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Over the Wire share price climbs 10% as it announces partnership with NEXTDC

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The Over the Wire Holdings Ltd (ASX: OTW) share price is charging higher today on the back of a business update and new strategic partnership.

Over the Wire is a telecommunications, cloud and IT solutions provider that specialises in converged voice and data networks, data centres, and hosted infrastructure solutions for corporate clients.

The company owns a carrier-level network with points of presence in all major Australian capital cities and Auckland, New Zealand.

What did Over the Wire announce?

This morning, the company revealed that the current pandemic and associated restrictions have generated strong demand for its voice offering, resulting in higher volumes. This increase in voice volumes has positively offset the delay in some data services due to customer site access restrictions during lockdown.

What’s more, Over the Wire’s exposure to customers in the hardest-hit industries of retail, hospitality and travel is limited, with those most affected representing less than 3% of its recurring base.

While COVID-19 has affected its non-recurring business, recent orders from customers indicate the company is now likely to deliver more than 70% of its non-recurring revenue forecast.

On the whole, Over the Wire noted that it continues to generate positive operational cash flow, maintains a strong balance sheet, and its recurring business is in line with expectations.

The company remains confident of being within 3% of consensus, which comprises revenue of $90.4 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of $17.4 million.

Commenting on business performance, managing director Michael Omeros said:

“Although the COVID-19 pandemic has created uncertainty and challenging market conditions our team has shown focus and resilience which should be commended. We are satisfied with how the business is currently tracking and confident about achieving positive growth into next financial year.”

Partnership with NEXTDC Ltd (ASX: NXT)

On top of the business update, Over the Wire also announced a strategic partnership with S&P/ASX 200 Index (ASX: XJO) share NEXTDC. Over the Wire will migrate core elements of its network and private cloud infrastructure into NEXTDC’s tier 4 facilities.

Over the Wire described this partnership as a “foundational building block” that will bring its network closer to many of the world’s leading cloud providers and cloud on-ramp services. Additionally, the partnership will allow Over the Wire to further develop its multi-cloud strategy in conjunction with its current private cloud offering.

“NEXTDC forms an integral part of our multi-cloud strategy and we are excited to be on the journey with NEXTDC, as they continue to build out next generation data centres that are enabling the growth of the digital economy,” said Mr Omeros.

At the time of writing, the Over the Wire share price is sitting 6.35% higher at $3.18 after soaring as much as 10.7% at around midday. Like most small-cap ASX growth shares, Over the Wire shares took a tumble in the wake of COVID-19 and are currently down 30% year to date.

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Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Over The Wire Holdings Ltd. The Motley Fool Australia has recommended Over The Wire Holdings Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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