Data-centre operator Nextdc Ltd (ASX: NXT) released its full-year 2015 results to the market today. Shares dived 10% in initial trade to recover somewhat, down 7% at the time of writing. Despite the falls, Nextdc is still up 49% for the year as investors buy into its initial success and hope for profitability in the near future.
Here are some of the highlights of today's release:
- Revenue up 85% to $60.9m (beat guidance of $55-60m)
- Net Loss After Tax of $10.3m, down from $22.9m in 2014
- Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) of $8m
- Contracted utilisation of 21.7MW*, up 83% on 2014 (beat guidance of 15.3-15.9MW)
- Annualised recurring revenue of $69.6m from 2016 onwards
- Increase in network capacity from 19.65MW to 24.4MW
- 'Project Plus' is expected to increase originally planned network to 42MW instead of 35.35MW initially indicated
- Assessing new future sites in Brisbane ('B2') and Melbourne ('M2')
- Capital expenditure of $85m forecast for 2015, to be funded from existing cash, debt and receipts from sales
- Cash at bank of $52.9m
- Forecast for 2016: revenue of $85-90m (39% increase), EBITDA of $25-$28m (200% increase)
*MW = MegaWatts, Nextdc's preferred way to measure storage capacity utilised
So What?
Nextdc clearly benefited from high interest in its services with a number of major contracts won during the 2015 financial year. Additionally as the contracts roll in, the company's future financial situation becomes more assured as recurring revenue stacks up.
The fact that Nextdc is already looking at adding additional data centres on the back of strong utilisation (79% in Brisbane and 76% in Melbourne) is a big positive and reflects both demand for and the quality of Nextdc's services. With a number of big-name clients already on its books, Nextdc should also find it easier to win new work.
Now What?
Investors didn't like the fact that Nextdc posted a loss for the year, with several analysts predicting the company would post its maiden profit. The forecast of slowing revenue for 2016 is also a negative, with an increase of approximately 39% forecast, down from the 85% recorded in the past 12 months.
In this light, Nextdc may look a little expensive. However, I feel that management may also be somewhat conservative in their estimates and I feel that the chances of Nextdc coming in at the upper end of guidance next year are fairly good.
High demand for services combined with a greater than forecast maximum MW leaves plenty of potential for profit to scale up over time; it's only early days yet. While I'm not personally a buyer of Nextdc at today's prices, I would say the stock is far from a sell.
