Spirit Telecom Ltd (ASX: ST1) released its Q1 FY21 update to the market today, sending its shares flying in opening trade. The Spirit share price rocketed up 10.8% to 41 cents before dropping back to 39 cents, up 5.4%, at the time of writing. This compares to the All Ordinaries Index (ASX: XAO) which is marginally higher at 0.8% to 6,396 points.
Let’s take a look at how Spirit performed over the first quarter.
Record performance
Spirit announced record growth and scale in its quarterly update for the period ending September 30. The results were underpinned by the company’s strategy in the acquisition of 7 businesses and by improving internal efficiencies.
Total revenue for the quarter came to $15.6 million, up 149% year-on-year (YoY), and 30% above Q4 FY20. The result was predominately from recurring revenue which represented $9.2 million, up 78%. The solutions and projects division created revenue of $6.2 million, jumping 507% over the prior corresponding period.
TCV sales increased 124% YoY to $8.4 million, with pending installations at $2.7 million and IT services and technology sales at $8.9 million. The uplift was driven by expansion into managed services, including orders placed for the school’s notebook program.
Spirit recorded a healthy balance sheet of $30.1 million in cash and available debt as of 30 September.
Outlook
The company anticipates future growth coming into the second and third quarter for FY21. Spirit noted that its resellers segment was picking up with 70+ new resellers signed nationally, and more in play.
In addition, the telecom provider will launch new Spirit-branded mobile products and bundles across Australia in Q2–Q3.
The first unified voice communications platform, LiveCall and LivePBX will aim to operate at 75% gross margin.
Spirit advised it expects to see material demand for its products for the rest of the financial year. This is due to the Federal Government budget tax incentives that allow businesses to spend on IT needs.
In the acquisition space, the company said it was considering multiple targets as it focused on revenue growth.
What did management say?
Spirit managing director Sol Lukatsky welcomed the robust Q1 result. He said:
We have been able to integrate the businesses efficiently, enabling us to leverage the cross-sell opportunities that have been created. We have successfully bundled services and provided a product with outstanding customer service which has led to organic growth. This has been particularly pleasing to achieve during the COVID-19 pandemic.
With our latest acquisitions – VPD Group, Reliance, Beachhead and Altitude IT – we’ve grown our geographic footprint and expanded our national network for reselling products via Spirit Solutions Partners. This is another avenue for both organic and acquisitive growth into FY21 and beyond.
How has the Spirit share price tracked?
The Spirit share price has risen 95% since the beginning of the calendar year. With a market capitalisation of $200 million, the Spirit share price is trading just below its all-time high of 45 cents.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has recommended SPIRIT TC FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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