Megaport (ASX: MP1) shares are up another 18% on their announcement of their results. These came in at the top end of their own, only recently updated, predictions of what they would be. So, the turnaround seems to be working. But there's one line in there which we think most important - that they are now cashflow positive. This removes, barring strategic deals and the like, the need for further dilutive share issues. That removes a dampening pressure on the MP1 share price.
The results were good at Megaport: “Megaport delivered 4Q FY23 Normalised EBITDA of $11.8M, and FY23 Normalised EBITDA of $20.2M, which is within the upgraded guidance range. Reported FY23 EBITDA is $25.2M, which is also within the upgraded guidance range of $24M to $26M2. For the first quarter in its history, Megaport has delivered a positive Net Cash result. Net Cash at 30 June 2023 was $33.3M, up $2.3M over the quarter including payments to impacted employees as part of the reduction in force of $2.6M. The strong net cash flow generated saw repayments of $2.4M made to the vendor financing facility. The Board has decided to terminate its $25M HSBC debt facility due to a lack of requirement and to reduce costs.”
That's a pretty clear indication that further capital is not needed - except, perhaps, for any deals that might be offered.
Megaport share price from ASX
As we said back at the time of the prediction announcement from Megaport: “The Company also confirms that it was net cash positive in Q4FY23 inclusive of redundancy payments of approximately $2.6M.”” To us that's the really interesting news. For back a few months things weren't quite so rosy for MP1: “Megaport (ASX: MP1) shares have jumped 40% today on the release of projections about future performance. Of course, those predictions, especially of the future, are difficult. But companies do as well as they can given circumstances. The basic background at Megaport is that the business has been in trouble for some time. Therefore strategic review, change how things are done, hope it all gets better. That may sound cynical but that is how things are done - and such reviews do, sometimes, actually turn a business around. Which is what Megaport is suggesting will indeed happen.”
The turnaround has been delivered. The cost base has been rightsized for the revenue while the business still continues to expand.
Megaport is, at this stage, clearly a victory for sound financial management. Now the question is how long is this going to remain true?
