Megaport Ltd
(ASX: MP1) has released its trading update for the first quarter of FY21. The Megaport share price is down 6%.
Megaport is an interesting business. It enables businesses to connect with data centres, to switch between data centres and can provide more capacity quickly when a business needs it.
Megaport’s first quarter
The company reported that revenue for the quarter was $17.3 million, up 2% quarter on quarter. In year on year terms, revenue was up 44%.
Monthly recurring revenue (MRR) for September 2020 was $5.8 million, an increase of 2% quarter on quarter.
Total installed data centres was 385 and total enabled data centres was 702, both up 5% quarter on quarter.
Megaport’s customer numbers grew by 7% quarter on quarter to 1,980. Total ports grew by 10% quarter on quarter to 6,333. Total Megaport cloud routers (MCR) grew by 12% quarter on quarter to 343.
Average revenue per port in September 2020 was $913.
Turning to cashflow, the company saw an operating cash outflow of $8.6 million. It finished the September 2020 quarter with $152.8 million.
Megaport said that growth in the North American and APAC (Asia Pacific) business units remains strong. However, in Europe it suffered a MRR decline in contract pricing to secure long term strategic customers which will be competitive and stable going forward. MRR growth from the second quarter of FY21 is expected to benefit from the record increases in ports and customers this quarter.
Megaport CEO Vincent English said: “Our investments in North America, in terms of network footprint and commercial capabilities, yielded excellent results this quarter and contributed significantly to our record quarterly port and customer performance. This will have a positive impact on MRR from Q2 onwards. North America is our fastest growing region, with USD revenues growing 11% quarter on quarter and now accounting for 47% of our total revenue.”
Summary
The company is aiming for profitability, with a goal of being EBITDA breakeven (click here to learn what EBITDA means) by the end of FY21 on an annualised basis with further customer growth.
I can’t say I know a lot about the intricate technological details of Megaport’s service. But COVID-19 has clearly brought forward the demand for data centres with all of the extra digital entertainment and online shopping. I think the rise in the Megaport share price has been largely justified, but this quarter’s growth did slow so I’m not surprised it’s down 6% in early trading.
I think the next few weeks (and months) could be an opportunity to buy shares if sentiment about the company dips. Other ASX growth shares are also worth watching in this space including Nextdc Ltd (ASX: NXT), though Pushpay Holdings Ltd (ASX: PPH) is my preferred digital business.
