Megaport Names Its New CEO While Continuing Its C-Suite Shakeup

Megaport MP1 has named Michael Reid of Cisco as its new CEO, effective May 15. In the same announcement, Megaport disclosed it has parted ways with CFO Sean Cassidy, effective immediately, and that a search for a permanent CFO is now under way. The abrupt CFO exit three weeks after a similar process with former CEO Vincent English is again inartful, but the board is seemingly unconcerned with optics. We suspect new top executives will now bring some stability and harmony with founder and board chairman Bevan Slattery. We’re maintaining our AUD 13 fair value estimate. We think the stock has gotten overly punished in the last year, while our outlook for the business has not materially changed.

New CEO Reid is currently the chief revenue officer for ThousandEyes, one of Cisco’s software-as-a-service businesses. We think tapping the Cisco pipeline was wise, as Cisco was a key partner in Megaport’s mobile virtual edge and software-defined wide area network services. Also, the experience at a premier global networking company should mesh well for a firm built around network-as-a-service offerings. We did not see Megaport’s business as broken. On the contrary, we thought it was performing well, but we’re comfortable that the new CEO will be well-positioned to keep Megaport on its growth trajectory and path to profitability. We expect Megaport to generate normalized EBITDA profits in 2023 and positive free cash flow by 2024.

The departure of Cassidy as CFO was not entirely surprising. Given what seemed to be a house cleaning at the very top and his relatively short tenure of about two years, it makes sense that Megaport wanted to completely turn the page to a new C-suite. Until Megaport finds a new CFO, Leticia Dorman, who is currently Megaport’s head of finance and is a former KPMG auditor, will serve in an interim capacity. Megaport currently has a net cash position, and we don’t expect a need to raise capital before reaching free cash flow positivity.