The Tesserent Ltd (ASX: TNT) share price is currently trading 12.82% higher following the release of a strong quarterly report for the period ending June 2020. The company is Australia’s largest ASX-listed cybersecurity provider.
The report follows the strategic acquisition of Melbourne and Canberra-based cybersecurity consultancy Seer Security, which sent the Tesserent share price flying last week.
Quarterly report
According to the report, Tesserent’s revenue in Q4 2020 of $10.96 million was 32% higher than Q3. Additionally, the per annum revenue run rate as at 30 June 2020 was $43.8 million.
Pleasingly, Tesserent achieved positive earnings before interest, tax, depreciation and amortisation in Q4 and positive cash flow from operations in June. The company reported that cash receipts of $12.3 million in Q4 were up 73% compared to Q3, and it had $4.34 million in available cash at the end of Q4.
The company has signed an agreement with Pure Asset Management for a new debt facility of $15 million. This replaces the existing $5 million dollar facility on an improved interest rate of 8.9% per annum, compared to the prior rate of 11.5%. The funds will be used to support further acquisitions.
Tesserent has indicated that strategic acquisitions are a cornerstone of its growth strategy to drive earnings.
Seer acquisition
The Seer Security acquisition strengthens the relationship between Tesserent and the federal government, given Seer’s many long-term contracts with a number of government departments and agencies.
In FY20, Seer reported revenue in excess of $7.6 million and $2.2 million in sustainable earnings. The forecast for earnings in FY21 is expected to be strong.
The Seer acquisition is fully funded through Tesserent’s debt funding facility with Pure Asset Management. The consideration will be $5 million in cash and shares in Tesserent.
In the acquisition announcement, Tesserent’s co-chief executive officer Julian Challingsworth commented, “current market conditions continue to present tremendous consolidation opportunities in the short to medium term, and we fully expect to take advantage of this with additional acquisitions currently under consideration”
About the Tesserent share price
The most recent Seer acquisition follows other acquisitions in 2019. Last year, Tesserent also acquired Rivium, Pure Security and Canberra-based North. As a result, the bolt-on acquisitions deliver a wide range of cybersecurity services to help drive Tesserent’s earnings higher.
At time of writing, Tesserent shares are trading at 22 cents which represents a gain of 12.82% in today’s trade. Additionally, over the past year the Tesserent share price has increased 315.09%.
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Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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