Internet service provider Spirit Telecom (ASX: ST1) has bucked the trend of companies struggling under the strain of the COVID-19 pandemic and the resulting quarantine measures imposed on over half of the world’s population.
In a statement to the market, Spirit said that in the current “highly challenging macro environment”, the company had generated revenues of $14.3 million in the first quarter of this year, up 146% on a year-on-year basis.
In terms of business-to-business revenue growth, Spirit said it achieved $12.4 million in quarterly revenue, up 216% compared to last year.
Recurring revenue growth was also sharply higher compared to last year with the B2C business generating $8.6 million, up 60%, while B2B services were up 92% to $7 million.
The prime reason for the strong performance this year was attributed to demonstrating successful execution of its strategy of product bundling its high-speed internet, cloud and IT/MSP services.
Another important factor behind the company’s recent success has been acquisitions and cross-selling its products and services.
Buoyed by its recent acquisition of Trident Technology Solutions, Spirit says it can tap into essential providers serviced by Trident with schools and aged care providers taking up Spirit’s internet services, as part of a cross-selling strategy.
In the view of Spirit’s managing director Sol Lukatsky, “acquisition target opportunities continue to grow with revised valuation expectations of vendors becoming more realistic over the last period”.
“The Spirit Group result is particularly pleasing as Trident’s business mix has seasonal flows in the current financial quarter, which is typically the slowest quarter for Trident only generating 15% of its revenue for the financial year,” the company said.
Balance sheet springboard
Following its amiable revenue growth figures, Spirit declared that its balance sheet was now in a “very healthy position”, further boosted by a recent capital raising of $9.2 million and a debt facility from Commonwealth Bank to the tune of $10.9 million.
In total, Spirit’s balance sheet contains a mix of cash and debt totalling $14.8 million, to be deployed for acquisitions and expansion of its Spirit X digital sales platform.
Providing a hint of what’s to come, Mr Lukatsky said Spirit was now “in a very unique position to acquire quality Telco & IT/MSP assets at reduced prices.”
Looking forward, Spirit said it would harness the Spirit X platform to launch the NBN Enterprise Ethernet range to its partners and direct customers later this month with current estimates indicating the NBN product could reach over 500,000 business locations in Australia.
“We are simply executing to strategy for our customers, who are demanding a bundled High-Speed Internet links & IT services in one offering and it’s working,” said Mr Lukatsky.
“The launch of the NBN EE product will add more than 500,000 locations we can sell into with our Internet and IT services bundles. This is a game-changer in terms of organic opportunity for Spirit,” he added.
The news nudged Spirit’s shares 6.25% higher to $0.17 in morning trade.