Macquarie Technology Group (MAQ) reported last week. I know @raymon68 has already posted the results so this is more for me to journal down my thoughts on the result.

From their presentation:

Overall I thought it was a solid result albeit EBITDA was more on the lower end of guidance.

Not much changed from last report. Data Centre EBITDA percentage slightly down on last half.

Main thesis for MAQ is the continued growth in its data centre segment which is the segment with the highest margins. MAQ currently has around 23MW of data centre load across 3 sites:

• IC1 (Sydney CBD) = 3MW
• IC2, IC3 east and IC3 super west (Macquarie Park) = 10MW (IC2)+ 8MW (IC3 E)
• IC4 and IC5 (Canberra) around 2MW

Future development of IC3 SW is due to start soon and when complete will bring the total capacity to around 68MW.

Outlook was somewhat muted considering IC3 SW has been part of plans for a while now. MAQ expect that the first phase will be online around 3Q 2026 bringing an extra 6MW of capacity. I guess the market probably also didn't like the fact that MAQ expect growth rates in the Cloud and Government segments to slow in the coming FY.

Overall capex is expected to be higher than previous years considering the need to spend to build IC3 SW. Currently MAQ have no debt but there is a loan facility of 190m which I do expect them to tap into otherwise they'll need to do another raise in the next year.

With D&A expected to be slightly lower than FY24, and EBITDA is continue to increase, I expect that NPAT may gain slightly or may be flat based on how much interest costs will be.

Considering we are only just entering the growth phase for MAQ, I will give them some leeway in terms of their financial metrics as I see this being a much bigger business in 5-10 years time once their new data centres are all up and running however it does make this business quite hard to value at the current stage.

A thesis breaker would involve further delays in the development of IC3 SW or a complete blow out in costs involved to build out the centre. So far, apart from delays, it seems that management have fairly good capital management and I trust that this should continue into the future.

Disc: Held IRL and on Strawman.

Macquarie Technology Group (MAQ) released results after hours last night. From their presentation:

On the surface seems a pretty good result. Increasing costs have put pressure on margins but they have remained fairly strong.

The Data Centre business once again doing well and this is the growth driver in this business.

Interesting though that most of the EBITDA growth was driven from the telecom business which isn't considered one of the growth segments of the business. The decrease in Cloud Services and Government EBITDA was flagged at the last report due to increased investments and timing of sales.

Outlook was given with particular focus towards the new IC3 Super West Data Centre which has been a long time coming. Works have commenced and expected to be completed in Q3 CY26. This will increase the data centre load from 22MW currently to 60MW with further capacity to increase this to 67MW.

MAQ management have historically been pretty good capital allocators so hopefully this new build can be funded from the profitability of the existing segments of the business without the need for further dilution.

Disc: Held IRL and on Strawman.

Macquarie Technology Group released their results after hours yesterday, from their presentation:

Once again operationally a very solid result with continued growth in all segments of the business.

Data centres now comprise 11% of total revenue but amazingly contribute 32% towards total EBITDA. The slide below shows the incredible margins of the data centre business:

Telecom revenue actually declined compared to FY22 however EBITDA increased due to operational efficiencies. Long term I don't see telecom being a major segment of the business but it is profitable at present and does contribute 20% towards overall EBITDA.

Capital expenditure which was forecasted to be $76m-$80m ended up being $65.8m. I suspect this may be due to ongoing delays with their IC3 Super West build which has once again been delayed. IC3 Super West was due to be approved mid 2023 but is now expected late calendar 2023. The build will also now take 30 months, up from 18-24 months from the last report. Total load of IC3 Super West has been upgraded to 38MW with potential to increase to 45MW if needed.

Outlook for FY24 was given:

As expected, Capex will increase in FY24 due to (hopefully) the build of IC3 Super West. On a cash flow level, they shouldn't have any issues given that they raised capital last year and repaid all of their debt. The company also generated free cash flow of around $43m (if you back out the cash they placed into Investment Accounts). There is still the potential to use the debt facility which has a capacity of $190m.

Doing some rough numbers based on their outlook. Say EBITDA grows to around $110m, then assuming around $58m depreciation, there is a potential for MAQ to generate NPAT of between $30-35m.

Disc: Held IRL and on Strawman

MAQ announced that they have completed their raise.

In the end they have raised $160m (more than the $130m they were aiming for) and thus will issue 2.74m shares.

Probably one thing of interest that I did note was that the raise introduces multiple new institutional shareholders to the Company’s share register and increases free float.

Currently MAQ is not in the ASX300 even though it is large enough for it to be included (and borderline ASX200 by market cap). Perhaps the increase in free float may allow it to be included in the indices in the near future?

Full Announcement here

DIsc: Held IRL and on Strawman.

Macquarie Technology Group (ASX:MAQ) announced that they will be raising capital to fund further growth in their data centres business.

From their presentation:

Seems to be only an Institutional Placement with nothing for us private investors.

Maybe a little surprising that they are raising capital at this stage given that they still have $80m in undrawn debt facilities and $13m in cash. Although they did say that they will be paying down their debt at the last set of results. Perhaps taking the opportunity to reduce their debt with the cash raised?

FY23 outlook was also given in the presentation:

Total Depreciation and Capex are actually lower than previously forecasted. May be a short term boost to their overall profitability at the next set of results.

Full presentation here

Disc: Held IRL and on Strawman

MAQ reported last month however I'm just coming around to reading through the results. And realised no one had posted a straw yet about their results. From their announcement:

• Eight consecutive years of EBITDA growth.
• Full year revenue of $309.3 million, an increase of 8.5% compared to $285.1 million for FY21.
• Earnings before interest, tax, depreciation, and amortisation (EBITDA) of $88.4 million, an increase of 19.8% from prior year, at the top end of June’s guidance.
• Conversion of EBITDA to operating cash flows generated total operating cash flows of $98.0 million during the year. There is a closing cash balance of $3.0 million and undrawn debt facilities of $64.0 million having drawn down $126.0 million.
• The Company has completed work on the fit-out of Intellicentre 3 East data centre development (“IC3”) and has commenced billing of its hyperscale customer.
• Net profit after tax (NPAT) of $8.5 million, reflecting the increase in depreciation & amortisation flowing from the significantly higher levels of capital expenditure since FY20.
• Capital expenditure for FY22 was $98.5 million (FY21: $139.1 million) driven by Growth Capex of $64.5 million primarily relating to fit out of IC3 East in Macquarie Park. Customer related Capex was $24.5 million. Maintenance Capex was $9.5 million. 

On first glance the results are pretty impressive on an EBITDA level. Revenue increased by 8.5% but EBITDA increased almost 20% showing some operating leverage and scale. The breakdown of each segment and its contribution was also interesting. Data centres only comprised 8% of total revenue but contributed 31% of total EBITDA. Although capex (and future depreciation and amortisation) will also be high as they increase capacity.

Outlook:

• The Company’s EBITDA will continue to grow in FY23. Due to investments being made in Data Centres and Cloud Services & Government in the 1H FY23, EBITDA will grow in 2H FY23.
• Expected EBITDA for the Data Centres business in FY23 is between $31 to $33 million.
• Inflation impacts on cost base are being materially passed through to our customers.
• We continue to see a strong demand for cyber security and hybrid IT in our Government and Cloud Services businesses.
• Telecom is focusing on new initiatives to improve operational efficiencies and continued growth of our successful SDWAN business.
• Pleasingly we are able to increase the total IT Load capacity of IC3E by approximately 1MW independent of the IC3 Super West build. We will invest in this opportunity by 2H FY23. This leverages our existing investment in IC3E.
• State Significant Development Application submitted for IC3 Super West. We expect to receive DA approval in late calendar year 2022 to mid-calendar year 2023 and construction to be completed 18 to 24 months later.
• Depreciation and amortisation for FY23 is expected to be $70 to $74 million, driven by full year impact of IC3 in FY22. Cloud Services & Government and Telecom depreciation to remain broadly flat at $27 to $28 million and $19 to $20 million respectively in FY22.
• We are focused on maintaining industry leading Net Promoter Score greater than +70 across all business segments.
• The Company plans to make further investment in growth and customer growth capex during FY23. Total capex is expected to be between $76 to $80 million consisting of:
• Growth Capex - $37 to $39 million
• Customer Growth - $23 to $24 million
• Maintenance Capex - $16 to $18 million
• Telecom capex will remain broadly flat at $11 to $12 million in FY23 with Hosting capex at $65m to $68m.

Nothing too surprising in the outlook for FY23. Capex is expected to be lower than in FY22 but I expect this to accelerate again into FY24 and FY25 due to continued build out of their data centres.

Overall I think this was a decent result for MAQ. They are slowly building out a very strong cloud and data business and doing it whilst maintaining profitability. On a cash flow level they were also FCF positive for this year and although the cash balance appears low at $3m, there is plenty of loan facility available to utilise.

Disc: Held IRL and on Strawman