Day: November 19, 2024

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TORONTO, Nov. 19, 2024 /CNW/ – George Weston Limited WN (“GWL” or the “Company”) today announced its consolidated unaudited results for the 16 weeks ended October 5, 2024⁽²⁾.

GWL’s 2024 Third Quarter Report has been filed on SEDAR+ and is available at www.sedarplus.ca and in the Investor Centre section of the Company’s website at www.weston.ca.

“George Weston delivered another quarter of positive results, driven by the consistent financial performance of our underlying businesses,” said Galen G. Weston, Chairman and Chief Executive Officer, George Weston Limited. “Loblaw delivered exceptional value, quality, and service to Canadians, resulting in increased customer traffic, while Choice Properties experienced higher demand for its retail properties and strong leasing spreads in its industrial portfolio.”

Loblaw Companies Limited (“Loblaw”) reported consistent operational and financial performance in the third quarter as it continued to provide value to Canadians across its retail network, while maintaining its focus on retail excellence. Drug retail sales growth outperformed food retail in the quarter. Drug front store sales reflected continued strength in the beauty category but were pressured by Loblaw’s exit from certain low margin electronics categories and lower customer spend on convenience items. Pharmacy and healthcare services revenue increased due to ongoing strength in acute and chronic prescriptions. Food retail stores attracted increased customer visits in the quarter, despite Thanksgiving holiday sales shifting into the fourth quarter this year. Food sales growth reflected the ongoing strength of Loblaw’s Maxi and NoFrills hard discount stores, and its growing selection of multicultural foods across its banners, anchored by strong performance in the T&T banner. In the quarter, Loblaw continued to invest in its network of stores, including opening 25 new hard discount stores and piloting two new ultra-discount no name® stores.

Choice Properties Real Estate Investment Trust (“Choice Properties”) delivered strong operational and financial results in the third quarter, driven by increasing demand from retail tenants for its necessity-based neighbourhood centres and strong leasing spreads in its industrial portfolio. Choice Properties continues to leverage its size and financial strength, with $172 million of real estate transactions and over $125 million of financings completed in the third quarter, further improving the quality of its market leading portfolio and the strength of its balance sheet.

2024 THIRD QUARTER HIGHLIGHTS

• Revenue was $18,685 million, an increase of $278 million, or 1.5%.
• Adjusted EBITDA⁽¹⁾ was $2,158 million, an increase of $139 million, or 6.9%.
• Net earnings available to common shareholders of the Company were $15 million ($0.08 per common share), a decrease of $595 million, or 97.5%. The decrease was due to the unfavourable year-over-year net impact of adjusting items, primarily due to the unfavourable year-over-year impact of the fair value adjustment of the Trust Unit liability as a result of the increase of Choice Properties’ unit price in the quarter.
• Adjusted net earnings available to common shareholders of the Company⁽¹⁾ were $476 million, an increase of $10 million, or 2.1%.
  • Contribution to adjusted net earnings available to common shareholders of the Company⁽¹⁾ from the publicly traded operating companies was $516 million, an increase of $19 million, or 3.8%.
• Adjusted diluted net earnings per common share⁽¹⁾ were $3.57, an increase of $0.21 per common share, or 6.3%.
• Repurchased for cancellation 1.3 million common shares at a cost of $284 million.
• GWL Corporate free cash flow⁽¹⁾ was $422 million.

CONSOLIDATED RESULTS OF OPERATIONS

The Company operates through its two reportable operating segments: Loblaw and Choice Properties, each of which are publicly traded entities. As such, the Company’s financial statements reflect and are impacted by the consolidation of Loblaw and Choice Properties. The consolidation of these entities into the Company’s financial statements reflect the impact of eliminations, intersegment adjustments and other consolidation adjustments, which can positively or negatively impact the Company’s consolidated results. Additionally, cash and short-term investments and other investments held by the Company, and all other company level activities that are not allocated to the reportable operating segments, such as net interest expense, corporate activities and administrative costs are included in GWL Corporate. To help our investors and stakeholders understand the Company’s financial statements and the effect of consolidation, the Company reports its results in a manner that differentiates between the Loblaw segment, the Choice Properties segment, the effect of consolidation of Loblaw and Choice Properties, and lastly, GWL Corporate.

The Company’s results reflect the year-over-year impact of the fair value adjustment of the Trust Unit liability as a result of the significant changes in Choice Properties’ unit price, recorded in net interest expense and other financing charges. The Company’s results are impacted by market price fluctuations of Choice Properties’ Trust Units on the basis that the Trust Units held by unitholders, other than the Company, are redeemable for cash at the option of the holder and are presented as a liability on the Company’s consolidated balance sheet. The Company’s financial results are negatively impacted when the Trust Unit price increases and positively impacted when the Trust Unit price declines.

Net earnings available to common shareholders of the Company in the third quarter of 2024 were $15 million ($0.08 per common share), a decrease of $595 million ($4.33 per common share) compared to the same period in 2023. The decrease was due to the unfavourable year-over-year net impact of adjusting items totaling $605 million ($4.54 per common share), partially offset by an improvement of $10 million ($0.21 per common share) in the consolidated underlying operating performance of the Company.

The unfavourable year-over-year net impact of adjusting items totaling $605 million ($4.54 per common share) was primarily due to:

• the unfavourable year-over-year impact of the fair value adjustment of the Trust Unit liability of $787 million ($5.90 per common share) as a result of the increase in Choice Properties’ unit price in the third quarter of 2024;

       partially offset by,

• the favourable year-over-year impact of the fair value adjustment on Choice Properties’ investment in real estate securities of Allied Properties Real Estate Investment Trust (“Allied”) of $95 million ($0.70 per common share) as a result of the increase in Allied’s unit price;
• the favourable impact of the recovery related to a President’s Choice Bank (“PC Bank”) commodity tax matter at Loblaw of $66 million ($0.50 per common share). See “Loblaw Other Business Matter”, section of this News Release for further information; and
• the favourable year-over-year impact of the fair value adjustment on investment properties of $33 million ($0.25 per common share) driven by Choice Properties, net of the effect of consolidation.

Adjusted net earnings available to common shareholders of the Company⁽¹⁾ in the third quarter of 2024 were $476 million, an increase of $10 million, or 2.1%, compared to the same period in 2023. The increase was driven by the favourable year-over-year impact of $19 million from the contribution of the publicly traded operating companies, partially offset by the unfavourable year-over-year impact of $9 million at GWL Corporate due to an increase in income tax expense as a result of GWL’s participation in Loblaw’s Normal Course Issuer Bid (“NCIB”) program and the impact of other non-deductible items, and an increase in adjusted net interest expense and other financing charges⁽¹⁾.

Adjusted diluted net earnings per common share⁽¹⁾ were $3.57 in the third quarter of 2024, an increase of $0.21 per common share, or 6.3%, compared to the same period in 2023. The increase was due to the performance in adjusted net earnings available to common shareholders⁽¹⁾ as described above and the favourable impact of shares purchased for cancellation over the last 12 months ($0.13 per common share) pursuant to the Company’s NCIB program.

CONSOLIDATED OTHER BUSINESS MATTERS

GWL CORPORATE FINANCING ACTIVITIES  The Company completed the following select GWL Corporate financing activities:

NCIB – Purchased and Cancelled Shares  In the third quarter of 2024, the Company purchased and cancelled 1.3 million common shares (2023 – 2.4 million common shares) for aggregate consideration of $284 million (2023 – $364 million) under its NCIB. As at October 5, 2024, the Company had 130.8 million common shares issued and outstanding, net of shares held in trusts (October 7, 2023 – 135.5 million common shares).

In the third quarter of 2024, the Company entered into an automatic share purchase plan (“ASPP”) with a broker in order to facilitate the repurchase of the Company’s common shares under its NCIB. During the effective period of the ASPP, the Company’s broker may purchase common shares at times when the Company would not be active in the market.

Refer to note 11, “Share Capital” of the Company’s third quarter 2024 unaudited interim period condensed consolidated financial statements for more information.

Participation in Loblaw’s NCIB  The Company participates in Loblaw’s NCIB in order to maintain its proportionate percentage ownership interest. In the third quarter of 2024, Loblaw repurchased 1.1 million common shares (2023 – 1.5 million common shares) from the Company for aggregate consideration of $193 million (2023 – $171 million).

Debenture Repayment and Issuance  On June 17, 2024, the Company paid in full upon maturity, at par, plus accrued and unpaid interest thereon, the $200 million aggregated principal amount of the 4.12% senior unsecured notes outstanding.

On September 5, 2024, the Company completed an issuance of $250 million aggregate principal amount of senior unsecured notes bearing interest at 4.19% per annum and with a maturity date of September 5, 2029.

RESULTS BY OPERATING SEGMENT

The following table provides key performance metrics for the Company by segment.

Effect of consolidation includes the following items:

Loblaw Operating Results 

Loblaw has two reportable operating segments, retail and financial services. Loblaw’s retail segment consists primarily of food retail and drug retail. Loblaw provides Canadians with grocery, pharmacy and healthcare services, health and beauty products, apparel, general merchandise and financial services.

Revenue  Loblaw revenue in the third quarter of 2024 was $18,538 million, an increase of $273 million, or 1.5%, compared to the same period in 2023, driven by an increase in retail sales and in financial services revenue.

Retail sales were $18,259 million, an increase of $277 million, or 1.5%, compared to the same period in 2023. The increase was primarily driven by the following factors:

• food retail sales were $12,966 million (2023 – $12,843 million) and food retail same-store sales growth was 0.5% (2023 – 4.5%). Food retail same-store sales growth was approximately 1.3% after excluding the unfavourable impact of the timing of Thanksgiving;
  • the Consumer Price Index as measured by The Consumer Price Index for Food Purchased from Stores was 2.3% (2023 – 7.1%), which was lower than Loblaw’s internal food inflation; and
  • food retail traffic increased and basket size decreased.
• drug retail sales were $5,293 million (2023 – $5,139 million) and drug retail same-store sales growth was 2.9% (2023 – 4.6%). The timing of Thanksgiving had a nominal impact on same-store sales growth for drug retail;
  • pharmacy and healthcare services same-store sales growth was 6.3% (2023 – 7.4%). On a same-store basis, the number of prescriptions increased by 2.3% (2023 – 0.9%) and the average prescription value increased by 3.5% (2023 – 5.1%);

                  partially offset by,

• • front store same-store sales decline of 0.5% (2023 – growth of 1.8%). The decline in front store same-store sales was primarily driven by lower sales of food and household items and the decision to exit certain low margin electronics categories, partially offset by the continued strength in beauty products.

Financial services revenue was $382 million, an increase of $3 million, or 0.8%, compared to the same period in 2023, primarily driven by higher interchange and credit card fee income, partially offset by lower sales attributable to The Mobile Shop.

Operating Income  Loblaw operating income in the third quarter of 2024 was $1,319 million, an increase of $256 million, or 24.1%, compared to the same period in 2023. The increase included the recovery of $155 million related to a PC Bank commodity tax matter.

Adjusted EBITDA⁽¹⁾  Loblaw adjusted EBITDA⁽¹⁾ in the third quarter of 2024 was $2,067 million, an increase of $143 million, or 7.4%, compared to the same period in 2023, driven by an increase in retail of $130 million and an increase in financial services of $13 million.

Retail adjusted EBITDA⁽¹⁾ increased by $130 million compared to the same period in 2023, driven by an increase in retail gross profit of $140 million, partially offset by an increase in retail selling, general and administrative expenses (“SG&A”) of $10 million.

• Retail gross profit percentage of 30.9% increased by 30 basis points compared to the same period in 2023, primarily driven by improvements in shrink.
• Retail SG&A as a percentage of sales was 20.0%, a favourable decrease of 30 basis points compared to the same period in 2023, primarily due to the year-over-year impact of certain real estate activities and operating leverage, partially offset by incremental costs related to opening new stores.

Financial services adjusted EBITDA⁽¹⁾ increased by $13 million compared to the same period in 2023, primarily driven by lower customer acquisition expenses and operating costs, including the ongoing benefits associated with the renewal of a long-term agreement with Mastercard, and higher revenue as described above, partially offset by higher contractual charge-offs and higher loyalty program costs.

Depreciation and Amortization  Loblaw depreciation and amortization in the third quarter of 2024 was $903 million, an increase of $23 million compared to the same period in 2023, primarily driven by an increase in depreciation of information technology (“IT”) assets and leased assets, and an increase in depreciation of fixed assets related to conversions of retail locations. Depreciation and amortization in the third quarter of 2024 included $155 million (2023 – $154 million) of amortization of intangible assets related to the acquisitions of Shoppers Drug Mart Corporation (“Shoppers Drug Mart”) and Lifemark Health Group (“Lifemark”).

Loblaw Other Business Matter

PC Bank Commodity Tax Matter  In July 2022, the Tax Court of Canada (“Tax Court”) released a decision relating to PC Bank, a subsidiary of Loblaw. The Tax Court ruled that PC Bank is not entitled to claim notional input tax credits for certain payments it made to Loblaws Inc. in respect of redemptions of loyalty points. PC Bank subsequently filed a Notice of Appeal with the Federal Court of Appeal (“FCA”) and in March 2024, the matter was heard by the FCA. In August 2024, the FCA released its decision and reversed the decision of the Tax Court. As a result, PC Bank reversed charges of $155 million, including $111 million initially recorded in the second quarter of 2022. In addition, $10 million was recorded related to interest income on cash tax refunds.

Choice Properties Operating Results

Choice Properties owns, manages and develops a high-quality portfolio of commercial and residential properties across Canada.

Revenue  Choice Properties revenue in the third quarter of 2024 was $340 million, an increase of $15 million, or 4.6%, compared to the same period in 2023 and included revenue of $196 million (2023 – $186 million) generated from tenants within Loblaw.

The increase in revenue in the third quarter of 2024 was primarily driven by:

• higher rental rates, primarily in the retail and industrial portfolios;
• higher recoveries; and
• acquisitions, net of dispositions, and completed developments;

       partially offset by,

• lower lease surrender revenue.

Net Interest Expense (Income) and Other Financing Charges  Choice Properties net interest expense and other financing charges in the third quarter of 2024 were $1,039 million, compared to net interest income and other financing charges of $221 million in the same period in 2023. The change of $1,260 million was primarily driven by the unfavourable year-over-year change in the fair value adjustment on the Class B LP units (“Exchangeable Units”) of $1,258 million, as a result of the increase in the unit price in the quarter.

Net (Loss) Income  Choice Properties recorded a net loss of $663 million in the third quarter of 2024, compared to net income of $435 million in the same period in 2023. The unfavourable change of $1,098 million was primarily driven by:

• higher net interest expense and other financing charges as described above;

       partially offset by,

• the favourable year-over-year change in the adjustment to fair value of investment in real estate securities of $103 million driven by the increase in Allied’s unit price; and
• the favourable year-over-year change in the adjustment to fair value of investment properties, including those held within equity accounted joint ventures, of $56 million.

Funds from Operations⁽¹⁾  Funds from Operations⁽¹⁾ in the third quarter of 2024 were $187 million, an increase of $6 million compared to the same period in 2023. The increase was primarily due to an increase in rental income, partially offset by higher general and administrative expenses including certain non-recurring items, an increase in interest expense net of an increase in interest income, and lower lease surrender revenue.

OUTLOOK⁽²⁾

The Company continues to expect adjusted net earnings⁽¹⁾ to increase due to the results from its operating segments, and to use excess cash to repurchase shares. 

Loblaw  Loblaw will continue to execute on retail excellence while advancing its growth initiatives with the goal of delivering consistent operational and financial results in 2024. Loblaw’s businesses remain well positioned to meet the everyday needs of Canadians.

For the full-year 2024, Loblaw continues to expect:

• its retail business to grow earnings faster than sales; and
• to return capital to shareholders by allocating a significant portion of free cash flow to share repurchases.

Based on its year-to-date operating and financial performance and momentum exiting the third quarter, Loblaw is slightly increasing its guidance for full year adjusted net earnings per common share⁽¹⁾ growth from high single-digits into the low double-digits.

Additionally, based on the year-to-date investments in its store network and distribution centres, Loblaw now expects to invest a net amount of $1.9 billion in capital expenditures (previously $1.8 billion), which reflects gross capital investments of approximately $2.3 billion (previously $2.2 billion), net of approximately $400 million of proceeds from property disposals.

Choice Properties  Choice Properties is focused on capital preservation, delivering stable and growing cash flows and net asset value appreciation, all with a long-term focus. Its high-quality portfolio is primarily leased to necessity-based tenants and logistics providers, who are less sensitive to economic volatility and therefore provide stability to its overall portfolio. Choice Properties continues to experience positive leasing momentum across its portfolio and has successfully completed the majority of its 2024 lease renewals. Choice Properties also continues to advance its development program, with a focus on commercial developments in the near term, which provides the best opportunity to add high-quality real estate to its portfolio at a reasonable cost and drive net asset value appreciation over time. 

Choice Properties is confident that its business model, stable tenant base, strong balance sheet and disciplined approach to financial management will continue to position the business well for future success. In 2024, Choice Properties will continue to focus on its core business of essential retail and industrial, its growing residential platform and its robust development pipeline, and is targeting:

• stable occupancy across the portfolio, resulting in 2.5% – 3.0% year-over-year growth in Same-Asset NOI, cash basis⁽³⁾;
• annual FFO⁽¹⁾ per unit diluted⁽³⁾ in a range of $1.02 to $1.03, reflecting 2.0% – 3.0% year-over-year growth; and
• strong leverage metrics, targeting Adjusted Debt to EBITDAFV⁽³⁾ below 7.5x.

FORWARD-LOOKING STATEMENTS

This News Release contains forward-looking statements about the Company’s objectives, plans, goals, aspirations, strategies, financial condition, results of operations, cash flows, performance, prospects, opportunities and legal and regulatory matters. Specific forward-looking statements in this News Release include, but are not limited to, statements with respect to the Company’s anticipated future results, events and plans, strategic initiatives and restructuring, regulatory changes including further healthcare reform, future liquidity, planned capital investments, and the status and impact of IT systems implementations. These specific forward-looking statements are contained throughout this News Release including, without limitation, in the “Outlook” section of this News Release. Forward-looking statements are typically identified by words such as “expect”, “anticipate”, “believe”, “foresee”, “could”, “estimate”, “goal”, “intend”, “plan”, “seek”, “strive”, “will”, “may”, “should” and similar expressions, as they relate to the Company and its management.

Forward-looking statements reflect the Company’s estimates, beliefs and assumptions, which are based on management’s perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. The Company’s estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. The Company can give no assurance that such estimates, beliefs and assumptions will prove to be correct. 

Numerous risks and uncertainties could cause the Company’s actual results to differ materially from those expressed, implied or projected in the forward-looking statements, including those described in the “Enterprise Risks and Risk Management” sections of the Management’s Discussion and Analysis in the Company’s 2023 Annual Report and the Company’s Annual Information Form for the year ended December 31, 2023.

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect the Company’s expectations only as of the date of this News Release. Except as required by law, the Company does not undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

DECLARATION OF QUARTERLY DIVIDENDS

Subsequent to the end of the third quarter of 2024, the Company’s Board of Directors declared a quarterly dividend on GWL Common Shares, Preferred Shares, Series I, Preferred Shares, Series III, Preferred Shares, Series IV and Preferred Shares, Series V payable as follows:

2024 THIRD QUARTER REPORT

The Company’s 2023 Annual Report and 2024 Third Quarter Report are available in the Investor Centre section of the Company’s website at www.weston.ca and have been filed on SEDAR+ and are available at www.sedarplus.ca.

INVESTOR RELATIONS

Shareholders, security analysts and investment professionals should direct their requests to Roy MacDonald, Group Vice-President, Investor Relations, at the Company’s Executive Office or by e-mail at investor@weston.ca.

Additional financial information has been filed electronically with various securities regulators in Canada through SEDAR+. This News Release includes selected information on Loblaw, a public company with shares trading on the Toronto Stock Exchange (“TSX”), and selected information on Choice Properties, a public real estate investment trust with units trading on the TSX. For information regarding Loblaw or Choice Properties, readers should refer to the respective materials filed on SEDAR+ from time to time. These filings are also maintained on the respective companies’ corporate websites at www.loblaw.ca and www.choicereit.ca.

Ce rapport est disponible en français.

APPENDIX 1:  NON-GAAP AND OTHER FINANCIAL MEASURES

The Company uses non-GAAP and other financial measures and ratios as it believes these measures and ratios provide useful information to both management and investors with regard to accurately assessing the Company’s financial performance and financial condition.

Further, certain non-GAAP measures and other financial measures of Loblaw and Choice Properties are included in this document. For more information on these measures, refer to the materials filed by Loblaw and Choice Properties, which are available on www.sedarplus.ca or at www.loblaw.ca or www.choicereit.ca, respectively.

Management uses these and other non-GAAP and other financial measures to exclude the impact of certain expenses and income that must be recognized under GAAP when analyzing underlying consolidated and segment operating performance, as the excluded items are not necessarily reflective of the Company’s underlying operating performance and make comparisons of underlying financial performance between periods difficult. The Company adjusts for these items if it believes doing so would result in a more effective analysis of underlying operating performance. The exclusion of certain items does not imply that they are non-recurring.

These measures do not have a standardized meaning prescribed by GAAP and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies, and should not be construed as an alternative to other financial measures determined in accordance with GAAP.

ADJUSTED EBITDA  The Company believes adjusted EBITDA is useful in assessing and making decisions regarding the underlying operating performance of the Company’s ongoing operations and in assessing the Company’s ability to generate cash flows to fund its cash requirements, including its capital investment program.

The following table reconciles adjusted EBITDA to operating income, which is reconciled to GAAP net earnings attributable to shareholders of the Company reported for the periods ended as indicated. 

The following items impacted adjusted EBITDA in 2024 and 2023:

Amortization of intangible assets acquired with Shoppers Drug Mart and Lifemark  The acquisition of Shoppers Drug Mart in 2014 included approximately $6 billion of definite life intangible assets, which are being amortized over their estimated useful lives. Annual amortization associated with the acquired intangible assets will be approximately $500 million until 2024 and will decrease thereafter.

The acquisition of Lifemark in 2022 included approximately $299 million of definite life intangible assets, which are being amortized over their estimated useful lives.

Recovery related to PC Bank commodity tax matter  In July 2022, the Tax Court released a decision relating to PC Bank, a subsidiary of Loblaw. The Tax Court ruled that PC Bank is not entitled to claim notional input tax credits for certain payments it made to Loblaws Inc. in respect of redemptions of loyalty points. PC Bank subsequently filed a Notice of Appeal with the FCA and in March 2024, the matter was heard by the FCA. In August 2024, the FCA released its decision and reversed the decision of the Tax Court. As a result, PC Bank reversed charges of $155 million, including $111 million initially recorded in the second quarter of 2022.

Fair value adjustment of investment in real estate securities  Choice Properties received Allied Class B Units as part of the consideration for the Choice Properties disposition of six office assets to Allied in 2022. Choice Properties recognized these units as investments in real estate securities. The investment in real estate securities is exposed to market price fluctuations of Allied trust units. An increase (decrease) in the market price of Allied trust units results in income (a charge) to operating income.

Fair value adjustment on investment properties  The Company measures investment properties at fair value. Under the fair value model, investment properties are initially measured at cost and subsequently measured at fair value. Fair value is determined based on available market evidence. If market evidence is not readily available in less active markets, the Company uses alternative valuation methods such as discounted cash flow projections or recent transaction prices. Gains and losses on fair value are recognized in operating income in the period in which they are incurred. Gains and losses from disposal of investment properties are determined by comparing the fair value of disposal proceeds and the carrying amount and are recognized in operating income.

Gain on sale of non-operating properties  In the third quarter of 2024, Loblaw did not record any gain or loss related to the sale of non-operating properties (2023 – gain of $13 million).

In the third quarter of 2023, Choice Properties disposed of a property and incurred a loss which was recognized in fair value adjustment on investment properties. On consolidation, the Company recorded the property as fixed assets, which was recognized at cost less accumulated depreciation. As a result, in the third quarter of 2023, on consolidation, an incremental gain of $2 million was recognized in operating income.

Fair value adjustment of derivatives  Loblaw is exposed to commodity price and U.S. dollar exchange rate fluctuations. In accordance with Loblaw’s commodity risk management policy, Loblaw enters into exchange traded futures contracts and forward contracts to minimize cost volatility relating to fuel prices and the U.S. dollar exchange rate. These derivatives are not acquired for trading or speculative purposes. Pursuant to Loblaw’s derivative instruments accounting policy, changes in the fair value of these instruments, which include realized and unrealized gains and losses, are recorded in operating income. Despite the impact of accounting for these commodity and foreign currency derivatives on Loblaw’s reported results, the derivatives have the economic impact of largely mitigating the associated risks arising from price and exchange rate fluctuations in the underlying commodities and U.S. dollar commitments.

ADJUSTED NET INTEREST EXPENSE AND OTHER FINANCING CHARGES  The Company believes adjusted net interest expense and other financing charges is useful in assessing the ongoing net financing costs of the Company. 

The following table reconciles adjusted net interest expense and other financing charges to GAAP net interest expense and other financing charges reported for the periods ended as indicated.

The following items impacted adjusted net interest expense and other financing charges in 2024 and 2023:

Recovery related to PC Bank commodity tax matter  In the third quarter of 2024, $10 million was recorded related to interest income on cash tax refunds on the PC Bank commodity tax matter discussed above.

Fair value adjustment of the Trust Unit liability  The Company is exposed to market price fluctuations as a result of the Choice Properties Trust Units held by unitholders other than the Company. These Trust Units are presented as a liability on the Company’s consolidated balance sheets as they are redeemable for cash at the option of the holder, subject to certain restrictions. This liability is recorded at fair value at each reporting date based on the market price of Trust Units at the end of each period. An increase (decrease) in the market price of Trust Units results in a charge (income) to net interest expense and other financing charges.

ADJUSTED INCOME TAXES AND ADJUSTED EFFECTIVE TAX RATE  The Company believes the adjusted effective tax rate applicable to adjusted earnings before taxes is useful in assessing the underlying operating performance of its business. 

The following table reconciles the effective tax rate applicable to adjusted earnings before taxes to the GAAP effective tax rate applicable to earnings before taxes as reported for the periods ended as indicated.

In addition to certain items described in the “Adjusted EBITDA” and “Adjusted Net Interest Expense and Other Financing Charges” sections above, the following item impacted adjusted income taxes and the adjusted effective tax rate in 2024 and 2023:

Outside basis difference in certain Loblaw shares  The Company recorded a deferred tax recovery of $18 million in the third quarter of 2024 (2023 – $18 million) on temporary differences in respect of GWL’s investment in certain Loblaw shares that are expected to reverse in the foreseeable future as a result of GWL’s participation in Loblaw’s NCIB.

ADJUSTED NET EARNINGS AVAILABLE TO COMMON SHAREHOLDERS AND ADJUSTED DILUTED NET EARNINGS PER COMMON SHARE  The Company believes that adjusted net earnings available to common shareholders and adjusted diluted net earnings per common share are useful in assessing the Company’s underlying operating performance and in making decisions regarding the ongoing operations of its business.

The following table reconciles adjusted net earnings available to common shareholders of the Company and adjusted net earnings attributable to shareholders of the Company to net earnings attributable to shareholders of the Company and then to net earnings available to common shareholders of the Company reported for the periods ended as indicated.

The following table reconciles adjusted net earnings available to common shareholders of the Company and adjusted diluted net earnings per common share to GAAP net earnings available to common shareholders of the Company and diluted net earnings per common share as reported for the periods ended as indicated.

GWL CORPORATE FREE CASH FLOW  GWL Corporate free cash flow is generated from dividends received from Loblaw, distributions received from Choice Properties, and proceeds from participation in Loblaw’s NCIB, less corporate expenses, interest and income taxes paid.

CHOICE PROPERTIES’ FUNDS FROM OPERATIONS  Choice Properties considers Funds from Operations to be a useful measure of operating performance as it adjusts for items included in net income that do not arise from operating activities or do not necessarily provide an accurate depiction of its performance.

Funds from Operations is calculated in accordance with the Real Property Association of Canada’s Funds from Operations & Adjusted Funds from Operations for International Financial Reporting Standards issued in January 2022.

The following table reconciles Choice Properties’ Funds from Operations to net income for the periods ended as indicated. 

SOURCE George Weston Limited

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SHANGHAI, China, Nov. 19, 2024 (GLOBE NEWSWIRE) — GDS Holdings Limited (“GDS Holdings”, “GDS” or the “Company”) GDS HKEX: 9698)), a leading developer and operator of high-performance data centers in China and South East Asia, today announced its unaudited financial results for the third quarter ended September 30, 2024.

Third Quarter 2024 Financial Highlights

• Net revenue increased by 17.7% year-over-year (“Y-o-Y”) to RMB2,965.7 million (US$422.6 million) in the third quarter of 2024 (3Q2023: RMB2,519.0 million).
• Net loss was RMB231.1 million (US$32.9 million) in the third quarter of 2024 (3Q2023: net loss of RMB420.8 million).
• Adjusted EBITDA (non-GAAP) increased by 15.0% Y-o-Y to RMB1,295.7 million (US$184.6 million) in the third quarter of 2024 (3Q2023: RMB1,126.3 million). See “Non-GAAP Disclosure” and “Reconciliations of GAAP and non-GAAP results” elsewhere in this earnings release.
• Adjusted EBITDA margin (non-GAAP) was 43.7% in the third quarter of 2024 (3Q2023: 44.7%).

Third Quarter 2024 Operating Highlights

• Total area committed and pre-committed increased by 20.2% Y-o-Y to 785,692 sqm as of September 30, 2024 (September 30, 2023: 653,732 sqm).
• Area in service increased by 16.8% Y-o-Y to 647,468 sqm as of September 30, 2024 (September 30, 2023: 554,210 sqm).
• Commitment rate for area in service was 92.7% as of September 30, 2024 (September 30, 2023: 91.9%).
• Area under construction was 234,741 sqm as of September 30, 2024 (September 30, 2023: 189,585 sqm).
• Pre-commitment rate for area under construction was 79.2% as of September 30, 2024 (September 30, 2023: 76.1%).
• Area utilized increased by 20.9% Y-o-Y to 481,819 sqm as of September 30, 2024 (September 30, 2023: 398,674 sqm).
• Utilization rate for area in service was 74.4% as of September 30, 2024 (September 30, 2023: 71.9%).

“In the third quarter of 2024, we delivered solid performance across key strategic fronts,” said Mr. William Huang, Chairman and CEO of GDS. “In China, the accelerated move-in trend continued, as we executed our strategy of delivering the backlog while being selective on new orders. Internationally, our recent equity raise is a major step forward, and positions us well to capture the tremendous opportunities for growth in the international markets.”

“In the third quarter of 2024, we grew revenue by 18% and adjusted EBITDA by 15% year-over-year,” said Mr. Dan Newman, Chief Financial Officer. “The US$1 billion equity raise for GDSI will support our ambitious international expansion plans, further affirming the underlying value GDSI brings to our shareholders.”

Third Quarter 2024 Financial Results

Net revenue in the third quarter of 2024 was RMB2,965.7 million (US$422.6 million), a 17.7% increase over the same period last year of RMB2,519.0 million. The Y-o-Y increase was mainly due to continued ramp-up of our data centers and business growth.

• Net revenue for China¹ was RMB2,619.6 million (US$373.3 million), a 6.1% increase over the same period last year of RMB2,470.1 million.
• Net revenue for International² was RMB363.2 million (US$51.8 million), a 636.3% increase over the same period last year of RMB49.3 million.

Cost of revenue in the third quarter of 2024 was RMB2,308.8 million (US$329.0 million), a 11.5% increase over the same period last year of RMB2,071.6 million. The Y-o-Y increase was in line with the continued growth of our business.

Gross profit was RMB656.9 million (US$93.6 million) in the third quarter of 2024, a 46.8% increase over the same period last year of RMB447.4 million.

Gross profit margin was 22.2% in the third quarter of 2024, compared with 17.8% in the same period last year. The Y-o-Y increase was mainly due to the ramp-up of our international business.

Adjusted Gross Profit (“Adjusted GP”) (non-GAAP) is defined as gross profit excluding depreciation and amortization, operating lease cost relating to prepaid land use rights, accretion expenses for asset retirement costs and share-based compensation expenses allocated to cost of revenue. Adjusted GP was RMB1,502.3 million (US$214.1 million) in the third quarter of 2024, a 20.4% increase over the same period last year of RMB1,247.3 million. See “Non-GAAP Disclosure” and “Reconciliations of GAAP and non-GAAP results” elsewhere in this earnings release.

Adjusted GP margin (non-GAAP) was 50.7% in the third quarter of 2024, compared with 49.5% in the same period last year. The Y-o-Y increase was mainly due to the ramp-up of our international business.

Selling and marketing expenses, excluding share-based compensation expenses of RMB7.3 million (US$1.0 million), were RMB27.7 million (US$3.9 million) in the third quarter of 2024, a 5.4% increase over the same period last year of RMB26.3 million (excluding share-based compensation of RMB12.6 million). The Y-o-Y increase was mainly due to fast expansion of our international business.

General and administrative expenses, excluding share-based compensation expenses of RMB31.0 million (US$4.4 million), depreciation and amortization expenses of RMB98.6 million (US$14.0 million) and operating lease cost relating to prepaid land use rights of RMB16.1 million (US$2.3 million), were RMB147.4 million (US$21.0 million) in the third quarter of 2024, a 32.4% increase over the same period last year of RMB111.3 million (excluding share-based compensation expenses of RMB53.3 million, depreciation and amortization expenses of RMB135.9 million and operating lease cost relating to prepaid land use rights of RMB16.8 million). The Y-o-Y increase was mainly due to fast expansion of our international business.

Research and development costs were RMB8.6 million (US$1.2 million) in the third quarter of 2024, compared with RMB10.5 million in the same period last year.

Net interest expenses for the third quarter of 2024 were RMB535.0 million (US$76.2 million), a 6.3% increase over the same period last year of RMB503.2 million. The Y-o-Y increase was mainly due to a higher level of total borrowings.

Foreign currency exchange loss for the third quarter of 2024 was RMB32.5 million (US$4.6 million), compared with a gain of RMB0.9 million in the same period last year.

Others, net for the third quarter of 2024 was RMB6.1 million (US$0.9 million), compared with RMB21.7 million in the same period last year.

Income tax benefits for the third quarter of 2024 were RMB10.0 million (US$1.4 million), compared with income tax expenses of RMB20.9 million in the same period last year.

Net loss in the third quarter of 2024 was RMB231.1 million (US$32.9 million), compared with a net loss of RMB420.8 million in the same period last year.

Adjusted EBITDA (non-GAAP) is defined as net loss excluding net interest expenses, income tax expenses (benefits), depreciation and amortization, operating lease cost relating to prepaid land use rights, accretion expenses for asset retirement costs, share-based compensation expenses, gain from purchase price adjustment and impairment losses of long-lived assets. Adjusted EBITDA was RMB1,295.7 million (US$184.6 million) in the third quarter of 2024, a 15.0% increase over the same period last year of RMB1,126.3 million.

• Adjusted EBITDA for China was RMB1,204.9 million (US$171.7 million), a 3.6% increase over the same period last year of RMB1,163.1 million.
• Adjusted EBITDA for International was RMB97.0 million (US$13.8 million), compared with negative RMB36.5 million in the same period last year.

Adjusted EBITDA margin (non-GAAP) was 43.7% in the third quarter of 2024, compared with 44.7% in the same period last year. The Y-o-Y decrease was mainly due to higher level of corporate expenses for International business.

Basic and diluted loss per ordinary share in the third quarter of 2024 was RMB0.14 (US$0.02), compared with RMB0.30 in the same period last year.

Basic and diluted loss per American Depositary Share (“ADS”) in the third quarter of 2024 was RMB1.12 (US$0.16), compared with RMB2.37 in the same period last year.

Liquidity:

As of September 30, 2024, cash was RMB9,408.5 million (US$1,340.7 million).

• Cash for GDSH was RMB7,757.9 million (US$1,105.5 million).
• Cash for GDSI was RMB1,650.6 million (US$235.2 million).

Total short-term debt was RMB6,638.0 million (US$945.9 million), comprised of short-term borrowings and the current portion of long-term borrowings of RMB6,034.3 million (US$859.9 million), the current portion of convertible bonds payable of RMB561 thousand (US$80 thousand) and the current portion of finance lease and other financing obligations of RMB603.1 million (US$85.9 million). Total long-term debt was RMB42,648.0 million (US$6,077.3 million), comprised of long-term borrowings (excluding current portion) of RMB26,573.3 million (US$3,786.7 million), the non-current portion of convertible bonds payable of RMB8,356.5 million (US$1,190.8 million) and the non-current portion of finance lease and other financing obligations of RMB7,718.2 million (US$1,099.8 million).

• Total gross debt for GDSH, comprised of short-term and long-term borrowings, convertible bonds payable and finance lease and other financing obligations, was RMB43,361.6 million (US$6,179.0 million).
• Total gross debt for GDSI, comprised of short-term and long-term borrowings, was RMB5,924.4 million (US$844.2 million).

During the third quarter of 2024, the Company obtained new debt financing and refinancing facilities of RMB380.0 million (US$54.2 million), all for GDSH.

Third Quarter 2024 Operating Results

China

Sales

Total area committed and pre-committed at the end of the third quarter of 2024 was 626,783 sqm, compared with 609,140 sqm at the end of the third quarter of 2023 and 614,094 sqm at the end of the second quarter of 2024, an increase of 2.9% Y-o-Y and 2.1% quarter-over-quarter (“Q-o-Q”), respectively. In the third quarter of 2024, gross additional total area committed was 20,913 sqm, mainly contributed by data centers in Beijing and Langfang. Net additional total area committed was 12,689 sqm.

Data Center Resources

Area in service at the end of the third quarter of 2024 was 595,606 sqm, compared with 540,606 sqm at the end of the third quarter of 2023 and 580,165 sqm at the end of the second quarter of 2024, an increase of 10.2% Y-o-Y and 2.7% Q-o-Q. In the third quarter of 2024, net additional area in service for China was 15,441 sqm, mainly from data centers in Shanghai and Langfang.

Area under construction at the end of the third quarter of 2024 was 120,422 sqm, compared with 150,116 sqm at the end of the third quarter of 2023 and 117,861 sqm at the end of the second quarter of 2024, a decrease of 19.8% Y-o-Y and an increase of 2.2% Q-o-Q, respectively. During the third quarter of 2024, we initiated the construction of additional phases in existing data centers in Langfang, namely LF14 Phase 2, LF16 Phase 4 and LF18 Phase 2 & 3, with a total net floor area of 17,436 sqm and a pre-commitment rate of 85.1% across these new phases.

Commitment rate for area in service was 92.1% at the end of the third quarter of 2024, compared with 91.7% at the end of the third quarter of 2023 and 92.3% at the end of the second quarter of 2024. Pre-commitment rate for area under construction was 65.1% at the end of the third quarter of 2024, compared with 75.4% at the end of the third quarter of 2023 and 66.9% at the end of the second quarter of 2024.

Move-In

Area utilized at the end of the third quarter of 2024 was 438,654 sqm, compared with 393,225 sqm at the end of the third quarter of 2023 and 419,976 sqm at the end of the second quarter of 2024, an increase of 11.6% Y-o-Y and 4.4% Q-o-Q. In the third quarter of 2024, gross additional area utilized was 25,942 sqm, mainly contributed by data centers in Shanghai, Changshu, and Langfang. Net additional area utilized was 18,678 sqm.

Utilization rate for area in service was 73.6% at the end of the third quarter of 2024, compared with 72.7% at the end of the third quarter of 2023 and 72.4% at the end of the second quarter of 2024.

International

Sales

Total area committed and pre-committed at the end of the third quarter of 2024 was 158,910 sqm, compared with 44,593 sqm at the end of the third quarter of 2023 and 142,898 sqm at the end of the second quarter of 2024, an increase of 256.4% Y-o-Y and 11.2% Q-o-Q. In the third quarter of 2024, net additional total area committed was 16,011 sqm, mainly contributed from our NTP site in Johor, Malaysia, and NDP site in Batam, Indonesia.

Data Center Resources

Area in service at the end of the third quarter of 2024 was 51,862 sqm, compared with 13,605 sqm at the end of the third quarter of 2023 and 50,798 sqm at the end of the second quarter of 2024, an increase of 281.2% Y-o-Y and 2.1% Q-o-Q. In the third quarter of 2024, net additional area in service was 1,064 sqm, mainly from HK1 Phase 1 data center.

Area under construction at the end of the third quarter of 2024 was 114,319 sqm, compared with 39,469 sqm at the end of the third quarter of 2023 and 108,411 sqm at the end of the second quarter of 2024, an increase of 189.6% Y-o-Y and 5.4% Q-o-Q. During the third quarter of 2024, we initiated the construction of two new data centers on our NDP site in Batam, Indonesia, namely NDP2 and NDP3, with a total net floor area of 7,417 sqm, and both are 100% pre-committed.

Commitment rate for area in service was 99.3% at the end of the third quarter of 2024, compared with 100% at the end of the third quarter of 2023 and 95.2% at the end of the second quarter of 2024. Pre-commitment rate for area under construction was 93.9% at the end of the third quarter of 2024, compared with 78.5% at the end of the third quarter of 2023 and 87.2% at the end of the second quarter of 2024.

Move-In

Area utilized at the end of the third quarter of 2024 was 43,165 sqm, compared with 5,449 sqm at the end of the third quarter of 2023 and 42,698 sqm at the end of the second quarter of 2024, an increase of 692.1% Y-o-Y and 1.1% Q-o-Q. In the third quarter of 2024, net additional area utilized was 467 sqm, mainly contributed by NTP5 and HK1 data centers.

Utilization rate for area in service was 83.2% at the end of the third quarter of 2024, compared with 40.1% at the end of the third quarter of 2023 and 84.1% at the end of the second quarter of 2024.

Recent Development

On Oct. 29, 2024, the Company announced that its international affiliate, DigitalLand Holdings Limited (“GDS International” or “GDSI”), which acts as the holding company for GDSH’s data center assets and operations outside of mainland China, has entered into definitive agreements for certain institutional private equity investors to subscribe for US$1.0 billion of Series B convertible preferred shares (the “Series B”) newly issued by GDSI.

Post closing and on an as-converted basis, GDSH will own approximately 37.6% of the equity interest of GDSI in the form of ordinary shares. The value of GDSH’s equity interest in GDSI implied by the Series B subscription price is approximately US$1.3 billion, equivalent to approximately US$6.75 per American Depositary Share of GDSH. Post closing, GDSH will no longer consolidate GDSI for accounting purposes and GDSH will no longer have the right to appoint a majority of directors to the Board of GDSI.

Business Outlook

The Company confirms that the previously provided guidance of total revenues for the year of 2024 of RMB11,340 – RMB11,760 million, Adjusted EBITDA of RMB4,950 – RMB5,150 million remain unchanged.

The Company revised the previously provided capex guidance of RMB6,500 million, which includes RMB2,500 million for China and RMB4,000 million for International, to RMB 11,000 million, which includes RMB3,000 million for China as required to support move-in, and RMB8,000 million for International, reflecting an acceleration of business expansion.

This forecast reflects the Company’s preliminary view on the current business situation and market conditions, which are subject to change.

Conference Call

Management will hold a conference call at 8:00 a.m. U.S. Eastern Time on November 19, 2024 (9:00 p.m. Beijing Time on November 19, 2024) to discuss financial results and answer questions from investors and analysts.

Participants should complete online registration using the link provided below at least 15 minutes before the scheduled start time. Upon registration, participants will receive the conference call access information, including dial-in numbers, a personal PIN and an e-mail with detailed instructions to join the conference call.

Participant Online Registration:
https://register.vevent.com/register/BI2347220aa72a4610bafc061a7977f70a

A live and archived webcast of the conference call will be available on the Company’s investor relations website at investors.gds-services.com.

Non-GAAP Disclosure

Our management and board of directors use Adjusted EBITDA, Adjusted EBITDA margin, Adjusted GP and Adjusted GP margin, which are non-GAAP financial measures, to evaluate our operating performance, establish budgets and develop operational goals for managing our business. We believe that the exclusion of the income and expenses eliminated in calculating Adjusted EBITDA and Adjusted GP can provide useful and supplemental measures of our core operating performance. In particular, we believe that the use of Adjusted EBITDA as a supplemental performance measure captures the trend in our operating performance by excluding from our operating results the impact of our capital structure (primarily interest expense), asset base charges (primarily depreciation and amortization, operating lease cost relating to prepaid land use rights, accretion expenses for asset retirement costs and impairment losses of long-lived assets), other non-cash expenses (primarily share-based compensation expenses), and other income and expenses which we believe are not reflective of our operating performance, whereas the use of adjusted gross profit as a supplemental performance measure captures the trend in gross profit performance of our data centers in service by excluding from our gross profit the impact of asset base charges (primarily depreciation and amortization, operating lease cost relating to prepaid land use rights and accretion expenses for asset retirement costs) and other non-cash expenses (primarily share-based compensation expenses) included in cost of revenue.

We note that depreciation and amortization is a fixed cost which commences as soon as each data center enters service. However, it usually takes several years for new data centers to reach high levels of utilization and profitability. The Company incurs significant depreciation and amortization costs for its early stage data center assets. Accordingly, gross profit, which is a measure of profitability after taking into account depreciation and amortization, does not accurately reflect the Company’s core operating performance.

We also present these non-GAAP measures because we believe these non-GAAP measures are frequently used by securities analysts, investors and other interested parties as measures of the financial performance of companies in our industry.

These non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. These non-GAAP financial measures have limitations as analytical tools, and when assessing our operating performance, cash flows or our liquidity, investors should not consider them in isolation, or as a substitute for gross profit, net income (loss), cash flows provided by (used in) operating activities or other consolidated statements of operations and cash flow data prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of these non-GAAP financial measures instead of their nearest GAAP equivalent. First, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted GP, and Adjusted GP margin are not substitutes for gross profit, net income (loss), cash flows provided by (used in) operating activities or other consolidated statements of operation and cash flow data prepared in accordance with U.S. GAAP. Second, other companies may calculate these non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of these non-GAAP financial measures as tools for comparison. Finally, these non-GAAP financial measures do not reflect the impact of net interest expenses, incomes tax benefits (expenses), depreciation and amortization, operating lease cost relating to prepaid land use rights, accretion expenses for asset retirement costs, share-based compensation expenses, gain from purchase price adjustment and impairment losses of long-lived assets, each of which have been and may continue to be incurred in our business.

We mitigate these limitations by reconciling the non-GAAP financial measure to the most comparable U.S. GAAP performance measure, all of which should be considered when evaluating our performance. We do not provide forward-looking guidance for certain financial data, such as depreciation, amortization, accretion, share-based compensation and net income (loss); the impact of such data and related adjustments can be significant. As a result, we are not able to provide a reconciliation of forward-looking U.S. GAAP to forward-looking non-GAAP financial measures without unreasonable effort. Such forward-looking non-GAAP financial measures include the forecast for Adjusted EBITDA in the section captioned “Business Outlook” set forth in this press release.

For more information on these non-GAAP financial measures, please see the table captioned “Reconciliations of GAAP and non-GAAP results” set forth at the end of this press release.

Exchange Rate

This announcement contains translations of certain RMB amounts into U.S. dollars (“USD”) at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to USD were made at the rate of RMB7.0176 to US$1.00, the noon buying rate in effect on September 30, 2024 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or USD amounts referred could be converted into USD or RMB, as the case may be, at any particular rate or at all.

Statement Regarding Preliminary Unaudited Financial Information

The unaudited financial information set out in this earnings release is preliminary and subject to potential adjustments. Adjustments to the consolidated financial statements may be identified when audit work has been performed for the Company’s year-end audit, which could result in significant differences from this preliminary unaudited financial information.

About GDS Holdings Limited

GDS Holdings Limited GDS HKEX: 9698)) is a leading developer and operator of high-performance data centers in mainland China and, through an equity investment in its international affiliate, in Hong Kong and South East Asia. The Company’s facilities are strategically located in primary economic hubs where demand for high-performance data center services is concentrated. The Company also builds, operates and transfers data centers at other locations selected by its customers in order to fulfill their broader requirements. The Company’s data centers have large net floor area, high power capacity, density and efficiency, and multiple redundancies across all critical systems. GDS is carrier and cloud-neutral, which enables its customers to access the major telecommunications networks, as well as the largest PRC and global public clouds, which are hosted in many of its facilities. The Company offers co-location and a suite of value-added services, including managed hybrid cloud services through direct private connection to leading public clouds, managed network services, and, where required, the resale of public cloud services. The Company has a 23-year track record of service delivery, successfully fulfilling the requirements of some of the largest and most demanding customers for outsourced data center services in China. The Company’s customer base consists predominantly of hyperscale cloud service providers, large internet companies, financial institutions, telecommunications carriers, IT service providers, and large domestic private sector and multinational corporations.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “aim,” “anticipate,” “believe,” “continue,” “estimate,” “expect,” “future,” “guidance,” “intend,” “is/are likely to,” “may,” “ongoing,” “plan,” “potential,” “target,” “will,” and similar statements. Among other things, statements that are not historical facts, including statements about GDS Holdings’ beliefs and expectations regarding the growth of its businesses and its revenue for the full fiscal year, the business outlook and quotations from management in this announcement, as well as GDS Holdings’ strategic and operational plans, are or contain forward-looking statements. GDS Holdings may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”) on Forms 20-F and 6-K, in its current, interim and annual reports to shareholders, in announcements, circulars or other publications made on the website of the Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”), in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause GDS Holdings’ actual results or financial performance to differ materially from those contained in any forward-looking statement, including but not limited to the following: GDS Holdings’ goals and strategies; GDS Holdings’ future business development, financial condition and results of operations; the expected growth of the market for high-performance data centers, data center solutions and related services in China and South East Asia; GDS Holdings’ expectations regarding demand for and market acceptance of its high-performance data centers, data center solutions and related services; GDS Holdings’ expectations regarding building, strengthening and maintaining its relationships with new and existing customers; the continued adoption of cloud computing and cloud service providers in China and South East Asia; risks and uncertainties associated with increased investments in GDS Holdings’ business and new data center initiatives; risks and uncertainties associated with strategic acquisitions and investments; GDS Holdings’ ability to maintain or grow its revenue or business; fluctuations in GDS Holdings’ operating results; changes in laws, regulations and regulatory environment that affect GDS Holdings’ business operations; competition in GDS Holdings’ industry in China and South East Asia; security breaches; power outages; and fluctuations in general economic and business conditions in China, South East Asia and globally, and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks, uncertainties or factors is included in GDS Holdings’ filings with the SEC, including its annual report on Form 20-F, and with the Hong Kong Stock Exchange. All information provided in this press release is as of the date of this press release and are based on assumptions that GDS Holdings believes to be reasonable as of such date, and GDS Holdings does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

For investor and media inquiries, please contact:

GDS Holdings Limited
Laura Chen
Phone: +86 (21) 2029-2203
Email: ir@gds-services.com

Piacente Financial Communications
Ross Warner
Phone: +86 (10) 6508-0677
Email: GDS@tpg-ir.com

Brandi Piacente
Phone: +1 (212) 481-2050
Email: GDS@tpg-ir.com

GDS Holdings Limited

________________

1. For the purpose of this earnings release, “China” or “GDSH” refers to GDS’s assets and operations in Mainland China, including third party data centers in Hong Kong and Macau. The reported segment financial numbers include the inter-company charges.
2. For the purpose of this earnings release, “International” or “GDSI” refers to GDS’s assets and operations outside Mainland China, excluding third party data centers in Hong Kong and Macau. The reported segment financial numbers include the inter-company charges.

GDS HOLDINGS LIMITED UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))
		As of December 31, 2023		As of September 30, 2024
		RMB		RMB		US$
	Assets
Current assets
	Cash	7,710,711		9,408,464		1,340,695
	Accounts receivable, net of allowance for credit losses	2,545,913		3,756,149		535,247
	Value-added-tax (“VAT”) recoverable	214,385		248,551		35,418
	Prepaid expenses and other current assets	512,644		882,448		125,748
	Total current assets	10,983,653		14,295,612		2,037,108
Non-current assets
	Property and equipment, net	47,499,494		52,048,470		7,416,848
	Prepaid land use rights, net	22,388		21,927		3,125
	Operating lease right-of-use assets	5,436,288		5,332,954		759,940
	Goodwill and intangible assets, net	7,765,055		7,607,461		1,084,055
	Other non-current assets	2,739,812		3,035,849		432,604
	Total non-current assets	63,463,037		68,046,661		9,696,572
	Total assets	74,446,690		82,342,273		11,733,680
	Liabilities, Mezzanine Equity and Equity
Current liabilities
	Short-term borrowings and current portion of long-term borrowings	2,833,953		6,034,303		859,881
	Convertible bonds payable, current	0		561		80
	Accounts payable	3,424,937		3,640,199		518,724
	Accrued expenses and other payables	1,318,336		1,533,221		218,482
	Operating lease liabilities, current	180,403		166,279		23,695
	Finance lease and other financing obligations, current	547,847		603,099		85,941
	Total current liabilities	8,305,476		11,977,662		1,706,803
Non-current liabilities
	Long-term borrowings, excluding current portion	26,706,256		26,573,316		3,786,667
	Convertible bonds payable, non-current	8,434,766		8,356,467		1,190,787
	Operating lease liabilities, non-current	1,395,981		1,325,820		188,928
	Finance lease and other financing obligations, non-current	7,894,185		7,718,233		1,099,839
	Other long-term liabilities	1,586,223		1,597,397		227,627
	Total non-current liabilities	46,017,411		45,571,233		6,493,848
	Total liabilities	54,322,887		57,548,895		8,200,651
Mezzanine equity
	Redeemable preferred shares	1,064,766		1,053,300		150,094
	Redeemable non-controlling interests	0		4,797,484		683,636
	Total mezzanine equity	1,064,766		5,850,784		833,730
GDS Holdings Limited shareholders’ equity
	Ordinary shares	516		527		75
	Additional paid-in capital	29,337,095		29,513,306		4,205,612
	Accumulated other comprehensive loss	(974,393	)	(661,437	)	(94,254	)
	Accumulated deficit	(9,469,758	)	(10,233,666	)	(1,458,286	)
	Total GDS Holdings Limited shareholders’ equity	18,893,460		18,618,730		2,653,147
Non-controlling interests		165,577		323,864		46,152
	Total equity	19,059,037		18,942,594		2,699,299
	Total liabilities, mezzanine equity and equity	74,446,690		82,342,273		11,733,680

GDS HOLDINGS LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data)
		Three months ended									Nine months ended
		September 30, 2023		June 30, 2024		September 30, 2024					September 30, 2023		September 30, 2024
		RMB		RMB		RMB		US$			RMB		RMB		US$
Net revenue
Service revenue		2,518,978		2,826,369		2,965,713		422,611			7,399,447		8,419,449		1,199,762
Equipment sales		55		0		0		0			564		0		0
Total net revenue		2,519,033		2,826,369		2,965,713		422,611			7,400,011		8,419,449		1,199,762
Cost of revenue		(2,071,584	)	(2,188,544	)	(2,308,792	)	(329,000	)		(5,909,878	)	(6,551,029	)	(933,514	)
Gross profit		447,449		637,825		656,921		93,611			1,490,133		1,868,420		266,248
Operating expenses
	Selling and marketing expenses	(38,912	)	(26,516	)	(35,020	)	(4,990	)		(108,946	)	(95,164	)	(13,561	)
	General and administrative expenses	(317,326	)	(284,787	)	(293,022	)	(41,755	)		(876,349	)	(888,644	)	(126,631	)
	Research and development expenses	(10,529	)	(10,889	)	(8,628	)	(1,229	)		(25,359	)	(29,497	)	(4,203	)
Income from operations		80,682		315,633		320,251		45,637			479,479		855,115		121,853
Other income (expenses):
	Net interest expenses	(503,156	)	(505,231	)	(535,008	)	(76,238	)		(1,457,055	)	(1,543,715	)	(219,978	)
	Foreign currency exchange gain (loss), net	908		11,829		(32,500	)	(4,631	)		(1,114	)	(25,198	)	(3,591	)
	Others, net	21,680		5,876		6,140		875			67,716		18,250		2,601
Loss before income taxes		(399,886	)	(171,893	)	(241,117	)	(34,357	)		(910,974	)	(695,548	)	(99,115	)
Income tax (expenses) benefits		(20,945	)	(59,875	)	10,008		1,426			(209,775	)	(112,260	)	(15,997	)
Net loss		(420,831	)	(231,768	)	(231,109	)	(32,931	)		(1,120,749	)	(807,808	)	(115,112	)
Net (income) loss attributable to non-controlling interests		(350	)	(3,438	)	3,337		476			(3,350	)	(997	)	(142	)
Net loss attributable to redeemable non-controlling interests		0		9,465		35,432		5,049			0		44,897		6,398
Net loss attributable to GDS Holdings Limited shareholders		(421,181	)	(225,741	)	(192,340	)	(27,406	)		(1,124,099	)	(763,908	)	(108,856	)
Cumulative dividend on redeemable preferred shares		(13,745	)	(13,477	)	(13,618	)	(1,941	)		(39,946	)	(40,553	)	(5,779	)
Net loss available to GDS Holdings Limited ordinary shareholders		(434,926	)	(239,218	)	(205,958	)	(29,347	)		(1,164,045	)	(804,461	)	(114,635	)
Loss per ordinary share
Basic and diluted		(0.30	)	(0.16	)	(0.14	)	(0.02	)		(0.79	)	(0.55	)	(0.08	)
Weighted average number of ordinary share outstanding
Basic and diluted		1,468,336,869		1,470,013,200		1,476,130,132		1,476,130,132			1,467,583,364		1,472,056,703		1,472,056,703

GDS HOLDINGS LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))
		Three months ended									Nine months ended
		September 30, 2023		June 30, 2024		September 30, 2024					September 30, 2023		September 30, 2024
		RMB		RMB		RMB		US$			RMB		RMB		US$
Net loss		(420,831	)	(231,768	)	(231,109	)	(32,931	)		(1,120,749	)	(807,808	)	(115,112	)
Foreign currency translation adjustments, net of nil tax		20,261		(16,334	)	538,739		76,770			(242,792	)	466,380		66,459
Comprehensive (loss) income		(400,570	)	(248,102	)	307,630		43,839			(1,363,541	)	(341,428	)	(48,653	)
Comprehensive income attributable to non-controlling interests		(6	)	(2,323	)	(5,287	)	(753	)		(3,897	)	(7,707	)	(1,098	)
Comprehensive loss (income) attributable to redeemable non-controlling interests		0		5,548		(107,365	)	(15,299	)		0		(101,817	)	(14,509	)
Comprehensive (loss) income attributable to GDS Holdings Limited shareholders		(400,576	)	(244,877	)	194,978		27,787			(1,367,438	)	(450,952	)	(64,260	)

GDS HOLDINGS LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))
	Three months ended									Nine months ended
	September 30, 2023		June 30, 2024		September 30, 2024					September 30, 2023		September 30, 2024
	RMB		RMB		RMB		US$			RMB		RMB		US$
Net loss	(420,831	)	(231,768	)	(231,109	)	(32,931	)		(1,120,749	)	(807,808	)	(115,112	)
Depreciation and amortization	886,142		874,168		911,274		129,856			2,603,610		2,642,181		376,508
Amortization of debt issuance cost and debt discount	42,058		31,364		41,859		5,965			131,976		111,785		15,929
Share-based compensation expense	107,957		75,682		61,194		8,720			255,851		213,522		30,427
Others	11,356		(34,653	)	(73,811	)	(10,518	)		15,788		(96,237	)	(13,714	)
Changes in operating assets and liabilities	(116,236	)	(260,556	)	(67,893	)	(9,675	)		(770,609	)	(1,092,664	)	(155,703	)
Net cash provided by operating activities	510,446		454,237		641,514		91,417			1,115,867		970,779		138,335
Purchase of property and equipment and land use rights	(1,478,410	)	(1,960,947	)	(2,898,805	)	(413,077	)		(4,935,688	)	(6,454,859	)	(919,811	)
Payments related to acquisitions and investments	(94,000	)	(70,791	)	0		0			(236,448	)	(70,791	)	(10,088	)
Net cash used in investing activities	(1,572,410	)	(2,031,738	)	(2,898,805	)	(413,077	)		(5,172,136	)	(6,525,650	)	(929,899	)
Net proceeds from financing activities	442,341		3,833,394		1,941,787		276,704			2,765,599		7,397,150		1,054,086
Net cash provided by financing activities	442,341		3,833,394		1,941,787		276,704			2,765,599		7,397,150		1,054,086
Effect of exchange rate changes on cash and restricted cash	(10,222	)	30,883		(28,109	)	(4,008	)		149,597		(7,135	)	(1,016	)
Net (decrease) increase of cash and restricted cash	(629,845	)	2,286,776		(343,613	)	(48,965	)		(1,141,073	)	1,835,144		261,506
Cash and restricted cash at beginning of period	8,370,564		7,809,913		10,096,689		1,438,767			8,882,066		7,917,932		1,128,296
Reclassification as assets of disposal group classified as held for sale	(324	)	0		0		0			(598	)	0		0
Cash and restricted cash at end of period	7,740,395		10,096,689		9,753,076		1,389,802			7,740,395		9,753,076		1,389,802

GDS HOLDINGS LIMITED RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for percentage data)
		Three months ended									Nine months ended
		September 30, 2023		June 30, 2024		September 30, 2024					September 30, 2023		September 30, 2024
		RMB		RMB		RMB		US$			RMB		RMB		US$
Gross profit		447,449		637,825		656,921		93,611			1,490,133		1,868,420		266,248
Depreciation and amortization		748,658		773,302		811,434		115,628			2,215,559		2,340,696		333,548
Operating lease cost relating to prepaid land use rights		10,434		10,706		11,536		1,644			28,177		32,876		4,685
Accretion expenses for asset retirement costs		1,708		1,690		1,730		247			5,165		4,908		699
Share-based compensation expenses		39,005		27,934		20,678		2,947			87,401		74,936		10,678
Adjusted GP		1,247,254		1,451,457		1,502,299		214,077			3,826,435		4,321,836		615,858
Adjusted GP margin		49.5	%	51.4	%	50.7	%	50.7	%		51.7	%	51.3	%	51.3	%

GDS HOLDINGS LIMITED RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for percentage data)
		Three months ended									Nine months ended
		September 30, 2023		June 30, 2024		September 30, 2024					September 30, 2023		September 30, 2024
		RMB		RMB		RMB		US$			RMB		RMB		US$
Net loss		(420,831	)	(231,768	)	(231,109	)	(32,931	)		(1,120,749	)	(807,808	)	(115,112	)
Net interest expenses		503,156		505,231		535,008		76,238			1,457,055		1,543,715		219,978
Income tax expenses (benefits)		20,945		59,875		(10,008	)	(1,426	)		209,775		112,260		15,997
Depreciation and amortization		886,142		874,168		911,274		129,856			2,603,610		2,642,181		376,508
Operating lease cost relating to prepaid land use rights		27,211		27,316		27,602		3,933			80,760		82,521		11,759
Accretion expenses for asset retirement costs		1,708		1,690		1,730		247			5,165		4,908		699
Share-based compensation expenses		107,957		75,682		61,194		8,720			255,851		213,522		30,427
Adjusted EBITDA		1,126,288		1,312,194		1,295,691		184,637			3,491,467		3,791,299		540,256
Adjusted EBITDA margin		44.7	%	46.4	%	43.7	%	43.7	%		47.2	%	45.0	%	45.0	%

GDS HOLDINGS LIMITED SELECTED SEGMENT INFORMATION (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))
			Three months ended September 30, 2023									Three months ended June 30, 2024									Three months ended September 30, 2024
			GDSH		GDSI		Elimination		Total			GDSH		GDSI		Elimination		Total			GDSH		GDSI		Elimination		Total
			RMB		RMB		RMB		RMB			RMB		RMB		RMB		RMB			RMB		RMB		RMB		RMB		US$
Net revenue			2,470,125		49,328		(420	)	2,519,033			2,579,594		255,533		(8,758	)	2,826,369			2,619,578		363,209		(17,074	)	2,965,713		422,611
Net loss			(309,236	)	(111,272	)	(323	)	(420,831	)		(172,845	)	(55,666	)	(3,257	)	(231,768	)		(152,146	)	(76,227	)	(2,736	)	(231,109	)	(32,931	)
Net interest expenses			468,951		34,205		0		503,156			450,271		57,043		(2,083	)	505,231			463,327		74,999		(3,318	)	535,008		76,238
Income tax expenses (benefits)			20,943		2		0		20,945			59,864		11		0		59,875			(347	)	(9,661	)	0		(10,008	)	(1,426	)
Depreciation and amortization			845,901		40,241		0		886,142			790,901		83,430		(163	)	874,168			803,535		107,903		(164	)	911,274		129,856
Operating lease cost relating to prepaid land use rights			26,907		304		0		27,211			27,603		(287	)	0		27,316			27,602		0		0		27,602		3,933
Accretion expenses for asset retirement costs			1,656		52		0		1,708			1,690		0		0		1,690			1,730		0		0		1,730		247
Share-based compensation expenses			107,957		0		0		107,957			75,682		0		0		75,682			61,194		0		0		61,194		8,720
Adjusted EBITDA			1,163,079		(36,468	)	(323	)	1,126,288			1,233,166		84,531		(5,503	)	1,312,194			1,204,895		97,014		(6,218	)	1,295,691		184,637
Net cash provided by (used in) operating activities			578,723		(68,277	)	0		510,446			599,443		(106,926	)	(38,280	)	454,237			639,878		1,636		0		641,514		91,417
Net cash (used in) provided by investing activities			(1,355,859	)	(804,475	)	587,924		(1,572,410	)		654,451		(1,146,380	)	(1,539,809	)	(2,031,738	)		(788,123	)	(2,110,682	)	0		(2,898,805	)	(413,077	)
–	Purchase of property and equipment and land use rights		(673,935	)	(804,475	)	0		(1,478,410	)		(852,847	)	(1,146,380	)	38,280		(1,960,947	)		(788,123	)	(2,110,682	)	0		(2,898,805	)	(413,077	)
–	Payments related to acquisitions and investments		(94,000	)	0		0		(94,000	)		(70,791	)	0		0		(70,791	)		0		0		0		0		0
–	GDSH investment in GDSI		(587,924	)	0		587,924		0			1,578,089		0		(1,578,089	)	0			0		0		0		0		0
Net cash provided by (used in) financing activities			81,629		948,636		(587,924	)	442,341			(119,209	)	2,374,514		1,578,089		3,833,394			(392,325	)	2,334,112		0		1,941,787		276,704

GDS HOLDINGS LIMITED SELECTED SEGMENT INFORMATION CONT’D (Amount in thousands of Renminbi (“RMB”) and US dollars (“US$”))
	As of December 31, 2023		As of September 30, 2024
	RMB		RMB		US$
Property and equipment, net
GDSH	40,098,416		40,210,445		5,729,943
GDSI	7,408,567		11,855,262		1,689,361
Elimination	(7,489	)	(17,237	)	(2,456	)
Total	47,499,494		52,048,470		7,416,848
Gross debt (Note)
GDSH	42,547,203		43,361,579		6,178,975
GDSI	5,170,653		5,924,400		844,220
Elimination	(1,300,849	)	0		0
Total	46,417,007		49,285,979		7,023,195
Cash
GDSH	7,301,976		7,757,903		1,105,492
GDSI	408,735		1,650,561		235,203
Total	7,710,711		9,408,464		1,340,695

Note: Gross debt comprised of short-term and long-term borrowings, convertible bonds payable and finance lease and other financing obligations. For GDSI, for December 31, 2023, gross debt also includes the amounts due to GDSH.