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Global expansion causes AU$9.9m net loss for Megaport

The elastic interconnection services provider has used its increasing revenue to continue rolling services out worldwide, resulting in a net loss of AU$9.9 million.
Written by Corinne Reichert, Contributor

Australian elastic interconnection services provider Megaport has reported its first-half results for FY16, revealing a AU$9.9 million loss on revenue of AU$1,001,079 for the six months ending December 2015.

Megaport CEO Denver Maddux pointed towards the revenue growth rather than net loss. The company's December revenue was AU$220,543 -- 29 percent higher than in July 2015.

"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 percent revenue growth during this half-year," Maddux said.

"The number of ports sold increased by 72 percent, and we are happy that Singapore and Hong Kong have shown continued improvement in revenue growth."

The net loss was incurred as a result of continuing to roll out its services worldwide.

As of the end of December, Megaport extended across 46 locations, 504 ports, and 253 customers. The company had net assets of AU$28.36 million. It operates across 54 datacentres in 13 markets throughout Australia, New Zealand, Singapore, Hong Kong, and the United States.

Its cash position was AU$25.4 million at the end of the year, which Megaport said it would use to continue expanding across the US and Europe. The company plans to bring services to 31 North American and 13 European locations, including London, Stockholm, Dublin, and Amsterdam, by April 30.

"We are delighted with our team's execution on the rollout of our core service footprint in North America and their business development efforts to build our ecosystem of service providers," said Maddux.

"Megaport has the largest elastic interconnection network in Asia Pacific, with the greatest reach into the most key datacentres. By demonstrating demand for direct, elastic interconnectivity to cloud service providers within Asia Pacific, we have strengthened our relationship with key cloud and network service providers. This is also fuelling demand for Megaport to enable our cloud partners' direct connectivity services into our expansion markets."

Megaport now has services live in seven Sydney locations, nine Melbourne locations, eight Brisbane locations, four Hong Kong locations, four Singapore locations, and two Auckland locations. It is currently constructing two more Brisbane locations, one Perth location, and one Auckland location, with a further location in Perth and two more in Auckland in the planning stage.

In the US, a number of services have been rolled out to Seattle, the San Francisco Bay Area, Los Angeles, Chicago, New York, Ashburn, and Texas, with several being constructed in Toronto.

Seven of the 13 locations planned for the European region have commenced construction. While it did not mention when it expects to begin turning a profit, the company said it is planning to expand to more than 100 sites globally by the end of December 2016.

Last month, Megaport published a quarterly cash flow update, reporting a negative net operating loss of AU$6.28 million for the five months to the end of December, with cash at hand standing at AU$25.44 million.

Megaport's US subsidiary signed a deal in January that will see the company's US footprint expand almost immediately, with Megaport partnering up with enterprise datacentre provider CyrusOne to provide software-defined networking (SDN)-enabled elastic interconnection and cloud services to customers using CyrusOne's existing US datacentres.

CyrusOne has datacentres across 30 locations in the world, with its US facilities present in Chicago, Austin, Dallas, Cincinnati, Houston, Phoenix, Sterling, Florence, South Bend, Stamford, Norwalk, Wappingers Falls, Totowa, and San Antonio.

The deal will see Megaport enable CyrusOne's more than 925 customers with more capacity, as well as provide them with access to several service providers and clouds through Megaport's API, mobile apps, and "Megaportal".

It will see Megaport gain access to 13 US locations.

Megaport also announced signing a deal with non-profit company Amsterdam Internet Exchange (AMS-IX) to exclusively provide services to AMS-IX customers worldwide.

The deal, also secured by Megaport's US subsidiary, will see it provide elastic multi-cloud connectivity to AMS-IX customers in Hong Kong, the San Francisco Bay Area, and Chicago.

"The need for innovation at the interconnection layer is absolutely clear," Maddux said on Monday when announcing the financial results.

"Both CyrusOne and AMS-IX represent significant opportunities to bring our respective strengths together to provide the next level of interconnection capabilities.

"Enterprise-rich datacentre operators like CyrusOne will deliver a strong pipeline for our elastic cloud interconnection services, while AMS-IX enables us to expand our reach in Amsterdam, a major European cloud market."

Megaport began trading on the Australian Securities Exchange (ASX) in mid-December after a successful Initial Public Offering (IPO) in November that saw it raise AU$25 million to be primarily used to expand services across the US and Europe.

Founded in 2013 by Australian technology entrepreneur Bevan Slattery, Megaport initially operated in the dark fibre business. It then spun off its dark fibre assets to found a separate company called Superloop, so that it could focus solely on expanding its layer 2 elastic connectivity platform outside of Asia and Australia.

"Rather than enterprises needing to purchase long-term, fixed bandwidth circuits between datacentres and their cloud providers, Megaport has developed a platform that uses software-defined networking to enable our customers to provision secure, dedicated, and highly scalable circuits otherwise known as 'elastic interconnects' between their network and other networks connected to the Megaport fabric," Slattery said at the time.

"With Megaport, customers can provision elastic interconnects for as long as a year and as short as one day, as slow as 1 megabit per second or as fast as 100 gigabits per second."

Superloop also announced results for the first half of FY16 on Monday, reporting a net loss of AU$3.98 million on revenue of AU$1.94 million.

Slattery was made interim CEO of Superloop last week.

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