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EUR486m
Research: TMT
Northern Data Group released its FY22 results as scheduled, reflecting delays due to its transformation into a diversified high-performance computing (HPC) infrastructure solutions provider. Despite significant crypto price declines, the group achieved year-on-year revenue growth and adjusted EBITDA positivity, driven by investments in mining compute power and a small inaugural cloud computing contribution. Ethereum’s shift to proof-of-stake led to substantial impairment, driving an operating loss. That said, Northern Data was able to repurpose a share of the graphic processing units (GPUs) from Ethereum mining for cloud computing, enabling expected FY23 revenue growth of over 10x in the recently formed Taiga Cloud division. Investments in NVIDIA H100 hardware and requisite data centres, alongside unmet demand from target customers, underpin management’s expectations for at least a further 10x Taiga revenue growth in FY24. Buoyed by bitcoin’s FY23 and FY24 appreciation, Northern Data is well-positioned for strong diversified revenue and profit growth.
Written by
Northern Data Group |
First transparency milestone achieved |
FY22 results |
Tech hardware and equipment |
25 March 2024 |
Share price performance
Business description
Analysts
Northern Data Group is a research client of Edison Investment Research Limited |
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Northern Data Group released its FY22 results as scheduled, reflecting delays due to its transformation into a diversified high-performance computing (HPC) infrastructure solutions provider. Despite significant crypto price declines, the group achieved year-on-year revenue growth and adjusted EBITDA positivity, driven by investments in mining compute power and a small inaugural cloud computing contribution. Ethereum’s shift to proof-of-stake led to substantial impairment, driving an operating loss. That said, Northern Data was able to repurpose a share of the graphic processing units (GPUs) from Ethereum mining for cloud computing, enabling expected FY23 revenue growth of over 10x in the recently formed Taiga Cloud division. Investments in NVIDIA H100 hardware and requisite data centres, alongside unmet demand from target customers, underpin management’s expectations for at least a further 10x Taiga revenue growth in FY24. Buoyed by bitcoin’s FY23 and FY24 appreciation, Northern Data is well-positioned for strong diversified revenue and profit growth.
Year end |
Revenue (€m) |
Adjusted EBITDA |
PBT* |
EPS* |
P/sales |
P/E |
12/20 |
16.4 |
(12.3) |
(83.0) |
(7.3) |
86.2 |
N/A |
12/21 |
189.9 |
89.6 |
342.1 |
13.2 |
7.4 |
2.0 |
12/22 |
193.3 |
42.4 |
(251.6) |
(10.6) |
7.3 |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
FY22 revenue grew 1.8% y-o-y to €193m, driven by a 40% y-o-y increase in crypto mining computing power provision to €155m. The growth reflects a 133% market share expansion (measured by exahashes per second (EH/s)), offsetting a 63% bitcoin price decline and corresponding mining business revenue declines. As per our initiation, Northern Data continues investing significantly in Peak Mining, spending US$150m on the latest miners to achieve efficiency and the 14EH/s target by end-FY24, up from 3.34EH/s at end-FY23. This investment, alongside rising bitcoin prices over 2023 and year-to-date, underpins a positive Peak outlook.
Notably, the group reported inaugural €1.6m cloud computing revenue in FY22 and joined NVIDIA’s Partner Network as a Preferred Cloud Services Partner in Europe. Management expects Taiga Cloud division’s revenue to grow to €11–14m in FY23, supported by its preferred partner status and continued GPU investments. As of Q124, the division had €30m annual run-rate revenue and four contracts in its H100s pipeline (33% H100 utilisation), potentially equating to over €105m annual revenue assuming €2 per GPU hour. Deploying H100s on schedule (Q324 finish) and converting the pipeline are key near-term Taiga milestones.
On an adjusted basis, FY22 EBITDA fell 53% y-o-y, reflecting investment in its diversified HPC strategy through a 65-employee increase to 209, as well as inflationary and rate pressures. Ethereum’s shift from proof-of-work to proof-of-stake led to substantial impairment charges and one-off trading costs, resulting in a €266m reported FY22 net loss. Most impairment charges were non-cash and the sale of €127m in cryptocurrency generated positive operating cash flow, allowing for the repayment of a €76.9m shareholder loan. The group was debt free as at end-FY22 but initiated a €575m debt facility in FY23 to invest in the HPC strategy. We will look to introduce forecasts after the FY23 results, scheduled for end-H124.
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Research: Industrials
Quadrise continues to advance towards commercial revenues for its innovative fuel and biofuel technologies, with each of its projects approaching key milestones in 2024. Preparatory steps for the MSC Shipmanagement (MSC) fuel trials are now complete and fuel supply agreements are nearing finalisation. Quadrise will achieve its first licensing revenues on the successful completion of Valkor’s project financing (timing uncertain). Quadrise also successfully concluded its Morocco trial, paving the way for commercial negotiations. According to management’s guidance, the potential Valkor revenue, the £1.5m gross proceeds raised in March 2024 and the £1.7m of cash (at end-December 2023) will provide Quadrise the necessary working capital resources to 31 March 2025. By then, the Morocco and Utah projects should be generating commercial revenue and the trial with MSC will be near completion.