In morning trade the NEXTDC Ltd (ASX: NXT) share price has fallen 8% to $6.50 following the release of the data centre operator's half year results.
Here's how NEXTDC performed in the first half compared to the prior corresponding period:
- Revenue increased 17% to $90.8 million.
- Underlying EBITDA up 26% to $42.2 million.
- Statutory net loss after tax of $3.1 million.
- Contracted utilisation up by 28% or 11.1MW to 50.4MW.
- Interconnections up 34% to 9,982.
- Customer numbers up 25% to 1,090.
- Guidance: Full year underlying EBITDA of $83 million to $87 million.
NEXTDC's chief executive officer and managing director, Craig Scroggie, appeared to be pleased with the company's performance during the first half.
He said: "NEXTDC achieved an unprecedented level of sales in the first half, both across contracted utilisation as well as interconnections. These results demonstrate the strength of the Company's market presence and serve to underpin further growth in revenues and earnings in future periods."
I agree with Mr Scroggie on this and was pleased with increases in key metrics during the half.
NEXTDC's annualised revenue per square metre has continued to rise and now stands at $10,482 per sqm, up 8.7% on the prior corresponding period. In addition to this, annualised revenue per MW has increased 5.3% to $4.54 million.
Another positive is that the strong growth in interconnections has driven the average interconnects per customer to 9.2, up 7% from the same period last year.
Management notes that the growth in average interconnects per customer highlights the increasing use of hybrid cloud and connectivity both inside and outside the data centre as customers expand their ecosystems. This is a very good thing as management expects ecosystem growth to drive higher margins and customer retention.
Looking ahead, management has downgraded its revenue guidance slightly to $180 million to $184 million due to lower interest and distribution income in the second half from property acquisitions. But this is not going to impact its EBITDA, so its guidance remains the same at $83 million to $87 million on an underlying basis. Capital expenditure guidance has also remained unchanged at between $430 million to $470 million.
How does this result compare to the market's expectations?
According to a note out of Goldman Sachs, it was expecting NEXTDC to achieve EBITDA of $43 million during the first half. Which means NEXTDC has fallen a touch short of expectations.
However, the broker was particularly bullish on the company, with its estimate sitting ~7% ahead of the analyst consensus.
Should you invest?
I'm a big fan of NEXTDC and believe it is well-positioned to deliver strong growth over the next decade. However, due to the premium that its shares trade on, it is a reasonably high risk option and its shares could come under pressure if the expected growth fails to materialise.
In addition to NEXTDC, I think Macquarie Telecom Group Ltd (ASX: MAQ) and Megaport Ltd (ASX: MP1) would be great ways to gain exposure to the cloud computing boom that is driving the increasing demand for data centre services.
