Hello, ladies and gentlemen. Thank you for standing by for GDS Holdings Limited Second Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen only mode. Today's conference call is being recorded. I will now turn the call over to your host, Ms.
Laura Chen, Head of Investor Relations for the company. Please go ahead Laura.
Thank you. Hello, everyone, and welcome to the 2Q 'seventeen earnings conference call of CDS 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. Gdservices.com.
Leading today's call is Mr. William Huang, GDS' Founder, Chairman and CEO, who will provide an overview of the business. Mr. Dan Newman, GDS's 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 provisions of the U.
S. Private Securities Litigation Reform Act of 1995. Forward looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risk and uncertainties is included in the company's prospectus as filed with the U.
S. Securities And Exchange Commission. The company does not assume any obligation to update any forward looking statements, except as required under applicable law. Please also note that GDS earnings press release and this conference call include discussions of unaudited GAAP Financial Information as well as unaudited non GAAP financial measures. GDS press release contains a reconciliation of the unaudited non GAAP measures to the unaudited most directly comparable GAAP measures.
I will now turn the call over to GDS founder, Chairman and CEO, William Wong, please go ahead, William.
Okay. Thank you, Rola. Hello, everyone. Welcome. Thank you for joining today's call.
In 2Q 2017, we continued to make significant progress across all aspects of our business and further strengthened our market leadership position. As you can see on slide 3, On the financial side, we grew total revenue by over 40% and adjusted EBITDA by over 110% year on year. We invested about $60,000,000 of CapEx to develop the capacity required by our customers. We obtained over US100 million dollars of new debt facilities to ensure that our projects Turning to the operations. As shown on slide 4, we had another great quarter for sales.
Signing up customers for over 8000 square meters net of new commitments. At midyear, our total area committed grow to over 76,000 square meters. 72% higher than 1 year ago. Our bookings in 2q 'seventeen are worth about 14,000,000 dollars in terms of annual recurring revenue. Over the first half of this year, We have down over USD 75,000,000 of bookings, following on from our achievement of US120 million dollars sign up over the whole of last year.
We believe that this level of new commitments puts us at the top of the global league table and clearly demonstrate our sales strategy is on track. While our sales volumes are reaching new heights, I'm pleased to report that's the average selling price for new contracts has remained quite stable. We are also successfully renewing contracts each quarter with industry high retention rates term was 0.3% in 2q 'seventeen. This reflects our high operation standards and high degree of customer satisfaction. Pricing on renewals is generated at similar levels to premium contracts.
We continued to convert the backlog to revenue generating space, increasing our air utilization area utilization utilized to over 42,000 square meters. 32% higher than 1 year ago. Now moving to the Slide 5. Before giving more color on our sales wins and resource development, I want to update you of what is happening in the market. Cloud adoption continued to take off in China currently it is around a US2 billion dollars market in terms of annual revenue.
Representing around 1% of total IT spend, but we shared a view of the leading industry player that it is rapidly heading towards $20,000,000,000 to $30,000,000,000 market. This transformation is happening at a faster pace in China than in the US Aribalo and Tencent are reporting consistent triple digital growth rates for their cloud business. In our view, cloud service providers together with some of the large internet companies, account for more than 70% of new demand for data center capacity in China. From what we see, they are outsourcing substantially all of their requirements for high performance data centers in Tier 1 market. The major cost service providers in China are mainly Chinese.
However, we also see some of the largest largest global service providers, increasing their presence in China. We recognized several years ago The strategic importance of capturing demand from the hyperscale cross service providers First, because they represent a large part of the market opportunity and by serving these customers we gain scale advantages. 2nd, because access to cloud infrastructure is key to attracting further customers such as SaaS providers and a larger enterprise to co locate. And third, because car is the platform to support the next wave of the new technology around the big data, AI and IoT, which will require a lot of additional capacity We continue to have great success in capturing this demand As shown on slide 6, cloud has grown from almost nothing 3 years ago, to over 50% of our total area committed today. Our cloud customers include both the largest Chinese and the global service providers.
We target customers who we believe are strategically important to the future of the digital economy. We are already a major service provider to many of the customers who matter and continue to make progress in adding new accounts and in deepening our existing relationships. In the last quarter, we won a major new deal from the first time customer, which is China's largest travel company and 1 of the world's largest online travel agents. As previously announced, This deal will anchor our new campus in Shanghai. The customer immediately become one of our top 5 in terms of total area committed.
With this addition, cloudpluslargeinternet now accounts for over 75% of our total area committees, made up entirely of strategic high potential customers. We realized that cloud is enabling the next generation of technology at advancements and we are well aligned to capture growth. When people talk about the home of the cloud, We believe that this process is unique in China and offers significant operation and operational benefits to all participants in the cloud ecosystem. Serving the right customers is key to growth because once the relationship is established, they keep coming back for more. As illustrated by the chart on the right side of Slide 6, we have been winning incremental business from our top 2 customers nearly every quarter.
Just in the prior quarter, we obtained pre commitments from one of them for 100 percent of the capacity of our new Beijing Street data center. Our relationship with these customers keep getting stronger. We recently announced strategic partnerships with Alibaba and a cancer where we will recognize a preferred vendor for both of them What this means, practice is that Alibaba and Tencent are prioritizing performance from GDS. We in turn are aligning our resource development to fulfill their data center growth requirements. As a matter of priority, in all Tier 1 markets, on a continuous basis.
Besides the car and the large internet customer, in the last quarter, we added over 20 new financial FSI and large enterprise customers, increasing our total customer counts by 5% and further diversifying our customer base. I would like to highlight first time deal for 1 of the largest commercial and retail banks in China, which has its headquarters in Shanghai. And for one of the leading and best known multinational brands in digital payment solutions, In order to enhance the value propositions of having this ecosystem of cost, FSI and enterprise customers, we recently applied for a new category of telecom license, which will allow us to provide a cross connect service over our own network I'm pleased to report that we have passed several key steps in the license application process. And we are optimistic to obtain the license in the near future. The key to maintaining our sales growth momentum is resource supply.
We put significant focus on our project sourcing, design and construction management efforts and continue to deliver impressive results. And shown on slide 7. In 2017, we brought 3 new projects in the service totaling over 10,000 square meters of capacity. Our total area of service remains almost fully sold out with 92% commitment rate. We also started 3 new projects totaling over 13,000 square meters of additional capacity.
Our area under construction at midyear was over 38,000 square meters with a pre commitment rate of 28%. In addition, we have soft, soft allocated to key customers a large part of the remaining pipeline capacity. To give more color on the 3 new projects, in Shanghai, we added Shanghai 5 which is primarily targeted FSI customers. It is located close to our main Shanghai campus in an area where there is a cluster of FSI data centers. We already have over 100 FSI customers at our nearby campus in Weigeltra, free trade zone.
And it was important for us to have another facility well suited to serve incremental demand from this vertical. In Shanghai, we also added Shanghai 6, the first data center on our new campus in Waigweigauchao. China S6 will enable us to carry over the sales momentum from our Shanghai 1, Shanghai 2 and Shanghai 3 data centers. We are almost fully committed. We plan to construction of the 2nd data center on the same campus as Shanghai 6 next year.
In Beijing, we added the Beijing 3, which is next to our Beijing 1 data center. Both Beijing 1 and our new Beijing 3 data centers up now fully committed. In order to support sales into 2018, and beyond, we are still looking for more supply in all our Tier 1 markets. We have promising targets which we will add when the time is right. From time to time, We also see opportunities to work with our strategic customers on half datacenter projects outside the Tier 1 market.
We will consider these opportunities in the economics and deal structure satisfy our requirements. The combination of our established relationship with the customers whomever and our high performance data center portfolio in all Tier 1 market puts GDS in a very strong competitive position Our seasoned and mature teams added to this and provide a platform which offers our customers truly unique value. It is getting more and more difficult to replicate what we already have. As we believe competitive advantage to strengthen our market leadership position in In closing, this is our 4th earnings call since become a U. S.
Listed company. We are proud to be reporting these results today because they demonstrate we are executing our plan delivering what we promised and confident moving forward. With that, I will now hand the call over to Dan for the financial review.
Thank you, Slide 11 shows our P and L analysis for 2Q 2017. But in order to better highlight the underlying trends, I'll start with the version shown on Slide 12. Please note that all quarter on quarter comparison is based on pro form a numbers for 1Q 2017, which excludes a one time termination fee of RMB44.1 million booked in that quarter. To RMB331.5 million in 2Q 'seventeen. On a non GAAP basis, underlying adjusted NOI grew by 16.1 percent quarter on quarter to RMB 155,500,000 and underlying adjusted EBITDA grew by 23.7 percent quarteronquarterto100.4000000.
The underlying adjusted EBITDA margin was 3.2 percentage points higher at 30.3% in 2Q 'seventeen compared with 27.1% in 1Q 'seventeen. In 2Q 2017, there was an increase in area utilized of 4572 Square Meters, which drove revenue growth. The increase in area utilized is a significant step up from the rate of increase in prior quarters. What we are seeing now is conversion from sales backlog to revenue generating area, particularly from some of the larger contracts which we signed with cloud service providers over the past year. The average monthly service was RMB2750 in 2q 'seventeen compared with RMB2708 in 1Q 'seventeen.
On slides 1415, we show growth in net operating income and EBITDA and operating leverage. In 2Q 2017, we achieved an underlying adjusted NOI margin of 46.9%. Which was 2.2 percentage points higher than for 1Q 2017. This mainly reflects operating leverage on fixed costs of data centers, which are at the ramp up stage. The NOI margin can fluctuate due to growth drag We are confident that the underlying trend is upwards.
To give you a better idea of the long term potential for margin improvement, We can point to our stabilized data centers, which for this purpose we define as data centers with a utilization rate of over 80%. At the end of 2Q 2017, we had 27,406 square meters of area and service in self developed data centers, which were stabilized. The underlying adjusted NOI margin for these data centers was 61.1% in aggregate. At the same time, we had 32,673,000 square meters of area and service and self developed data centers, which were still ramping up. These data centers were 91.5% committed in other words almost sold out, but the utilization rate was 32.5% in aggregate as they are earlier in the move in cycle.
Based on the contract terms for area committed, we can anticipate that these data centers will attain similar NOI margin levels to the stabilized part of our portfolio once the backlog contracts are delivered. Moving on to the corporate level. Our SG and A excluding DNA and stock based compensation came out at 16.9% of service revenue compared with 17.9% in 1Q 2017. Although the volume of our sales and resource development is increasing rapidly, we do expect to achieve significant further operating leverage. On our SG and A costs going forward.
Turning to our investment activities. As shown on slide 16, we paid CapEx of RMB 405.7 million in 2Q 2017, which was a step up from the run rate over the previous four quarters. CapEx in 2Q 2017 included RMB43.6 million payment related to acquisitions, Replacement CapEx accounted for 3.8 percent of total quarterly CapEx compared with 3.3% in 1Q 2017. Our total area under construction is 38,028 square meters across 7 sites, out of which 51.7% will enter service this year. Now I'd like to update you on the progress of each project which were under construction at midyear.
Starting with Beijing 2, this data center actually entered service in July. A major global cloud service provider is moving in and the data center is already revenue generating. We have demand in hand from cloud customers for additional HD in this data center. Shenzhen for phase 1 construction is almost complete. We're awaiting activation of the primary power supply and we expect to bring the data center into service in the next couple of months.
We have customer commitments for this data center, which are far along in the contracting process. Shanghai 4 is the 4th data center in our main Shanghai campus. We aim to bring Shanghai 4 into service by the end of 2017. The other three data centers on the campus, Shanghai 1, 23 are now 93.2% committed in aggregate. All of our major cloud customers are present on this campus as well as over 100 FSI and large enterprise customers.
Shanghai 4 is substantially pre allocated on a soft basis. Beijing III is a new project which we announced in May It is now 100% pre committed to a major cloud service provider. We aim to bring it into service as soon as possible in 2018. Shenzhen V is a project which we acquired while under construction in March. Phase 1, which is 100% committed, entered into service in late June, a full quarter ahead of schedule.
1 of the major cloud service providers is moving in and the data center is already revenue generating. Phase 2 of Shenzhen V is in effect a separate data center within the same building. We commenced construction of phase 2, which is substantially pre allocated on soft basis. Shanghai V is a new project which we announced in July. We have commenced construction of phase 1.
We're positioned positioning this data center to serve the FSI vertical and will secure commitments as we get closer to the completion date. Shanghai 6 is the first to 2 data centers on our new campus in the Wiger Chiao free trade zone. It's a greenfield project where our property development partner has agreed to build suit and lease to us, the Shell and Core of 2 data center buildings. This is another case where we have worked with a partner for build to suit leads. It's a great approach for us because it means that we end up with purpose built data centers which are highly marketable and rare in Tier One markets.
But without the added capital intensity of having to own the land and basic building structure ourselves. As compared with outright ownership, it reduces our unit development costs by roughly 20% depending on the location. While we show this project is under construction, we will not incur any material CapEx until the first shell and core is handed over to us next share. With regard to financing, as shown on Slide 17, During 2q 'seventeen, we drew down RMB432.5 million of net additional borrowings. We also booked additional debt that borrowings and capital leases from the acquisition of Shenzhen V.
Our blended financing cost was 6.9% in Q2 2017 compared with 7.1% in 1Q 2017. Excluding the convertible bond, the cost was 6.1% in 2Q 2017 versus 6.2% for the prior quarter. Almost all of our loans are floating rate linked to the PBOC rate. At the end of the quarter, Our gross debt was rmb 5,500,000,000 and our net debt was rmb 4,000,000,000. The ratio of net debt to last quarter annualized pro form a adjusted EBITDA was 10 times.
Fully diluted for conversion of the CB the multiple was 7.5 times. Because we are in a heavy investment phase, consolidated net debt to EBITDA ratios may not give an accurate indication of our leverage. We incur debt before we generate EBITDA, hence If we exclude the financing obligations related to data centers under construction, the consolidated net debt to EBITDA multiple falls from ten times to complete is only RMB340.3 million. The commitment rate for data centers in service was 92.2 percent, and the utilization rate was 59.3 percent at midyear. The difference between commitment rate and utilization rate is just a matter of timing.
Hence as the backlog is delivered, the consolidated net debt to EBITDA multiple for the in service part of our portfolio will come down from 6.3 times to levels in line with industry norms. As things stand, all of our data centers in service and under construction, but the exception of the recently announced Shanghai 5 and Shanghai 6 projects are fully funded. We are currently in discussions with banks to Shanghai 5 and Shanghai 6. The fact that we had very strong customers high levels of pre commitment and many long term contracts definitely helps us to access the debt finance which we need. As we sign up more contracts with cloud service providers, our contract length gets longer as they typically commit to 6 to 10 year contracts often with no right of early termination without courts.
These contracts further enhance our finance ability. To conclude on financing, we are strongly positioned to capture the opportunity with China market and are growing in terms of sales at a high rate than we foresaw previously. As an asset based business, we are constantly looking for capital from different sources in order to supplement our capital base and to optimize our cost of capital. We're currently in discussions regarding a range of financing options at both the project and holding company level. Whatever options we take, we are very conscious of the need to enhance returns for our existing equity holders.
While maintaining a sustainable and sustainable capital structure going forward. We will let you know about any new financing plans in due course. Turning to slide 18. With the strong sales progress, our backlog has grown again. To over 34,000 square meters.
The average selling price for the contract in the backlog is in line with our current MSR. Accordingly, the backlog is worth around US163 million dollars in terms of annual recurring revenue. This provides visibility for 84% growth from a base of $195,000,000, for the last quarter annualized service revenue in 2Q 2017. Delivery of the backlog depends on the timing of project completions, and customer moving schedules. Over the second half of twenty seventeen, we expect the net addition in area utilized to be significantly higher than based on the significant move in, which has already taken place in the current quarter to date and the program of delivery schedules over the remainder of the year, We are on track to achieve FY17 revenue and EBITDA within the range which we guided at the beginning of the year, and we reaffirm the existing guidance.
With that, I will end the formal part of my presentation. We'd now like to open the call to questions. Operator?
You. For the benefit of all callers participating in today's Our first question will come from the line of Colleen McLean from Credit Suisse. Please ask the question.
Yes, thanks for the opportunity. And congrats on the numbers. My question is really just related to the competitive environment. We saw the relationship that you've dealt with with BARBA, are you seeing then continuing to use partnership approach, or are you seeing them building a lot more of their own data centers? That's the first question.
And then secondly, amongst other kind of independent data center providers, are you, who are you seeing as the main competitors when you are, when you're pitching for new contracts from the customers? Thank you.
Okay, Corinne, this is William.
I answered your question first. I mean, In my view, I mean, as we answered this question last quarter, I think in the 2nd quarter, there's a competitive landscape, no any change in my view. This is number 1. But I want to say in Q2, we are already strengthening our customer. I mean, our customer to keep our customer satisfied, satisfaction and keep our operating track record is very, very important.
And this capability is not easy to replicate is number 1. Number 2, as we show up in our during our presentation, we keep deliver and supply in all the key markets about the resource. So this is not easy. This is not a one night job. So our each, any of our competitors, once they are coming, it will still take more, more a long time.
So I think this is my view, what happened in the market. Is number 1. Number 2 is,
Is Alibaba partnering or building themselves?
I think Alibaba, you know, if ever there in the Tier 1 city, they still keep all sorts in there. 100% outsourcing their requirement. So this is what we see so far. And we also see in the next couple of years, they still will keep this strategy like before. So we didn't see any Alibaba self built data center will impact the cooperation between TDS and Alibaba.
Got it. Thank you very much. Thank
you. Our next question comes from the line of harry Hannah from JP Morgan. Please ask your question.
The first question I had is, looks like we are seeing a nice step up, in terms of area utilized after remaining relatively stagnant for the last few quarters. And I think Dan did mention that this is probably the early sign of some of the larger contracts that you signed, starting to come on, come on board. Could you give a little bit more color ban of William in terms of how that is going to progress over the next couple of quarters. That is my first question. Second would be, could you talk a little bit about, for your cloud customers what is the kind of market share that, you're seeing carrier neutral occupy?
And within that, That that would you rank, GDS, if the other care and you proven this as well. You mentioned that your cloud related revenue or cloud related customers account for slightly higher than 50% of the area committed as of end of Q2.
Hi, Goco. It's Dan here. So on your first question, actually there was a step up in area utilized in the 2nd quarter in the 1st quarter and it stepped up again in the 2nd quarter. And I mentioned that there's been a lot of activity in the current quarter to date, which is very positive. So we are expecting to see a quantum increase in an area utilized in the third quarter 4th quarter of this year, And it ties back to, if you look at our sales pattern over the last 4 to 6 quarters and you look at the curve, there was a very significant amount of new business in third quarter of last year.
And a lot of that was pre commitment for data centers, which were under construction and so on. So this is something which we anticipated several quarters ago in which we tried to communicate when we talked about the quarterly cadence. So it's happening as we expected and give us comfort about our guidance. Your question about market share, I think we discussed before that there's a kind of natural fifty-fifty divide between carrier and carrier neutral because 2 availability zones. 1 goes to the incumbent carrier.
1 goes to non incumbent. So carrier neutral target market share might be 50% in total. I would say that we are getting at least three quarters if not more of that, because most of it is tied to the top 3 or 4 5 Chinese players. And as you know, they are all our major customers. So we follow that we would be having that kind of market share on the Cara neutral side.
Okay. If I could follow-up on one other question, I think we've discussed the progression of potential immediate power kind of arrangements with some of the larger customers. How is it progressing? And when is it that form a part of the overall revenue stream. Is that is it something that we should be really concerned about from how the revenues progress as metered power contracts become a bigger portion of the overall mix?
I think there's a source of concern because needed power simply means that the Income we obtained from customers is linked to their actual power usage. So economically, we are close to indifferent about that. But I think you're asking in terms of our contract base, maybe talk to the proportion, which is on a metered unbundled basis as opposed to bundled, the metered unbundled part has been growing, and is now a substantial minority part of our contract portfolio, significant part of the backlog contracts are structured like that. But the pricing structures vary a lot from case to case even with the same customer. I mean, we can have meeted unbundled power, but that can be quite often the minimum power usage commitments.
So it's not a simple matter, but I think, really, this is just that you should just think about this as customer preference, and not having any economic impact on us.
Our next question comes from the line of Atalay from Citigroup. Please ask question.
Hi, William. And then, thanks for taking my question. So I have a question. So you just mentioned that in terms of the area UTIs, actually, you are seeing the, good signs. So how is the 2017, checking compared to your previous expectation.
And if that's ahead, what's the driver, for example, from which clients or from which end market? That's my first question. Thank you.
One thing you know, the high degree of certainty is what our backlog is worth because we set it on the call and you could always estimate it yourself. So that's what the revenue will be when the backlog is fully delivered. That is just a question of the timing of delivery over the next 1 to 3 quarters, revenue growth will come entirely from delivery of the backlog. Contracts have fixed delivery schedules. But I'd say in majority of cases, our customers are moving in ahead of those schedules, which means that from a forecasting point of view, we can't forecast just based on contractual minimum commitment we had to forecast based on what the customers have already done.
And the program of move in which we've agreed with them and which we're implementing, going forward. And what's happening right now is I'd say very much in line with our expectations, running something that communicated, for 1 or 2 quarters ago, as I said, in terms of the cadence this year. It's encouraging. It's actually happened. It's a significant amount of movement that's happened already in this quarter.
Okay. Thank you. And, for the 2018, how much capacity do you plan to add? Would be similar to the area you had in 2017?
I'll take a slightly complicated question because the capacity that we add, if you talk about new projects that we initiate, that is driving that's providing, resource to fuel the sales efforts. So last year, when we were on the road for the IPO, I think at the time of the IPO, we've done about $100,000,000 in terms of new bookings. We ended up $120,000,000 for the full year, which was a lot higher than the year before would have been very high by U. S. Standards.
And I think a lot of investors asked us, is that sustainable? And we said, yes, But as you can see, we're on track this year to achieve more than that. And I'd say the sales pipeline is looking very strong and very significant deals in the pipeline. So we have to add resource to enable us to fulfill our customer requirements and maintain that sales momentum. And that is a challenge believe it's something that we're doing quite well and probably doing better than anybody else in the market.
So what we've added, what we've announced, you can calculate in terms of square meters, 38,000 square meters under construction, I think 10,000 square meters is pre committed. So 28,000 square meters is based on disclosure 28,000 square leases is still available for commitment. Well, that's available. That's equivalent to slightly more than we added over the full of the whole of last year. That's equivalent.
Last year, we added about 25,000 square meters in new bookings. So now we've got 28,000 square meters in the pipeline available for commitment to customers. So you could infer that would be maybe equal to 3 or 4 quarters of new sales.
Also, what I say there, for year 2018 revenue, a contract fulfillment disfunding or fully funding. So when we are, we plan to invest in next year, it's most most most of the resources for year 2019 year 2020.
Yes.
Okay. And then, last question is probably for William. I think the first time you talk about the cross, connected, service, and you mentioned that, you are getting the license to doing that. Can you elaborate more if it's more like, you know, some service that we can, you know, differentiate from the other, carrier neutral provider, or this is, actually, service that we can increase our ASP because, if we were to look, you know, the other data center provider in overseas, they actually charge this closer compared to the service.
Okay. I think the this is very early stage, I mean, a topic, I mean, as we mentioned in the last quarter, I mean, we are in the process to gather the final approval of the license, which I mentioned that we are gathered, we got a significant progress past most of the key steps. So this is number 1. Based on this, we are, of course, we already start to planning, integration and technology especially some SDN technology in this offering. And we are not in the short term, we are not planned to charge our customer, frankly speaking, and we try to use these tools to strengthen our core value proposition.
Because we understand in future because GDS has the unique, very unique, I mean, position because we are our strategies ledigitest datacenter platform as a home office cloud. And we know in the future, there's a lot of huge potential to connect the cloud and connect cloud, customer connect, customer connect, the multi cloud, it's very, very strong demand, a potential demand, but we don't want to capitalize immediately. We want to use this application and a new service line, which we will, is well prepared right now to strengthen our Colo position right now. That's my answer.
Thank you, William. Yeah, that's my question. Thank you. And don't have any questions.
Our next question comes from the line of Jonathan Achin from RBC Capital.
Yes. So I think you answered some of this in the last question, but maybe just to be a little more clear, the development. Pipeline that we look at on page 7 and then looking out for the next 4 to 6 to 8 quarters, do you is there enough land, what you're looking at in terms of land buildings and perhaps possible acquisitions for redevelopment and so forth? Do you think you can sustain the development pipeline that you currently have, or could that protect potentially contract or expand compared to what you're seeing right now?
Jonathan, I think that I mean, the simple answer is yes. But if we look at it in three parts, I mean, the first thing is you have to have the sales capability. And I think, people taking that for granted, but that is something which, it is immensely valuable. The customer relationships we had, the repeat business we're getting the sense that our customers are relying on us. We adopted a strategy maintaining continuous supply in all Tier 1 markets, long ahead, years ahead of anyone else.
And I think we're still years ahead of anyone else. We have a certain amount of capacity, which we categorizes held for future development. We don't disclose that every quarter, but there is certainly a substantial amount of resource, which when the demand is there in the right place at the right time, we can activate But that apart, I can tell you that there is a strong pipeline of new projects in all the markets. And We've included in this presentation material for the first time to map showing the location of our projects. And what we'd wanted to highlight there was that we have campuses and we have clusters.
This matters to our customers. They want to be able to expand in the same place. They want to see visible expansion capacity. And, we have that in all markets. I think this is a point of competitive differentiation, which is probably often underappreciated.
Yes, Jonathan, I think I want to add a little bit at the point. I mean, Number, I think this deliver capability, including the sourcing capability, design capability and a project management capability and also procurement capability and financing capability I think that GDS based on our last 4th quarter, our track record, GDS has more experienced team and experience to well manage their future sourcing, delivering better. So I think we are more now we are more confident than before and we are more confident to compare with other new players jump to the market. We had very, very comprehensive, I mean, capability. It's not easy to replicate by the new new player.
And then on the guidance,
I was interested. So the, was was was Shenzhen Five in in your earlier guidance, which you have reaffirmed. And then I noticed that Shenzhen for Phase I expenses for delivery in second half think in the prior call, you might have expected that in the first half. So just interested a little bit in that dynamic. Okay.
I can think, 1st of all, Section 4, we are on as Dan mentioned, we are on track to complete the construction phase 1. But I would like to say this is it's a special case because in terms of a national wide, our delivered track record or Simpson delivered track record, I mean, the ATA is a special case because the district and other central government is Chenzhen, one is that we call it a ping ping center district. They have some special policy and they ask for a more long process to review our all the projects in Pincang So this is a process. It's more than initial is bad. But so far it's on track.
It's still in a process. We are, our team is working hard to it's working on that and try to And we believe we will get the approval soon.
Yes, Jonathan, when you're asking about one project being ahead, one project being behind, I mean, we have an enormous amount of development we have a more amount of resource delivery, to our customers. We're operating in a very dynamic market. So it's inevitable that within this very this mosaic, there's going to be some things which are ahead and some things which are which are behind. I think the important thing from a is that when we look at it in aggregate, we are comfortably on track for the guidance that we gave some time ago.
Yes, that's what I try to emphasize. I mean, even the project symptom for the process is more longer than what we expect. Given this is a fact, I think But the good things for our management team, we never bet on one project to deliver our financial results. So it will not impact our year 20 70s financial results. Great.
Thank
you very much.
Thank you. Our next question comes from the line of Michael Hart from Guggenheim Securities. Please ask your question.
Hi, thanks for fitting me in. I guess just first to follow-up on that. The topic of Shenzhen V, which you were able to open so far ahead of schedule. As you look to the rest of the construction pipeline, are there any other potential opportunities where you might be able to pull forward deliveries of space that you've pre committed to your customers?
Michael, I think, pull forward means relative to our own internal plan, And I think the, yeah, our track record of completing projects within budget and on time has been very near perfect. And Our construction time period has been shortening and, we're gaining, we're gaining efficiencies in terms of procurements and also in terms of standardization. So there are a lot of improvements going on is it's a multi quarter, I think it's a multi year process. We expect to continue to improve for several years yet yet to come. But if you're asking, is there something extraordinary that's going to happen that I haven't told you about that's going to lead to significantly higher financial numbers.
I think, well, frankly, we were giving guidance at the beginning of the year for revenue and EBITDA growth here in the kind of I can't remember 50% to 75% range. So I hope that's that's enough.
Yes, definitely. I appreciate that. I want to follow-up offline. Better understand how to market those efficiencies. And I guess the other thing I wanted to ask about was around cloud adoption.
I was wondering if you could offer some additional color on what types of enterprises are leading the way in cloud adoption Also, when you talked about the cloud revenue run rate now versus where you think it could go, I think that kind of suggests that enterprises are less than 10% of the way through the process of switching to cloud infrastructure. I was wondering, I wanted to get your thoughts on that. And, I was wondering if you could maybe offer some additional color on, which, enterprise verticals, the most important drivers and whether that could be a source of additional demand for you long term? Thanks.
Michael, I'd like to answer you, but I don't think I position myself as a kind of cloud guru. Actually, Alibaba had an Investor Day about a month ago, And they gave a presentation on their cloud business, and they gave quite a few examples of customer case studies or reference reference customer cases. And they are portraying that there is a good penetration beginning to happen into larger enterprises and so on. Some of the bigger spenders in in IT, IT dollar terms. So I think you know, we're talking about our customers' customer.
So apps, I shouldn't really say anything more specific than that.
I think based on my observation, I think there are a couple of industry they use the adaptor to cloud very fast. Based on our first of all, the new type of the, I mean, financial service provider, like payment, online trading, they use the car very heavily. I don't want to give the specific name, which is our course, one of our big Colo customer, they adopt to the early crop in the last 2 years very, very heavily. Another vertical, what I think is that's definitely a lot of the mobile company, mobile internet based company, and video stream there used the crop very naturally. So I think this is a couple of the industry.
Based on my observation, they use it grows very, very fast.
Okay. Thanks. And so you're, are you seeing, bookings from these types of customers looking to locate their deployment adjacent to your cloud customers?
Yes, Michael. I mean, that's that's the driver of the growth in our enterprise and FSI customer base. 20 new accounts. So 5% growth in terms of that year on a quarterly basis, 5% growth in terms of the number of customers. And when we look at the identity of those customers, they're pretty substantial, entities.
And, a lot of them it's cloud related business, to be a financial cloud customer, for example, who is operating online and leveraging the cloud infrastructure that we have that our other customers have in our data centers.
Yes, we do see some, a very significant trend, I mean, a lot of our total customer they use the crop with not only adding also the other crop in GDS. Very, very actively. This is number 1. Number 2 is we see some customer, they used to be not GDS target customer because they want to sit close to the Alicro or other core. They moved to move some uh-uh a lot of their production server to our data center.
They have become another our new vertical customer. Great.
Thank you very much.
Thank you. As there are no further questions, I would like to turn the call over to today's company for closing remarks.
Yes, thank you once again for joining us today. If you have further questions, please feel free to contact GDS Investor Relations through the contact information on our website and the Pisonte Group Investor Relations. Thank you.