DXN Faces Financing Hurdles as It Pursues Key Data Centre Acquisition
DXN Limited reported a modest 2% revenue increase to $2.5 million in Q3 FY25, launched its Data Centre as a Service division with a $3.6 million initial contract, and progressed a key acquisition valued at $10 million, positioning itself for growth despite some project delays.
- Q3 FY25 revenue up 2% to $2.5 million, driven by East Micronesia Cable System projects
- Launched Data Centre as a Service (DCaaS) division with $3.6 million initial contract
- Converted $1 million of loan to equity, reducing debt and improving financial flexibility
- Agreed to acquire freehold of SDC Darwin data centre valued at $10 million
- On track to meet $16 million FY25 revenue guidance with robust project pipeline
Quarterly Financial Performance
DXN Limited, a specialist in prefabricated modular data centres, reported a steady revenue increase of 2% for the March 2025 quarter, reaching $2.5 million. This growth was primarily driven by ongoing work on the East Micronesia Cable System (EMCS) projects. Despite some project delays that deferred milestone payments, DXN maintained a solid cash balance of $3.2 million and improved its operating cash flow, narrowing the negative outflow to $1.8 million from $2.6 million in the previous quarter.
The company remains confident in achieving its full-year revenue target of $16 million, supported by a backlog of approximately $2.5 million and a healthy pipeline of over 60 identified projects at various stages of qualification and negotiation.
Strategic Debt Restructuring and Financial Position
In a strategic move to strengthen its balance sheet, DXN converted $1 million of its $3 million loan from PURE Asset Management into equity, issuing over 17 million shares at $0.07 each. This conversion reduced the outstanding loan to $2 million and enhanced the company’s financial flexibility as it pursues growth initiatives. The remaining loan facility is secured and carries an interest rate of 11.25% plus fees, with maturity set for October 2025.
Expansion Through New Business Division and Acquisition
DXN made significant operational strides by launching its Data Centre as a Service (DCaaS) division, securing an initial $3.6 million contract to design, build, and deploy modular infrastructure for a US-based global satellite earth station provider in the Northern Territory. This capital-light, recurring revenue model positions DXN to expand DCaaS offerings across regional Australia and internationally under a frame agreement.
Additionally, DXN executed a binding contract to acquire the freehold of Secure Data Centre Pty Ltd (SDC Darwin) for $2.1 million. An independent valuation places the combined data centre and freehold at $10 million, underscoring the strategic value of this acquisition. The transaction is subject to financing conditions, with the company actively engaging banks and non-bank lenders to secure debt funding. Settlement is anticipated in the coming month.
Regional Growth and Contract Wins
DXN continues to consolidate its leadership in the Micronesian region, signing a $0.6 million contract with BwebwerikiNET Limited, a Republic of Kiribati state-owned enterprise. This project, in collaboration with Kiribati’s Ministry of Information, Communication and Transport, aims to enhance internet connectivity across Micronesia and complements the broader EMCS initiative involving multiple Pacific governments.
Outlook and Market Positioning
Managing Director Shalini Lagrutta highlighted the company’s focus on executing strategic objectives, including innovation in products and services, expanding recurring revenue streams, and strengthening the team. While acknowledging slower-than-expected project wins in Q3 due to customer decision delays, she remains optimistic about closing several deals currently in advanced negotiation stages.
DXN’s robust project pipeline, combined with the launch of DCaaS and the pending acquisition of SDC Darwin, signals a company poised for growth in the modular data centre sector. The upcoming investor webinar scheduled for May 2, 2025, will provide further insights into these developments.
Bottom Line?
DXN’s strategic moves in DCaaS and acquisitions set the stage for accelerated growth as it navigates project timing challenges.
Questions in the middle?
- Will DXN secure the necessary financing to complete the SDC Darwin acquisition on schedule?
- How quickly can the new DCaaS division scale beyond the initial Northern Territory contract?
- What impact will project delays and milestone payment deferrals have on DXN’s cash flow in the coming quarters?
