MEGAPORT TAKES A HIT TO MAKE GREATER GAINS

Written on the 29 February 2016 by Laura Daquino

MEGAPORT TAKES A HIT TO MAKE GREATER GAINS

LAUNCH costs have driven Megaport (ASX: MP1) to a $9.9 million net loss for the half year to December, but the Brisbane company's cash in the bank proves it's more than ripe for expansion.

The loss took into account one-off costs of establishing the business and its $3.1 million IPO prior to listing on the ASX on December 17.

Despite this, the elastic connectivity provider held $25.44 million cash reserves at the end of the interim reporting period, December 31.

Megaport CEO Denver Maddux (pictured) says the result was always to be expected.

The company isn't providing guidance for the next 6 months just yet.

"It's a lot like mobile carriers, when you're expanding into a new country cost-wise," says Maddux.

"We have to go and build out a number of locations, there's some capital outlay, there's contracted items you have to take down in terms of leases and data centre space and power, as well as the hiring of staff.

"The loss is definitely in line with an expanding company that has to put together a service platform before it can really start bringing on customers and making money."

Even still, Megaport performed well in its Asia Pacific business. Megaport operates in 54 data centres across thirteen markets in Australia, New Zealand, Singapore, Hong Kong and United States.

The software-based company drove its revenue up 29 per cent from July 2015 to $220,543 in December 2015.

This was taken solely from its Asia Pacific businesses, with Australia accounting for 90 per cent.

"We are pleased to report that the markets in Asia Pacific, specifically Australia, continue to grow and generate profit after direct network costs, in addition to strong market adoption gains with 31 per cent revenue growth during this half-year," says Maddux.

He also says the team 'really kicked the door open' on expansion into the US too, forming partnerships that are yet to have taken full effect.

"We have partnered with CyrusOne, which is the third largest data centre operator in North America and has the 'who's who in the zoo' of the Fortune 500 all Fortune 50 companies are in its data centres and a tremendous number of the rest," says Maddux.

"They are a great partner and what we do in the cloud exchange business, by connecting customers to the cloud, their clientele base is just clamouring for.

"It's a really, really strong outcome for us as a young company and they are very active, young and engaged, so it's a perfect cultural fit.

"Our product is getting a lot of attention from data centre operators who see it as a great platform to have in their facilities because they don't have an elastic interconnection fabric that allows customers to get instant access to the cloud. Customers now want access to the cloud at a minimum."

Megaport is roughly halfway through the physical rollout of its core international expansion, completing 18 of its 31 planned North American locations and commencing rollout of 7 of its 13 European locations.

In Europe, Maddux describes a recent partnership with Amsterdam Internet Exchange as particularly exciting for the Brisbane-based business, which is the second largest internet exchange in the world.

"They spent a lot of years building up a lot of trust and for us to have them in most of our European markets, it shows we are building a platform quality enough for a brand like theirs that they will basically use us as an infrastructure provider," he says.

"There's a lot of things we will do on our own to get strong organic growth but there are also a lot of great partnerships we can put together."

Megaport opened at $2.66 per share on the ASX today, dropped to $2.45 following the results announcement and stabilised to close at $2.52.
 


Author: Laura Daquino Connect via: Twitter LinkedIn

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