The Megaport Ltd (ASX: MP1) share price has jumped 10% higher after reporting its FY22 result.
Megaport is one of the businesses that is enabling the world’s digital infrastructure to move onto the cloud/internet.
Strong global growth in FY22
Here are some of the highlights from the FY22 result:
- Global revenue up 40% to $109.7 million
- North American revenue up 49% to $57.8 million
- Annualised revenue up 43% to $128.3 million
- Total number of customers increased by 16% to 2,643
- Total number of services rose 26% to 27,383
- Normalised EBITDA (EBITDA explained) improved 23% to a loss of $10.2 million
- Net loss for the year improved 12% to $48.5 million
Not only did North American revenue soar, but Asia Pacific revenue increased 30% to $33.5 million and Europe revenue rose by 33% to $18.4 million.
Megaport noted that it was EBITDA positive in the fourth quarter of FY22, helped by Japan and Canada.
Profit after direct network costs and partner commissions increased 62% to $68.3 million thanks to the revenue growth as well as “efficient cost control”. The profit after direct network costs and partner commissions profit margin improved from 54% to 62%.
The company also noted that while FY22’s operating cashflow was minus $9.8 million, it was cashflow positive in the fourth quarter of FY22.
Growth outlook
Megaport said that the use of three or more cloud providers is expected to go from 52% of organisations to 84% in 24 months from now. This could be very beneficial for the Megaport share price.
Three quarters of respondents said that the majority of their infrastructure-as-a-service (IaaS) hosted applications are business-critical. Network investments are expected to increase by 15% more than the overall IT budget over the next 12 months.
Respondents forecast a 4.87% increase in IT spending and see a 5.59% increase in network investments over the next 12 months.
Megaport said that the average spending by customers increases annually as they take on additional services. Another trend is that the initial customer spend is increasing every year. Megaport shows this in action – joining customers spent $433 per month in FY14. In FY15, the joining customers spent $666. And so on between FY16 to FY21. In FY22, new customers were spending $1,964 per month.
Final thoughts on the Megaport share price
While I am no expert on cloud infrastructure, I think it’s clear that Megaport is on a good trajectory and it’s making positive EBITDA now. Revenue is soaring and it seems as though the next few years could see strong adoption of its services.
If I were interested in Megaport shares, I would use the 50% drop this year as a way to buy in at an opportunistic price.
