators announced meaningful pipeline in the region. So how shall we think about the competition landscape going forward? Thank you. So number one, we are target all kind of customers. Our sales team working on, domestic demand, international demand, and also China demand. So we are - we don't care who's customer. Customer is customer, right? So, so I think the, but we believe, our Johor, campus, two campuses, including new future campus, KTP, we definitely we are confident to get the, combination of the customer, just like, what we did in Hong Kong already, right? So I think this will not be the issue. We will not, we will not just specifically target, one kind of customer. We target all, right? So and we believe GDS sales and our product will welcomed by the all kind of customer as well. So the... In terms of the competition, I think, we have competed with everybody in China for 22 years. We don't afraid competing, which we like the competition. I think, GDS, we will grow from a lot of the competitor, right? So I think it's good. And that's why we already demonstrate, even in a very, very competitive market in China in the last 20 years, we've, we're getting a number one position, right? This is we already. So we are not think about what's our competitor doing. Well, they can do everything, but we believe we will win in every market. Got it. And then, is there any additional color on the, twelve new bookings, for next year? Should we- should they be higher than this year, especially given, the Johor campus continue to ramp up? You mean in international market? Like the overall- Overall, overall. Yeah, overall, and then maybe- Yeah. - there's additional color- Yeah. on overseas contribution. Yeah. Yeah. Yeah, so we take this in two parts, right? For China, you know, over quite a few quarters now, we've made it, you know, clear that we, you know, we're not targeting a high sales volume. We're targeting a particular kind of business which matches, you know, the inventory that we have, where there's a fixed move-in schedule faster than what we've experienced before, and of course, reasonable pricing. So we do any amount of business that meets those criteria. We don't forecast any change in China market conditions. Our own internal business plan just assumes continuation of the current run rate. We're not crystal ball gazers, so we don't build in any kind of assumptions about a change in market conditions. But of course, we are very well positioned to respond to any change. On the international side, I think the sales next year could be higher than this year. This year, including the second data center in Hong Kong, if we are able to conclude that presale, pre-commitment during the fourth quarter, then the gross bookings for international were about 20,000 square meters over the course of 2023. And I think we hope to at least that again next year. Yeah, the order size has been very large on the international side, so it's hard to predict because, you know, one order can make a huge difference. So it's not a widely dispersed, you know, book of orders, but, you know, it's a small number of very large orders. Got, got it very clear. Thank you. Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star one one on your telephone keypad. For the benefit of all participants, please limit yourself just to one question. Afterwards, if you would, if you would like, you're more welcome to re-enter the queue. Thank you. Now we're going to take our next question. The next question comes to the line of Michael Elias from TD Cowen. Your line is open. Please ask your question. Great. Thanks for, thanks for taking the questions. Two if I may. First, on the demand side, as we think about mainland China, would it be possible for you to create a, or provide a framework for how you're thinking about the evolution of demand in mainland China? Specifically, you talked earlier about, you know, it seems like there's some, digestion that's happening in the market. But could you talk about your conversations with your, with the cloud customers and essentially what it's indicating, is driving the slowdown in the demand there? Then my second question would be: as we think about getting ready for the AI opportunity, what is the standard density, power density, to which you build your current data centers? And then as part of that, as you consider the AI deals that are on the market, what is the density that those workloads are running at? And to the earlier point, do they require liquid cooling? Any color there would be great. Thank you so much. What's the first one was about, why, what, what's holding back demand in China? What's the one of the cloud customers say? Evolution of demand. Oh, okay. Okay, I think the, there's a couple of things I said. The cloud players in China, I think now they're adjusted their strategy. I mean, they are more pursue quality of the revenue. I mean, not just the quantity. So this is, I think, in the midterm and long term, is very good for data center player, because historically, the distribution number, including a lot of the stuff like, CDN, like network, or they call it integrating as a cloud. So, the number is big, but, also it has some system integration. But what we know is that those guys start to focus on the growth and real public cloud computing revenue, which we believe this is the right strategy and will, given the time, they will grow their revenue properly and will drive the more high-quality data center demand in the future. That's what we see, that this is the revolution from our customer. So I think this will get... In the future, will create more healthy data center demand for all the industry. This is number one. On the other hand, I think the AI is a hot topic in China already for a while. And China already announced eight large language model permission, right? So but still, in terms of timing, I think, as I mentioned, it's still a little bit early because the developing schedule is behind the US. So what are we already seeing is the global data center driven by all the US-based large language model. This is not happening in China, but it's coming. So I think this still need time. But in China, still have another issue is a supply chain issue in terms of the chips. So I think this need maybe 12 months, maybe 12, 18 months to solve all the issue. So what I expect is this will happening in one year or one year half, maybe in a big wave. The second question is the power density. Of course, I think GDS is always leading the power density product in China. If we look back to 10 years ago, our first data center, we built a [uncertain] triple high density than anyone else in the market, right? So we are very follow up the global trend and the IT trend. So our last couple of years, we start to build very high power density. Average power density is 8 kW per rack before last couple of years. Now, we also increased to 10-15 kW per rack, per rack. That's average number, which means we can serve 40 kW per rack, is no issue for us. Again, I would say not only per rack power density we increased. Also, we increased each new campus power total capacity. We're well positioned to respond to all the AI demand in next few years. So we are ready for that. Thank you. Very helpful. Thank you. As there are no further questions, I'd like to now turn the call back over to the company for closing remarks. Thank you once again for joining us today. If you have further questions, please feel free to contact GDS Investor Relations through the contact information on our website or the Piacente Financial Communications. See you next time. Bye. This concludes this conference call. You may now disconnect your line. Thank you for your participation. Have a good day.