Megaport shares surge 12pc as cloud network provider sets its sights on profitability

Brisbane-based Megaport (ASX: MP1) is ramping up its focus on profitability in 2023 after reporting a 40 per cent lift in revenue to $109.7 million over the past financial year – a result driven by a significantly higher spend from existing customers.

The result saw Megaport’s shares rocketed more than 12 per cent in trading today, hitting a high of $9.20 and pushing them almost 100 per cent up from their three-year low of $4.70 reached in June.

Megaport, chaired and founded by serial entrepreneur Bevan Slattery, continues to gain traction in the US where it has secured 140 customers listed in the Fortune 1000.

Revenue from the US is up 49 per cent to $57.8 million, or more than half of total group revenue. Growth in revenue has been aided by what the company says is the sale of ‘more complex solutions to larger global organisations’.

Megaport has reported a $48.5 million loss for FY22, representing a 12 per cent improvement on the previous year. Normalised EBITDA has improved at almost twice that pace with the $10.6 million loss for FY22 a 23 per cent narrowing of the result from the previous year.

Group EBITDA was positive in the fourth quarter for the first time, described by the company as a ‘significant improvement’ on the breakeven achieved in June last year.

Megaport’s platform currently services 145 cities in 25 countries, and while the group grew its customer base by more than 15 per cent to 2,643 in FY22, its key metric has been an increase of 24 per cent in average revenue per customer during the year.

CEO Vincent English says the business is benefitting from strong demand for cloud services globally and years of investment to meet that demand.

“With the continued rapid growth in the cloud connectivity space, we have the scale and capital position necessary to drive our business to profitability,” he says.

“This will be a key focus in fiscal year 2023 as we leverage our channel programs and operational efficiencies.”

Megaport operates a ‘network as a service platform’ that Slattery says has been built for scalability in an environment that is now ripe for growth.

“With the continued migration of enterprise workloads from siloed, on-premise infrastructure to hybrid and multicloud architectures, cloud is now an undeniable force in almost everything we do,” says Slattery.

“The question of whether a business will adopt cloud is no longer up for debate; it’s now a question of how many clouds they will adopt. In the face of rising global inflation, and ongoing supply chain issues, cloud services are proving to be a critical means of growing and scaling businesses.”

Megaport took advantage of its strong cash position last year to acquire New York-headquartered InnovoEdge, Inc, a company specialising in AI-powered software that manages multi-cloud systems.

The US$15 million ($21 million) deal was part of the reason for Megaport recording a 127 per cent increase in cash used for investing activities over the FY22 year to $50.2 million.