"There was no path to follow": Megaport founder bullish after rise from startup to ASX200

Network as a Service (NaaS) pioneer Megaport (ASX: MP1) celebrated a decade in business last month after its first ever net positive cash flow quarter, and has followed that up today with an optimistic forecast for FY24 as more customers sign up to its flexible service for connecting and storing data with multiple cloud computing partners.

The Brisbane-headquartered group has reported its first positive normalised EBITDA since inception at $20.2 million for FY23, with that figure set to rise by at least 152 per cent in the current financial year to $51-57 million.

CEO Michael Reid, a former Cisco exec who joined the company in March, says Megaport is in a strong financial position and expects to be net cash flow positive for the full-year after the investment in sales roles and planned capital expenditure.

In a letter to shareholders, Reid highlights how the company has built an "unrivalled global platform" connecting more than 800 data centres across 150 cities, with 284 cloud on-ramps and servicing 2,856 diverse customers.

He notes with the recent launch of the Megaport Reach service, the company can now "sustainably expand into new data centre locations connecting their customers to over 1,000 clouds, service providers, and other data centres in less than 60 seconds".

This capability is a far cry from what founder and non-executive chairman Bevan Slattery describes as "humble beginnings" in a small office in Brisbane's Fortitude Valley - an area that forms part of a key part of the "Brisbane Corridor" deemed by the CSIRO as one of Australia's top four digital clusters for startups.

"Ten years ago a handful of talented and passionate people set about building a business that we believed could transform the way enterprise customers connect to the cloud," Slattery, a prolific entrepreneur who also founded PIPE Networks, NEXTDC (ASX: NXT), Superloop (ASX: SLC), SUBCO and Biopixel, says in a letter to shareholders.

"We saw there was an opportunity to build a platform that was so unique, that no one had ever considered it possible.

"Our vision? To do for networking what Amazon has done for compute. Totally automated, virtualised, and on-demand."

He says the company pioneered the idea of Network as a Service (NaaS) and is now the leading independent provider of NaaS services worldwide.

"Fast forward ten years and that startup is today an ASX200 company generating $178.6 million in annual recurring revenue, and connecting to all the major cloud providers around the world," he says.

The founder describes the past 10 years as "extraordinary", filled with so many amazing stories and supported by so many remarkable people.

"In our case, there was no path to follow; we were leading the way in almost every respect," he explains.

"So the journey has been difficult at times, but also incredibly rewarding as we delivered on our vision. It almost seems fitting and ironic that for me, our tenth year as a company has been the most challenging, yet simultaneously, possibly the most inspiring."

Slattery notes the significant upgrade in earnings outlook - up by around $10 million - and an annual $30 million cash flow improvement in less than six months come as the business is now earnings positive and has a  streamlined, focused, and invigorated executive team.

"In March, the company appointed a proven technology and SaaS leader, Michael Reid, as chief executive officer. Since commencing his role as CEO in May, Michael has already had a significant impact on Megaport. His experience and energy are greatly welcomed by the team along with his openness and inclusive leadership style," Slattery says.

"A big thanks to the Megaport team who worked tirelessly to implement the transformation over the past year."