Northern Data Group — Continued progress as a diversified HPC provider

Northern Data Group (XETRA: NB2)

Last close As at 11/06/2024

EUR22.65

−0.25 (−1.09%)

Market capitalisation

EUR1,212m

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Research: TMT

Northern Data Group — Continued progress as a diversified HPC provider

Northern Data Group demonstrated progress made in Q124 alongside a capital markets day update, as it takes further steps in becoming a diversified high-performance computing (HPC) infrastructure solutions provider. It expects to deploy 20,000 NVIDIA H100 graphic processing units in FY24, cementing its position as Europe’s foremost AI hardware cluster. Key to this, 85% of its H100 capacity has already been sold. Management’s ambitious guidance is unchanged, expecting revenue of €200–240m in FY24 and €520–570m in FY25, with adjusted EBITDA growing from €50–80m in FY24 to €300–350m in FY25. The step-up in profitability in FY25 reflects the first year of full contribution from the company’s Ardent Data Centers, coinciding with peak H100 efficiency. Having moved away from being a pure-play cryptocurrency miner, Northern Data’s revenue profile is more predictable, stable and diversified. The group is fully capitalised and, with a clear capex plan that is front-end loaded, we believe its profitability profile should continue to improve.

Written by

Milo Bussell

Analyst, Consumer and TMT

TMT

Northern Data Group

Continued progress as a diversified HPC provider

Capital markets day and Q124 update

Tech hardware and equipment

8 May 2024

Price

€26.0

Market cap

€1.4bn

Net cash (€m) at 31 December 2022

39.9

Shares in issue

53.5m

Free float

100%

Code

NB2

Primary exchange

Frankfurt

Secondary exchange

N/A

Share price performance

Business description

Northern Data is a German-listed company, operating highly energy-efficient data centres across Europe and the US. The group is pivoting from a pure-play cryptocurrency miner into a diversified provider of high-performance computing solutions. Its updated strategy was marked with the launch of three new divisions: Peak Mining, Ardent Data Centers and Taiga Cloud, with each targeting a different area of the value chain.

Analysts

Milo Bussell

+44 (0)20 3077 5700

Katherine Thompson

+44 (0)20 3077 5700

Northern Data Group is a research client of Edison Investment Research Limited

Northern Data Group demonstrated progress made in Q124 alongside a capital markets day update, as it takes further steps in becoming a diversified high-performance computing (HPC) infrastructure solutions provider. It expects to deploy 20,000 NVIDIA H100 graphic processing units in FY24, cementing its position as Europe’s foremost AI hardware cluster. Key to this, 85% of its H100 capacity has already been sold. Management’s ambitious guidance is unchanged, expecting revenue of €200–240m in FY24 and €520–570m in FY25, with adjusted EBITDA growing from €50–80m in FY24 to €300–350m in FY25. The step-up in profitability in FY25 reflects the first year of full contribution from the company’s Ardent Data Centers, coinciding with peak H100 efficiency. Having moved away from being a pure-play cryptocurrency miner, Northern Data’s revenue profile is more predictable, stable and diversified. The group is fully capitalised and, with a clear capex plan that is front-end loaded, we believe its profitability profile should continue to improve.

Year end

Revenue (€m)

Adjusted
EBITDA (€m)

PBT*
(€m)

EPS*
(€)

P/sales
(x)

P/E
(x)

12/20

16.4

(12.3)

(83.0)

(7.3)

84.9

N/A

12/21

189.9

89.6

342.1

13.2

7.3

2.0

12/22

193.3

42.4

(251.6)

(10.6)

7.2

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Unaudited Q124 revenue was c €29m, made up of €21.7m from Peak Mining and c €7m the Taiga Cloud division. Peak Mining remains a highly profitable segment within Northern Data’s portfolio, and as per our initiation, is a division in which the group continues to invest. Following the bitcoin halving in mid-April 2024, the number of block rewards of bitcoin per day reduces from 900 to 450. Consequently, Q2 revenue is expected to reduce before increasing in Q3 and subsequently reach its highest level in Q4 as Northern Data invests in its exahash rate. Looking at FY24, Northern Data expects to achieve an EBITDA margin range of 30–40%.

Northern Data announced that it was one of 11 sovereign AI clouds to be selected to provide NVIDIA’s latest GB200 Grace Blackwell Superchips, highlighting its strong commercial relationship with NVIDIA. The GB200s improve performance by up to 30x compared with the current H100s, while reducing energy consumption and costs by 25x. GB200 chips will be in production testing from Q324.

Northern Data recently announced progress made on the upgrade of Ardent Data Centers’ Pittsburgh data centre site, which was acquired in January 2024. This 41,000 sq ft building is being retrofitted with the latest liquid cooling technology to maximise energy efficiency and power output. Energy capacity should increase from 5MW to 20MW, while its strategic location on the Eastern Seaboard enables it to provide latency of less than 10 milliseconds to a key area in the US.

Having secured a €575m debt facility in FY23 to invest in its HPC strategy, Northern Data expects FY24 capex in the range of €800–900m for hardware and infrastructure. Consequently, it expects to end FY24 with a net cash position of €100–200m. FY23 results are expected by the end of June.

General disclaimer and copyright

This report has been commissioned by Northern Data Group and prepared and issued by Edison, in consideration of a fee payable by Northern Data Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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London │ New York │ Frankfurt

20 Red Lion Street

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Northern Data Group and prepared and issued by Edison, in consideration of a fee payable by Northern Data Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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