Megaport (ASX: MP1) shares are up 17% today. MP1 shares are up on the release of their full year results. Which are pretty much what they’ve been telling us they will be for some time now. But while Megaport have been very good in informing the market about what those results were going to be, even giving us an unaudited version, it’s still that audited, full year, set of results which really sets things in stone.
The actual announcement: “Megaport delivered a record Normalised EBITDA
1 of $20.2M in FY23, an improvement of $30.4M from a Normalised EBITDA loss of $10.2M in FY22. FY23 Reported EBITDA is $25.2M, up $37.5M from a Reported EBITDA loss of $12.3M in FY22. Both Normalised EBITDA and Reported EBITDA were within the upgraded guidance range. These improvements in EBITDA were the result of robust 40% top line revenue growth and a strong focus on cost control within the business. This improvement in operating and financial performance through the year saw Normalised EBITDA margins increase to 13% in FY23 and to 27% in 4Q FY23.” To be crude about it they fired a bunch of people earlier in the year and sales still rose. That clearly feeds through right to the bottom line.
The thing is this isn’t so different from what they were telling us the results would be some months back at Megaport: “The MP1 announcement: “Megaport Limited ACN 607 301 959 (Megaport or Company) (ASX: MP1) announces that, as a result of continued improvement in the Company's operating metrics and financial performance, the Company is upgrading its FY23 Normalised EBITDA to be in the range of $19M to $21M (compared to previous guidance of $16M to $18M). Reported EBITDA Guidance is now expected to be in the range of $24M to $26M. The Company also confirms that it was net cash positive in Q4FY23 inclusive of redundancy payments of approximately $2.6M.””
Megaport share price from Google Finance
They also gave us a trading update at the end of Q4 - before the audit that is - which largely said the same things. So the market has known this was coming and it all largely explains the rise in the MP1 share price over these past few months. This last 17% is on the confirmation that is, not the revelation.
As we said at the time of the trading update at MP1: “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.”
We stand by that. A capital consuming tech company hoping to grow into its cost base is a radically different value proposition from one that is cash generative and therefore doesn’t need to call upon shareholders again.
