Thank you. Hello, everyone. Welcome to the third quarter of 2024 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. Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provision of the US 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 risks and uncertainties is included in the company’s prospectus as filed with the US 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’s earnings press release and this conference call include discussions of unaudited GAAP financial information, as well as unaudited non-GAAP financial measures. GDS’s press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. I will now turn the call over to GDS Founder, Chairman and CEO, William. Please go ahead, William.

Okay, thank you. Hello, everyone. This is William. Thank you for joining us on today's call. In 3Q 2024, we achieved a revenue growth of 18% and adjusted EBITDA growth of 15% year-on-year. This growth rate is quite remarkable in current market conditions. It reflects the progress we have made in turning around our China business, plus the uplift from the successful execution of our international strategy. From the beginning of this year, the move-in rate has clearly stepped up. In 3Q 2024, the gross additional area utilized was over 25,000 square meters. It is the highest level we have ever achieved. It is all organic and all in tier 1 markets. The main reason for this improvement is AI demand. About half of the move-in is coming from the recent new orders and half from orders that have been in the backlog for a longer time. For the full year of 2024, we expect net additional area utilized of around 60,000 square meters, which is similar to our peak year of 2020. Looking forward, we have better visibility on the deployment plans of our customers, which gives us a high level of confidence. Therefore, we expect this level of move-in to be sustained. The first wave of AI demand is for machine learning. For this use case, customers can deploy in remote areas where land and power are available. The second wave of AI demand is for inferencing. For this use case, customers must deploy in the tier 1 markets. This has been confirmed with our customers in multiple communications. So far, the volume of AI new orders in tier 1 markets is quite small. Customers are typically looking for move-in ready capacity. This fits with our current sales strategy, which is to target orders that match our inventory. In the coming year, we expect AI deployment in tier 1 markets to scale up. This will help bring the market back into balance. Some of the new demand will be for hyperscale campuses. We are uniquely well-positioned for this. We have large blocks of land and power at diverse sites around Beijing, Shanghai, Shenzhen, and Guangzhou. This kind of resource is scarce. To capture the AI wave in tier 1 markets, we will carefully consider sales opportunities that require us to initiate new developments. This is a more expansionary business plan with higher investment and higher growth. It goes hand-in-hand with the execution of our China REIT strategy. We made a decision to establish our international business as a standalone entity. We believe that this approach will maximize value for our shareholders. The vision for GDSI is to become a leading international data center platform. We pioneered the creation of new markets to fulfill AI demand. As of 3Q 2024, we have 431 megawatts of total customer commitment. The sales pipeline is very strong. During the third quarter, we signed a contract with a new customer, which is a leading global tech company for capacity at our campus in Batam. 34 megawatts is committed and 38 megawatts is reserved. This is the first data center of its kind in Asia, designed for the most advanced AI technology. The ramp-up is very fast. It's an incredible achievement by our management and the perfect illustration of how we can create new markets. During the current quarter, we officially entered into another new market, Thailand. We are the first data center operator to undertake the first hyperscale project in Thailand. We received strong support from the Thailand government. We think this is the next big opportunity in Southeast Asia. In the past few months, all the global tech leaders have announced large investment plans in Thailand. We have acquired the land for a data center campus in Chonburi province near Bangkok, which is the focus area for hyperscale deployment. We plan to develop around 120 megawatts of total IT power capacity on our first land site. We expect to serve the domestic demand from Thailand's fast-growing digital economy. We are very confident in making Thailand another success story. I will now pass on to Dan for the financial and operating review.

Thank you, William. I'll run through the China segment first, followed by international. Starting on Slide 16, in 3Q24, GDSH segment revenue increased by 6.1% and adjusted EBITDA increased by 3.6% year-on-year. GDSH revenue growth was mainly driven by an increase in total area utilized of 11.6% year-over-year. MSR per square meter has declined moderately over the past four quarters. Adjusted EBITDA margin for 3Q24 versus 3Q23 was down by 1 percentage point. The main reason for this is the increase in power tariffs, which occurred during the second half of last year. Looking forward, we expect net additional area utilized to continue at around 15,000 square meters per quarter. We expect MSR to decline slightly over the next year and assume that power tariffs remain at current levels. For the first nine months of 2024, our China CapEx totaled RMB2.6 billion. We originally guided for around RMB2.5 billion for the full year. However, due to higher move-in, we had to bring forward a small amount of CapEx. As a result, we are revising up our China CapEx guidance to around RMB3 billion for 2024. In our base case business plan for next year, we envisage China CapEx within the RMB2 billion to RMB3 billion range. For the first nine months of 2024, cash flow before financing for GDSH is negative RMB293 million. The fourth quarter of the year is usually a good quarter for collection. Therefore, we expect the cash flow before financing for the full year to be positive. This is in line with our financial target. This remains a key financial objective to deliver steady growth while generating positive cash flow before financing. As shown on Slide 20, at the end of 3Q24, the cash balance of GDSH decreased to RMB7.8 billion and the net debt to last quarter annualized adjusted EBITDA multiple was 7.4 times. Over 60% of our gross debt is RMB-denominated project term loans. The interest on these loans is floating rate linked to the over-five-year LPR. This benchmark came down by 25 basis points at the end of 3Q24 to see some benefit as our interest cost resets. As William mentioned, we are fully committed to establishing a China REIT. This is a key financial strategy for several reasons. One, it will give us continuous access to the onshore equity capital market with a lower cost of equity. Two, it will increase our liquidity and enable us to accelerate de-leveraging. Three, it will provide us with additional capital to capture attractive new sales opportunities as AI demand takes off. And four, it will benchmark the valuation of data centers in China and give us the means to recycle capital on an accretive basis. We are approaching China REITs with two transactions in parallel. The first involves the creation and IPO of a listed C-REIT, which holds stabilized data centers. The second involves the creation of asset-backed securities, ABS, which holds ramping up data centers. The ABS is the form of security which can be injected into a C-REIT once the underlying data centers are stabilized. Hence, we call the ABS a "pre-REIT". For the C-REIT, we have already completed a very thorough review process at the provincial level. Our application is now subject to a national level review by NDRC, CSRC, and the Shanghai Stock Exchange. We are aiming to obtain all the necessary approvals by the middle of next year. This would create the possibility of launching the C-REIT in the second half of 2025. For the purposes of the listing, we selected one large site that fits the typical C-REIT offering size of around RMB2 billion. However, once established, we would intend to inject additional data centers if it creates shareholder value. Currently, C-REITs are trading on significantly higher multiples than the current implied multiples for our China business. For the pre-REIT, we are at the final stage of obtaining all necessary approvals. The pre-REIT delivers many of the same benefits as the C-REIT, but it's a one-off transaction. We're trying to get it done as soon as possible. Turning to the international segment on Slide 23, in 3Q24, GDSI revenue increased by 42% and adjusted EBITDA increased by 15% quarter-on-quarter. Currently, we have around 103 megawatts of IT power utilized. As the delivery schedule for most of the backlog is very short and customers undertake to move in quickly, we expect to have around 400 megawatts of utilized capacity within the next 18 months. For the first nine months of 2024, international CapEx was around RMB4 billion. We originally guided RMB4 billion for the full year, but due to the extraordinary ramp-up, we now expect full year CapEx for international to be around RMB8 billion. Turning to Slide 29, on 29th of October, we announced that GDSI has raised $1 billion from the issue of Series B convertible preferred shares. The issue is expected to close by the end of the year. Post-closing and on an as-converted basis, GDSH will own approximately 37.6% of GDSI. The value of our equity interest implied by the Series B subscription price is approximately $1.3 billion, representing a 75% premium over the Series A valuation and equivalent to approximately $6.75 per ADS. The private equity valuation of data centers is typically based on the sum of installed capacity, contracted backlog, and near-term sales pipeline. As GDSI ramps up its installed capacity, wins new orders, and adds to its supply of highly marketable capacity, we expect the equity valuation to increase significantly. In this round, we aimed to secure enough capital to build and deliver over 1 gigawatt of capacity. Including the sale of the proceeds of Series B, we will have $2.1 billion of equity. With the addition of a moderate amount of mezzanine debt, we should be able to achieve our 1-gigawatt target. Post-closing, GDSH will deconsolidate GDSI. However, we will continue to disclose enough key information for you to track GDSI's performance. To ensure that the value of our equity investment accrues to GDSH shareholders, our Plan A is to IPO and spin off GDSI. We will give you a better sense of the timing on our next earnings call. Finishing on slide 30, we are maintaining our formal guidance for FY’24 consolidated revenue and adjusted EBITDA. However, as I mentioned before, we are raising our CapEx guidance to RMB11 billion, which includes RMB3 billion for China to support the faster move-in and RMB8 billion for international, reflecting its accelerated expansion. We would now like to open the call to questions.

Thank you. We will now take our first question. The first question is from Yang Liu from Morgan Stanley. Please go ahead.

Thank you for the opportunity. I have a question about the strategy in China. We noticed strong demand, good move-in rates, and solid bookings. At the same time, there was an increase in CapEx guidance. Is this an advancement of the previous plans for China CapEx in 2025 or 2026, or is it something new? William mentioned that future investments in China will be tied to the REIT strategy. Does this imply that if you achieve the risk listing, you can invest more aggressively in China? If there is no risk, will CapEx still be tightly controlled? Thank you.

Yeah, I think, Yang Liu, I think the number one, we still stick with our previous strategy, trying to stabilize our business in China and maintain a sort of organic growth, right? And digest our inventory. This is our first priority. But in the meanwhile, we always talk about selecting to do new business. That means very high-quality business. But of course, everybody knows we are currently trying to recycle capital in an efficient way and create more value for our shareholders. In the meanwhile, if we can recycle capital sufficiently in the future, then we will start to become more aggressive in taking some new orders, seeking growth again. Yeah, this is, I think, we try to balance growth and stabilization more in the future.

Thank you. We'll now take our next question. This is from the line of Jonathan Atkin from RBC. Please go ahead.

Thanks. I have a couple of questions. Could you discuss the development of the market? It's progressing more quickly than I anticipated. Do you foresee a significant amount of smaller internet and enterprise demand, or will it primarily consist of large deployments similar to the recent commitments you've secured? Additionally, can you elaborate on the ongoing financial commitment that GDS would have for the year?

Jon, your line is not that clear.

I think the first question was about kind of demand. Was Jon talking about Batam?

Yeah.

So what kind of customers are interested in Batam? I think Jon was asking.

Let me respond to the first question. We still see Batam as a SIJORI data center hub. Customers, especially hyperscale ones from the US, domestic markets, or China, are quite interested in Batam. So far, we have received significant interest from various countries.

Jon, second question.

Yeah, ongoing commitment to GDS National from GDS Holdings.

Yes, we decided at the beginning of last year to limit our capital allocation to international ventures to around $400 million. During the Series A capital raising, we used part of the proceeds to repay some shareholder loans, bringing that figure back to the $400 million cap we had set. From that point on, our goal has been to maximize the value of our $400 million investment. Based on the Series B pricing, we've increased that investment's value to $1.3 billion, and I believe it will continue to grow rapidly. Every shareholder in international has preemption rights, but we do not anticipate GDS Holdings will exercise theirs in the future. This means GDS Holdings' share will be available for allocation to other investors who can enhance the value of our international business.

And lastly, the Singapore CFA process, just announced within the past hour, so progress on the air, what they're going to be doing with their field, what is your visibility around finding magnitude location of where you're going to be building in Singapore?

Yeah, I think the Singapore location, we chose a site at a good location, which is another data center cluster in the western part of Singapore. I think in the future we will link them to our Johor and Batam data center campus as well. And so we will create a very good platform in the SIJORI area, which our customers very much like. And this is number one. I think we target, of course, we aim to finish the construction by the end of 2026. This is our current schedule.

The size of that building is quite large relative to the power quota that we had as of now. And that was a deliberate decision because with a relatively small amount of incremental investment, it gives us the option and the potential to be able to expand in a number of different ways on that same site.

Thank you. We'll now take our next question. This is from Louis Tsang from Citi. Please go ahead.

Hello. Thank you management for taking my question. Congratulations on the strong results. I think overall the domestic movements really resulted in very positive and encouraging results. So today I have two questions. The first one is regarding the GDSI. Could you please further elaborate on the rationale of entering the Thailand market? Or, let me put it this way, how should we think about the future demand and the availability of resources like connectivity, power, land, and water? And do you think that if there's any possibility that Thailand could be another data center hub similar to Johor? That's my first question. Maybe I should go one by one. Thank you.

Okay, I think the rationale for entering Thailand is that we always consider Thailand's 80 million population and the healthy growth of its economy. And if you know, just this year, many hyperscalers announced investments in Thailand. We also understand that digitalization and the digital economy are key drivers. It's part of the national strategy to drive the Thai economy. So the government is very supportive of all foreign investment in Thailand. We are very proud to be the first hyperscale player to enter this market. We always enter markets earlier than anyone else. And we are confident that there's a lot of demand coming. So I think this is the rationale. In terms of the current targeting, our customers mainly service the local domestic market. However, Thailand has the potential to grow as another data center hub in Asia Pacific due to the local economy as well as its influence on the surrounding countries. So we believe that in Asia Pacific, there will not be just one data center hub, and in the future, I think maybe there will be another two or three data center hubs that will grow. So I think this is our rationale.

Okay, thank you so much. Thank you so much. And the second one is about the domestic one because I think the domestic move-in target that I just heard was really good and I just want to know how we should calibrate the outlook for the domestic move-in next year because the demand is going to sustain. But just like if there's any chance that the moving will see a further acceleration next year, or would it maintain a similar level? Because based on my understanding, the CapEx cycle of the domestic giants will likely accelerate in the first half of next year. So I just want to know about the outlook for that. Thank you so much.

To clarify, the slightly higher than expected capital expenditures this year reflect a shift in timing and do not suggest that we will maintain this level next year. If we were to provide guidance for next year, it would likely align with our original estimate for this year, around RMB2.5 billion. Regarding move-ins, we anticipate net additional space utilized, with a gross total of 25,000 square meters in the third quarter and an expected net of 60,000 square meters for the year. We are confident that we will achieve this same level next year. Our growth strategy involves being selective about new business opportunities and focusing on delivering our backlog while keeping capital expenditures low to prioritize cost efficiency and increase utilization rates, which we expect to rise from the low 70s to the high 70s by the end of next year. However, we cannot predict the potential for new campus development, as there will certainly be demand from hyperscale customers in primary markets for new projects. We possess land and power quotas at several locations in Beijing, Shanghai, Shenzhen, and Guangzhou, which are valuable and sought-after resources. We will decide to pursue these opportunities if they are appealing enough, ideally coordinating these developments with plans to monetize stabilized assets for the benefit of our shareholders. While the timing may not align perfectly, we expect to explore these new development opportunities next year and have discussed our plans for asset monetization through both the pre-REIT and C-REIT in the upcoming quarters.

Okay, thank you so much. Looking forward to the further development. Thank you so much. I have no further questions. Thank you.

Thank you. The next question is from the line of Frank Louthan from Raymond James. Please go ahead.

Great, thank you. On the Batam design, can you give us some idea of what makes that so advanced and when you do a build like that how much of that CapEx are you paying for in your book that's sort of at risk versus customers that are building in that what you charge them to pay for what I assume is additional cooling or other things like that. Thanks.

This is a liquid cooling design, a base design. I think this is definitely – all the new design for the AI. We call it the AI-ready data center, right? I think of course a lot of the designs are mainly customized by the customers. They pay for everything in print.

Okay, and what sort of power density are you able to get with this design? Is there a limit to it or how should we think about that?

It's around the averages of 20 gigawatts per rack. Maybe, yeah, it's roughly I think. Yeah.

Thank you. The next question is from the line of Edison Lee from Jefferies. Please go ahead.

Hi. Thank you for taking my questions and congratulations again on your impressive progress. I would like to focus on China because I find it particularly interesting. I noticed that the net area utilized grew by 11% to 12% year-over-year, but your revenue from China only increased by 6% year-over-year. Can you help us understand the trend of unit pricing going forward?

The reason for the difference between the increase in area utilized and revenue is due to a lag, as the move-in occurs over a period of time. From the third quarter of 2023 to the third quarter of 2024, there was a 4% decrease in the MSR. When comparing on a like-for-like basis, the decline in most quarters over the past year has been less than that. However, in the third quarter, it was 4%. Additionally, during this period, power tariffs increased, both from the generator and the grid, which led to about a 1 percentage point reduction in the adjusted EBITDA margin when comparing the third quarter of 2024 to the third quarter of 2023. These factors together explain the discrepancy between the increase in area utilized and the revenue and EBITDA growth rates. Looking ahead, I anticipate that over the next four quarters, the MSR may decline by approximately 2% when comparing the same quarter of each year.

So does it mean that assuming that as I said earlier the net additional utilized next year would be, let's say, 60,000 square meters and then you have price erosion of 2%, final revenue and actually grow at a high single digit, right next year.

That's right. I mean, aim for 10%.

Aim for 10%. Okay. And then a quick follow-up. I mean, given slightly higher CapEx this year on China and then you're talking about maybe investing in some high potential new projects, does it change your objective or previous target to be free cash flow positive in 2025?

No, it doesn't. That's not reflected in the numbers. It's an upside opportunity that we're just flagging but it would require additional investment. I think we will, in our base case, be constantly positive in terms of cash flow before financing next year, as indeed we will this year. If we incur additional investment and the CapEx is higher than say the RMB2.5 billion number that I mentioned, hopefully that will be in conjunction with having completed some asset monetization, and that net should result in us still being positive.

Yep. I see. Okay. Got it. Great. Thanks.

Thank you. The next question is from a line of Sarah Wang from UBS. Please go ahead.

Hi. Congratulations on the solid set of results. I have two questions. First is on China. So would you please elaborate more on the potential outlook of China business? Meaning I think as management just mentioned, if we want to grab the AI opportunity in tier 1 markets that involves new investment. But at the same time, we also have quite a decent backlog. So previously, we were talking about cost to complete existing backlog. Is there any change in the cost to complete assumptions given now the demand is driven by AI, but maybe some of the backlog is from one or two years ago in the late cloud cycle? And then my second question is the international business. Given the solid new orders signed this year, how shall we think about the new orders for next year in terms of volume? And then I'm glad to see that we're entering into new markets, but given we are working in multiple overseas markets, which one is our top priority? Thank you.

Let me start with the cost to complete. So as of the end of the third quarter of 2024, we had 120,000 square meters under construction and the cost to complete for that capacity is RMB6 billion. Some small part of it actually relates to some data centers which are already in service because sometimes there is some cost to complete, meaning fitting out some space which is not yet utilized, where we are able to phase the timing of the installation of M&E and so on. But across the in-service and under-construction portfolio, the cost to complete in aggregate is RMB6 billion. If we were to undertake a completely new project, we would be utilizing land and energy quota, which we already have. That's why we put into our earnings presentation again a disclosure about how much capacity we have held for future development because this is becoming relevant again. And this is scarce resource. There are not that many options for customers if they're looking for somewhere to deploy 50 megawatts or more in the edge-of-town around Beijing, Shanghai, Shenzhen, and Guangzhou. We have a number of solutions for that. But you know our unit development cost in China, 50 megawatts, we're probably talking about incremental RMB1 billion to RMB1.5 billion. But one project like that could add 4 or 5 percentage points to our gross rate. So that's how we think about it, but we're just talking about it now because it's a possibility for us next year. But it’s our choice whether we go ahead with that. It really depends a lot on how attractive the commercial terms are.

I believe the international market, particularly the SIJORI area, remains our primary focus. We are well-positioned there with strong locations and an established customer base. There's a significant demand in our pipeline. Monetizing our assets, including our secured power and land, is our top priority. For new markets and sales, we aim for around 200 megawatts next year, and I previously mentioned our goal to achieve 1 gigawatt in sales over the next three years. I am very confident in this target, which sets a high standard. Regarding new markets, we are adopting a new strategy to address global demand, which is being driven by AI. This demand extends beyond Southeast Asia to regions such as Japan, the Middle East, Europe, and the US. We are focused on long-term growth and exploring new market opportunities vigorously. Taiwan is one of these new markets, still considered part of Southeast Asia. We are also targeting Japan, where we have initiated a new project that is currently under testing, and we are actively monitoring market trends there. Additionally, we are conducting thorough research in the European market. Our goal is to establish several more growth engines in the coming years.

Got it, very clear, thank you.

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 all for attending today, and we'll see you next time. Bye.

Thank you.

This concludes the conference call. You may now disconnect your line. Thank you.