Megaport shares jump as earnings guidance lifted

Megaport shares jump as earnings guidance lifted

Megaport CEO Michael Reid.

Brisbane-based cloud technology company Megaport (ASX: MP1) has today lifted its normalised earnings guidance by $3 million for FY23, and is so confident for its cash flow prospects in the current financial year that it terminated a $25 million HSBC debt facility that was at the ready.

Having recently appointed Cisco veteran Michael Reid into the role of CEO following the resignation in March of longstanding leader Vincent English, Megaport has seen an improvement in its operating metrics and financial performance, prompting the board to lift normalised EBITDA guidance to $19-21 million.

This signifies a 16.6-18.8 per cent rise on previous guidance depending on where performance lands in that range, and shares jumped higher still by more than a quarter to $8.425 - heights that had not been seen so far this calendar, apart from a high today of $8.50.

The massive share price jump was also likely influenced by Megaport's expectations that FY24 results will be higher than previous guidance of $41-46 million.

"The company also confirms that it was net cash positive in Q4FY23 inclusive of redundancy payments of approximately $2.6 million," Megaport reported today.

"Additionally, excluding any future strategic initiatives the Company may decide to undertake, Megaport confirms it expects to be net cash positive for FY24 after taking into account the planned incremental growth in sales headcount and planned capital expenditure.

"The board has also decided to terminate its $25 million HSBC debt facility due to a lack of requirement and to reduce costs. The Board is confident that, should the Company have a requirement for bank debt in the future, it would be able to obtain a significantly larger facility on terms reflecting the improved financial performance of the business."

Just weeks out from Reid's start date in mid-May, Megaport shares were trading at lows not seen since 2019, having been in steady decline since late January and with further deterioration in the wake of English's departure. But green shoots started to show in late April the company reported expectations that normalised EBITDA would be "materially above market consensus" levels of $9 million for FY23 and $30 million.

In retrospect, it appears the board underestimated just how much better off results would be, as today's lower end of guidance is more than double what was expected in April for FY23, and for FY24 it is up by more than third.

Megaport was founded by serial entrepreneur Bevan Slattery, who is currently chairman and was also overseeing operations at the IT infrastructure company as interim CEO after English left and before the arrival of Reid. 

 

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