Over the Wire raises operability via strategic partnership with NEXTDC

Over The Wire NEXTDC ASX OTW NXT COVID-19
Over the Wire has overcome the impact of COVID-19 and intends to launch its new mobile product in Q4 2020.

IT and telecommunications company Over the Wire Holdings (ASX: OTW) intends to raise its operability courtesy of a strategic partnership with data centre operator NEXTDC (ASX: NXT), in a bid to achieve positive growth going into the next financial year.

The partnership was described as a “foundational building block” and will see OTW migrate core elements of its network and cloud infrastructure into tier four data centres
“that will bring [the company’s] network closer to many of the world’s leading cloud providers and cloud on-ramp services, further supporting our strategy to drive a multi-cloud outcome for our clients”.

“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 Michael Omeros, managing director of OTW.

Additionally, the partnership is expected to enable OTW’s sales staff with the NEXTDC solution set, which allows for further development of OTW’s broader multi-cloud strategy in conjunction with its private cloud offering.

“Exponential growth of colocation and hybrid multi-cloud continues to fuel NEXTDC’s exciting journey,” said Craig Scroggie, chief executive officer and managing director of NEXTDC.

“Partnering with organisations with domain expertise in networking and cloud deepens the broad services portfolio our customers can access through our ecosystem.

OTW has proven to be an extremely capable organisation and we are pleased to make further strategic investments in our partnership,” Mr Scroggie said.

COVID-19 impact

In a statement to the market, OTW confirmed that the COVID-19 pandemic was continuing to weigh on market conditions although following the imposition of social distancing restrictions, the company stated that COVID-19 generated greater demand for voice and collaboration technologies, thereby boosting demand for OTW’s voice offering and improving sales volumes.

According to OTW, the increase in voice volumes has positively offset delayed delivery of some data services that resulted from customer site access restrictions during the lockdown period.

“Broadly speaking we are in-line with our expectations for the recurring business, we continue to generate positive operational cash flow and we maintain a strong balance sheet,” the company said.

OTW tried to allay fears of any significant COVID-19 impact by saying its exposure to customers in industries hardest hit by COVID-19 such as in retail, hospitality and travel was “limited” and those most affected represented “less than 3% of [its] recurring base”.

In terms of accounts receivable, the company said it was continuing to monitor payment trends, with appropriate provisions in place for areas of increased exposure.

OTW said that COVID-19 had impacted its non-recurring business and declared that recent orders from customers were indicating that the company would “now likely deliver over 70%” of its non-recurring revenue forecast.

More specifically, OTW is confident it can deliver “within 3% of consensus” and generate around $90.4 million in revenue and $17.4 million in EBITDA in this financial year.

As a hint of what’s to come, OTW said it plans to launch more novel voice products following the integration of the Microsoft Teams Direct Routing service around three months ago, while a new “mobile product” will be launched in the latter part of Q4 2020.

Moreover, there is a hint of potential acquisitions in the foreseeable future after OTW said its acquisition strategy “had continued to progress” with the company citing “a number of quality businesses in which it can achieve positive outcomes”.

NEXTDC was first founded by Bevan Slattery in 2010 and named as Australia’s fastest growing technology company in 2015 by Deloitte.

Meanwhile, OTW operates a national network with a presence in all major Australian cities, offering an integrated suite of services to business customers including data networks and internet, voice, data centre co-location, cloud and managed services.

OTW shares where up almost 6% to $3.16 in morning trade, while NEXTDC was trading up 0.11% to $9.27 a share.