NextDC share price powers down 7% despite turning a profit

What could be dragging NextDC down amid its FY22 results?

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Key points

  • The NextDC share price is 5.9% lower to $10.34 a share on Monday 
  • Investors are reacting negatively despite growth in the company's revenue in FY22 
  • Management is forecasting further growth in FY23 

The NextDC Ltd (ASX: NXT) share price is descending on Monday morning after releasing its full-year results.

At the time of writing, shares in the data centre operator are swapping hands for $10.34 apiece, down 5.9%. For context, the S&P/ASX 200 Index (ASX: XJO) is trading 1.7% lower after a hellacious session in US markets on Friday night.

NextDC share price falls on narrowing losses

  • Data centre services revenue up 18% year on year to $291 million
  • Contracted utilisation up 10% to 83 megawatts (MW)
  • Total customers up 7% to 1,613
  • Underlying EBITDA up 26% to $169 million
  • Statutory net profit after tax (NPAT) of $9.1 million, flipping from a $23.6 million loss
  • Finished FY22 with $457 million in cash, down from $652 million

What else happened in FY22?

Looking at the results from NextDC in FY22, it is evident the financial period was devoted to expanding the company's operations further. Being a data centre operator, NextDC's growth is primarily a function of installed capacity, contracted capacity, and revenue per megawatt.

Based on the reports, the company's key metrics were somewhat mixed compared to the prior year. For example, while installed capacity reached a record high of ~114MW, contract capacity dipped to 73% from 79%. Additionally, annualised revenue per MW was relatively unchanged at $3.99 million.

Furthermore, it was another capital-intensive year for NextDC. Development activities during the period included:

  • Bringing online S3 in Sydney
  • Adding 6MW of capacity to M2 in Melbourne
  • Continuing construction of M3 in Melbourne
  • Expanding new edge data centre SC1 in Sunshine Coast
  • Acquiring land in Horsley park, Sydney for S4 site

In total, the company poured $600 million into investing activities in FY22. As a result, NextDC recorded a net $195.8 million reduction to its cash balance. The substantial cash outflows might be playing a role in the steep downward move in the NextDC share price today.

What did management say?

Management provided their thoughts on the record year for NextDC in a letter to shareholders today. The piece was on behalf of CEO Craig Scroggie and chair Douglas Flynn, with the pair saying:

As the world around us continues to evolve rapidly, one thing is clear: digital infrastructure has a mission critical role to play in the new digital economy and so does NextDC.

The pair added:

We ended FY22 in an outstanding position. An abundance of current and future customer opportunities means we are well positioned to press into new regions with our customers in FY23 and beyond. We will continue to invest in our people and platform to achieve our goal of being a global leader in the provision of customer-centric data centre services.

What's next?

On a positive note, NextDC provided revenue guidance for FY23. Specifically, management is forecasting revenue between $340 million to $355 million. This would suggest a potential increase of between 17% to 22% from FY22.

Meanwhile, EBITDA is forecast to grow at a more modest rate of between 12% to 17%. In turn, this would mean underlying EBITDA of between $190 million to $198 million.

Lastly, the current financial year is expected to see a reduction in capital expenditure compared to FY22. Instead of $605 million, investors can expect capex to be in the range of $380 million to $420 million.

NextDC share price snapshot

The NextDC share price hasn't been a winner for any portfolios so far this year. On a year-to-date basis, shares in the company are down nearly 21%. That is more than twice the pain dealt by the benchmark index over the same window.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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