Megaport Limited Reports Transformational Improvements and Strong Financial Position

Megaport Limited (ASX: MP1) has released its June 2023 quarter Appendix 4C and Quarterly Activities Report, revealing significant achievements in EBITDA and Net Cash flow during the 4Q FY23. The company experienced substantial top-line revenue growth due to the full impact of Cloud VXC repricing and organic growth in recurring revenue. This success led to the upgrade of its guidance for FY23 Normalised EBITDA, projected to be in the range of AU$19 million to AU$21 million.

Source: Kapitales Research

Positive Net Cash Result

For the first time in its history, Megaport delivered a positive Net Cash result at the end of June 2023, amounting to AU$33.3 million, which included payments to impacted employees as part of a reduction in force. This strong net cash flow allowed the company to make repayments of AU$2.4 million under the vendor financing facility. The Board has also decided to terminate its AU$25 million HSBC debt facility to reduce costs.

Annual Recurring Revenue Growth

Megaport's Annual Recurring Revenue (ARR) for June 2023 reached AU$178.6 million, showing a significant increase of 6% compared to March 2023 ARR and a remarkable 39% growth compared to June 2022 ARR.

Executive Changes

Michael Reid assumed the role of CEO on May 15, 2023, bringing 19 years of industry experience from his previous role as Chief Revenue Officer for ThousandEyes, a rapidly growing SaaS business under Cisco.

Cash Flow and Investments

Megaport's operating activities saw increased receipts from customers and stable days sales outstanding (DSO) at 29 days. Network operating cash outflows increased slightly, impacted by a one-off reclassification of year-to-date amounts. Capital expenditure on property, plant, and equipment decreased as the company focused on upgrading existing capacity. Expenditure on intellectual property remained stable, supporting key internal projects.

Financing Activities

The company reported no proceeds from borrowings in 4Q FY23 but made repayments of AU$1.7 million under the vendor financing facility. The principal portion of lease liabilities was paid, including a one-off reclassification, resulting in cash payments for leases of AU$1.6 million.

Outlook

Megaport's strong financial position, increased Normalised EBITDA, and positive net cash flow position the company for further growth. The company is expected to provide more detailed FY24 guidance, which is projected to be higher than the previous guidance of AU$41million to AU$46 million, when it releases its FY23 full-year results on August 22, 2023.

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