Megaport takes a “marked leap forward” in first half FY17 results

Megaport takes a “marked leap forward” in first half FY17 results

Net loss continues as VXC revenue can't overcome direct network costs

Vincent English - Megaport chief operations officer

Vincent English - Megaport chief operations officer

ASX listed interconnectivity provider, Megaport (ASX:MP1), reported revenue of a little over $4.45 million for the six months ending 31 December 2016, up 345 per cent from the same time last year.

But, its net loss amounted to $13.7 million from $9.94 million the same time last year, as a result of increased direct network costs. Its direct network costs for the half year amounted to $5.29 million, from $1.15 million in 1H FY16.

Its total monthly recurring revenue, at December 2016, was $909,000, an increase of 311 per cent from $668,000 in December 2015. Its total services increased from December 2015 to December 2016 by 194 per cent, as a result of a “substantial uplift” in Virtual Cross Connections (VXC) of 308 per cent YoY.

Megaport chief operations officer, Vincent English, said the half year is a “marked leap forward” for the company as a result of increased cloud adoption and the “dramatic uptick” of its VXC count.

“More customers are connecting to more cloud services across the Megaport SDN. Our monthly recurring revenue has increased by 311 per cent in the last year, as a result of acquisitions and accelerating customer adoption of Megaport services in our organic markets as demand continues to grow,” he said.

Megaport said, in the statement on the ASX, that in that half year, it facilitated expansion with the hire of Haidee Van Ruth as chief financial officer and English moving to the full-time chief operating officer role. It also expanded its sales and marketing team.

The company also geared up for a leadership change, with Denver Maddux, resigning his position as company director just two weeks after he stepped down as CEO.

During the half year, it also undertook two successful capital raisings - $17.8 million on 5 August 2016 via private placements and $13.1 million on 22 August 2016 via a share purchase plan.

The company said the proceeds of the net capital raisings of $30 million has been and will continue to be used for capital expenditure, ongoing operating costs of the network, services and staff, and network capability investment.

Megaport added that this will provide the funding for revenue growth, market development, and additional partnership opportunities.

The company has been making a push into the Australian market, having signed on Synnex as a distribution partner in July 2016 and signing on Fujitsu as a global reseller in May 2016.

English added that Megaport continues to expand its footprint based on demand from several fronts.

“The addition of several new cloud provider onramps to our SDN is highly driven by the growing adoption of public cloud services and the demand cloud service providers see for better connectivity to their public cloud offerings.

“Concurrently, the demand from data centres and their customers for elastic interconnection, rapid provisioning, and direct cloud access has yielded several partnerships that bring the Megaport SDN to new markets,” English said.

He also said the company’s current cash position, increased customer traction, and operational foundation has put Megaport in an “excellent position” to execute on its strategy.

“The investments we’ve made in our brand, our service, and demand generation programs have created great momentum for our continued expansion and have accelerated customer adoption of Megaport services. [We are] energized to continue transforming the data networking industry,” he added.

At the time of writing, Megaport’s shares were trading at $2.20.

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