The Megaport Ltd (ASX: MP1) share price is having a day to forget on Thursday.
In morning trade, the network as a service provider's shares have dropped 22% to $9.23.
This follows the release of the company's FY 2024 results.
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Megaport share price sinks on FY 2024 results release
- Revenue up 28% to $195.3 million
- Annual recurring revenue (ARR) up 14% to $203.9 million
- Gross profit up 32% to $136.8 million
- EBITDA up 182% to $57.1 million
- Positive net cash flow of $28 million
What happened during the year?
For the 12 months ended 30 June, Megaport reported a 28% increase in total revenue to $195.3 million and a 14% lift in ARR to $203.9 million.
This was driven by a 4% increase in customer logos and an 11% lift in total services. The latter reflects growth across all products and services.
And thanks to management's "ambitious transformation" over the past year, Megaport delivered an even more rapid increase in earnings in FY 2024. Its EBITDA was up a whopping 182% year on year to $57.1 million.
This helped underpin positive net cash flow of $28 million, which represents an increase of $62.5 million from FY 2023. As a result, Megaport ended the period with net cash of $61.2 million.
Management commentary
Megaport's CEO, Michael Reid, was very pleased with the company's performance. He said,
Megaport smashed through $200M in annual recurring revenue during the year—a tremendous milestone—and delivered an incredible $57.1 million of EBITDA up 182%. FY24 saw us execute a massive financial turnaround whilst growing revenue by 28%. An astounding transformation resulting in our first ever net cash flow positive year generating $28.0M, up $62.5M YoY. This fiscal turn around set the stage for us to profitably invest in GTM, product, engineering, and our ecosystem, building the platform for profitable growth over the next three years and beyond.
Why the selling?
With its FY 2024 result largely in line with expectations, the weakness in the Megaport share price appears to have been driven by its guidance for FY 2025.
The company expects FY 2025 revenue to be in the range of $214 million to $222 million, with EBITDA of $57 million to $65 million.
Analysts at Goldman Sachs were expecting stronger growth in FY 2025. In response, they commented:
Megaport provided FY25 guidance for: (1) Revenue growth of +10% to +14% to A$214-222mn (-7% at midpoint vs. GSe A$234mn; -6% vs VAe A$233mn), with MP1 focus on accelerating ARR through the next 3 years; (2) EBITDA growth of +0% to +14% to A$57-65mn (-22% at midpoint vs. GSe A$78mn; -18% vs VAe A$74mn) with Jun-24 EBITDA being $4.5mn, implying $54mn annualised. This guidance reflects continuation of profitable efficient growth, while reinvesting in the business to drive long-term growth; (3) Capex of $27-30mn (GSe $35mn).
