The Nextdc Ltd (ASX: NXT) share price is up 5.7% today to be currently trading at $8.02. Let's take a look at what's driving NextDC shares higher today.
Strong half-year results
NextDC's share price rise today appears to be linked to the strong financial results the company released to the market last Friday.
For the six months ended 31 December 2019, NextDC reported revenue of $97.7 million, up by 8%, while underlying earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $50.9 million, a healthy 21% increase.
Falling in line with guidance, I see these results as very strong for a data centre provider which unlike many other ASX tech shares, require very high capital investment in order to roll out data centres.
The Australia data centre market has come leaps and bounds over the past 5–10 years as data storage has transitioned from being stored 'on premise' to being stored in 'third party' data centres. This has been driven by the rapid rise in cloud computing, and NextDC is capitalising on this trend.
Operating cash flows also grew strongly for the data centre provider, increasing by 34% to $20.1 million during the first half, indicating Next DC's strong operating leverage.
NextDC reported a first-half statutory loss after tax of $4.9 million, compared to a loss of $3.1 million in the prior corresponding period (pcp), which reflected higher depreciation and interest costs after a record period of investment.
Rolling out next-generation Tier IV data centres
NextDC is currently the largest locally based provider by a long margin. The company has a nationwide network of Tier III and Tier IV data centre facilities throughout Australia and continues to expand rapidly with a number of data centres under construction.
During the first half, NextDC's contracted utilisation within its portfolio of data centres was up 2.8MW or 6% to 53.3MW. The company's customer numbers continue to grow strongly and were up 16% over the pcp.
In its release last Friday, NextDC pointed out that the first half was a record period for new investments including both the development of its next generation of Tier IV data centres P2 in Perth and S2 in Sydney.
While most large third-party data centres are rated Tier III, NextDC is one of the few data centre providers in Australia rolling out the next generation of world-class data centres, rated Tier IV.
For FY20, NextDC reconfirmed its guidance of revenue in the range of $200 million to $206 million. Strong demand nationally for its services is set to continue and advanced negotiations are underway for some large potential customers.
