Megaport share price rockets 16% after FIRST EVER positive earnings and boom outlook

The virtual networking technology provider shows off the results of cost-cutting and a 40% revenue boost.

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The Megaport Ltd (ASX: MP1) share price is up 16.55% in early trade Tuesday after the company revealed history-making 2023 financial results before market open.

After closing at $10.39 a share on Monday afternoon, the technology stock was trading at $12.11 apiece at the time of writing.

What did the company report?

  • Revenue up 40% to $153.1 million
  • Normalised positive earnings before interest, taxes, depreciation and amortisation (EBITDA) for the first time in company history: $20.2 million, compared to a loss of $10.2 million last year
  • Reported positive EBITDA of $25.2 million, up from loss of $12.3 million last year
  • Net cash outflow of $35.4 million, which is $15.4 million better than last year
  • FY23 4Q was the first positive net cash flow quarter in company history
  • Net loss of $9.8 million, compared to a loss of $48.5 million last year
  • Annual recurring revenue (ARR) up 39% to $178.6 million

What else happened in FY23?

Megaport was seemingly in turmoil earlier this year, with its chief executive Vincent English departing without much explanation in March. The share price plunged 10% on the day with the market wondering where the company was headed.

Fortunately, his replacement Michael Reid was appointed reasonably swiftly within the same month, soothing investor anxiety somewhat.

What did Megaport's management say?

Reid said on Tuesday:

The outstanding turnaround is attributed to continued improvement in operating and financial performance resulting in us upgrading earnings guidance in July 2023. This is a strong validation of our business model, and demonstrates our excellent operating leverage as the business continues to grow revenue.

What's next for Megaport?

Reid predicted that Megaport would almost triple its earnings over the current financial year:

The company expects FY24 EBITDA growth to be between 152% and 182% year on year. This upgrades the previous EBITDA guidance to a range of $51 million to $57 million , and includes the planned incremental growth in sales headcount.

Revenue in fiscal 2024 is expected to be in the range $190 million to $195 million, an increase of 24% to 27% on fiscal 2023.

Megaport is in a strong financial position and expects to be net cash flow positive, for the full year FY24 after the investment in sales roles and planned capital expenditure.

Megaport share price snapshot

As the company grappled with the challenge of transforming from a cash-burner to one that generates positive earnings, the Megaport share price has fluctuated wildly.

From April last year to April this year, the stock plunged 70%. From then until market close on Monday, it had rocketed an amazing 158%.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Megaport. The Motley Fool Australia has recommended Megaport. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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