The NEXTDC Ltd (ASX: NXT) share price will be in the spotlight tomorrow after the data centre provider released its first-half result in after-market trading today.
What did NEXTDC announce?
Revenue for the half-year was $124.5 million, a 27% increase compared to last year’s result. This was underpinned by data centre services revenue of $121.6 million, which also had a 27% year-on-year increase.
The growth in data centres revenue was led by a 33% increase in contracted utilisation to 71.0 megawatts (MW). As a result, the business recorded a 16% increase in both customers and interconnections.
The fundamental unit economics of the business remained steady throughout the period. Annualised revenue per square meter increased marginally from $10,765 to $10,816, while annual revenue per megawatt fell slightly from $4.43 million to $4.31 million.
Underlying EBITDA rose 29% to $65.7 million while operating cash flow increased 219% to 64.1 million.
NEXTDC recorded a net loss of $17.5 million, largely due to a $45.2 million depreciation expense and $40.3 million in finance costs related to debt.
The business remains well-capitalised, with $1.8 billion in cash and undrawn debt facilities.
Development activity
A number of key additions to capacity and development took place during the half:
- S2 Sydney added 4MW of capacity, bringing total installed capacity to 26MW
- M2 Melbourne added 6MW of capacity, taking total installed capacity to 16MW
- S3 Sydney development continues with building construction works commencing during the half. Stage one is due for completion in the second half 2022
- M3 design and development approval was formally submitted to council
Full-year guidance upgraded
Management provided an update on guidance for the full-year as follows:
- Data centre services revenue in the range of $246 million to $251 million (previously $242 million to $250 million)
- Underlying EBITDA in the range of $130 million to $133 million (previously $125 million to $130 million)
- Capital expenditure in the range of $380 million to $400 million (unchanged)
My take
I think of the companies such as NEXTDC as modern-day Real Estate Investment Trusts (REITs).
The business builds the data centre infrastructure and then customers pay rent to store its critical information in the cloud.
While I’m certainly no expert, I foresee the demand for data centre storage only increasing from here as more information moves to the cloud, which will be a structural tailwind for the business going forward.
Given management has delivered an impressive 21% per annum growth in revenues and 32% per annum growth in EBITDA since 2017, I’d be willing to take a small position now and ride the cloud tailwind.
For more share ideas to take advantage of this structural shift, grab a copy of our in-depth (and free!) cloud stocks report.
