GDS Holdings Limited (GDS) Misses Q3 EPS by 4c

GDS Holdings Limited (NASDAQ: GDS) reported Q3 EPS of ($0.12), $0.04 worse than the analyst estimate of ($0.08). Revenue for the quarter came in at $149.2 million versus the consensus estimate of $149.06 million.

Third Quarter 2019 Financial Highlights

• Net revenue increased by 39.8% year-over-year (“Y-o-Y”) to RMB1,066.2 million (US$149.2 million) in the third quarter of 2019 (3Q2018: RMB762.8 million).
• Service revenue increased by 40.7% Y-o-Y to RMB1,058.9 million (US$148.1 million) in the third quarter of 2019 (3Q2018: RMB752.6 million).
• Net loss was RMB108.6 million (US$15.2 million) in the third quarter of 2019, compared with a net loss of RMB119.4 million in the third quarter of 2018.
• Adjusted EBITDA (non-GAAP) increased by 60.6% Y-o-Y to RMB483.7 million (US$67.7 million) in the third quarter of 2019 (3Q2018: RMB301.2 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 45.4% in the third quarter of 2019 (3Q2018: 39.5%).

Operating Highlights

• Total area committed increased by 49.8% Y-o-Y to 242,435 square meters (“sqm”) as of September 30, 2019 (September 30, 2018: 161,799 sqm).
• Area utilized (or revenue generating space) increased by 36.9% Y-o-Y to 137,820 sqm as of September 30, 2019 (September 30, 2018: 100,679 sqm).
• Area in service increased by 34.4% Y-o-Y to 198,097 sqm as of September 30, 2019 (September 30, 2018: 147,342 sqm).
• Commitment rate for area in service was 91.7% as of September 30, 2019 (September 30, 2018: 96.3%), and utilization rate was 69.6% as of September 30, 2019 (September 30, 2018: 68.3%).
• Area under construction was 84,765 sqm as of September 30, 2019 (September 30, 2018: 43,718 sqm).
• Pre-commitment rate for area under construction was 71.6% as of September 30, 2019 (September 30, 2018: 45.4%).

“We delivered another strong quarter across all parts of our business,” said Mr. William Huang, Chairman and Chief Executive Officer. “With more than 21,000 sqm of net additional area committed during the quarter, we are on track to achieve our sales target for the full year. We remain focused on securing land and power resources in Tier 1 markets, and continue to see success in expanding our capacity in key locations. We have further upgraded our market presence in Hong Kong, which we see as an important Tier 1 market in China. Through both organic growth and acquisition, and with the trust from our more diversified customer base, we believe we are able to sustain our advantage and strengthen the barrier to entry.”

“Our top line growth was sustained in the third quarter, posting an increase of around 40% year-over-year,” said Mr. Dan Newman, Chief Financial Officer. “Our adjusted EBITDA margin hit 45.4%, a 5.9-percentage point improvement from the same period a year ago, as a result of realizing operating leverage. We are once again raising our adjusted EBITDA guidance for 2019. On the funding side, we continue to see supportive debt environment, and at the same time, we are delighted that our cooperation with GIC, as an alternative funding solution, is progressing well.”

Updated Business Outlook

For the full year of 2019, the Company now expects its adjusted EBITDA to be in the range of RMB1,800 million to RMB1,820 million, increasing the low end of the previously revised guidance of RMB1,760 million by approximately 2.3% and the high end of RMB1,800 million by approximately 1.1%. The updated estimates imply an increase of 72.0% to 73.9% year-over-year in adjusted EBITDA.

The previously revised guidance for total revenues of RMB4,000 – RMB4,100 million and the original guidance for capital expenditures of RMB4,500 – RMB5,000 million for the full year of 2019 remain unchanged.

For earnings history and earnings-related data on GDS Holdings Limited (GDS) click here.

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