As the COVID-19 pandemic continues to infect economies across the globe, many listed companies are scrapping dividends, withdrawing guidance, and standing down staff across the country.
However, some companies are not only managing the global downturn, but are actively benefitting from the huge changes in how people work and play.
Internet and IT service provider Spirit Telecom (ST1) is one such company.
The company announced last Friday that revenue grew 146 per cent from January to April 2020 compared to the same period in 2019.
In the past few weeks, the company has announced record results, and a range of new institutional investors has come onto the register to support ST1's two-pronged organic and acquisition growth strategy.
Moreover, ST1's share price has leapt to a market capitalisation at around $75 million. The company has at its disposal $14.8 million of cash and debt for new acquisitions and organic growth. Commonwealth Bank recently showed its approval of Spirit’s performance by increasing its debt facility to $10.9 million.
This begs the question: what makes Spirit Telecom different?
Work and learn from home — and quickly
Spirit Telecom has been rated as Australia's fastest internet provider. The company touts its ability to provide internet speeds of 25 megabits per second (Mbps) to a whopping one gigabit per second (Gbps).
For reference, your average Telstra NBN speed will have you downloading between 30 Mbps and 50 Mpbs. ST1's one Gpbs is the equivalent of 1000 Mpbs — making it 20 times quicker than a strong NBN speed.
The big players in the world of internet providing were rolling out the revolutionary 5G internet throughout 2019. Spirit Telecom claims it's been using 5G tech since 2017.
So, what does high-speed internet have to do with defying COVID-19-related share price trends?
It's all about the sudden and dramatic shift to remote work in businesses and schools across the country.
Essential service providers like schools, small-to-medium businesses (SMBs) and aged care providers need high-speed internet and redundant internet links to function effectively.
The result is a dramatic upswing in demand for the services provided by tech companies like Spirit Telecom.
So, Spirit does something very clever here: it bundles a range of IT services such as cloud applications, cybersecurity, infrastructure and IT support with the high-speed links. The company is a one-stop-shop with one bill and one account manager to speak with.
Additionally, it has developed its own digital sales platform called Spirit X which is the largest aggregator of business-to-business (B2B) internet products in one online sales portal.
This has supported the hefty 146 per cent growth in revenue in the first four months of 2020.
Spirit reported $14.3 million in revenue over this period, with $4 million raked in over April alone.
This total revenue growth was supported by a 216 per cent increase in business-to-business (B2B) revenue compared to the time period the year before, standing at $12.4 million at the end of April, and a 60 per cent increase to recurring revenue, at $8.6 million.
Of course, a general concern for this sort of growth is that once the virus subsides and the economy returns to normal, so too will demand Spirit Telecom's services scale down.
However, ST1 has been laying strong foundations for future growth long before the virus struck through a string of strategic acquisitions.
A year of buyouts
While Spirit Telecom made four major acquisitions from 2012 to 2018 — namely the Voxcom, My Telecom, Phone Names, and World Without Wires purchases — 2019 was the year the company's acquisition strategy kicked into a new gear.
In one year, ST1 acquired LinkOne, Building Connect, Phoenix Austec, and Arinda IT.
Of course, it didn't just stop there. In January 2020, Spirit bought Cloud Business Technology in Sydney.
A month later, Spirit spent $6.9 million on the buyout of Trident Business group and Neptune Managed Services. With these two purchases, the company was set to launch its business unit, Trident IT Solutions.
With a focus on providing cloud-based IT and internet solutions for schools, hospitals, aged care facilities, and more, the new business sector could not have come a better time.
What's more, while businesses across the country are going into hibernation mode until the coronavirus pandemic subsides, Spirit recently raised $9.2 million through a share placement to continue its acquisition spree via a range of fund managers and high net worth families.
Why the buys?
Spirit's aggressive acquisitions strategy is all part of the company's plan to become Australia's largest provider of high-speed internet and IT to SMB sectors like hospitals, government branches, and education facilities: in simple terms, a provider of bundled IT and telco services.
Rather than cocoon its businesses and wait for the COVID-19 crisis to pass, the astute management team at Spirit Telecom is making the most of the unique opportunities presented by the virus.
Looking ahead, ST1 has a healthy balance sheet with $14.8 million available at the end of April in a mix of cash and debt.
Moreover, the company is set to launch its NBN Enterprise Ethernet range through its Spirit X platform at the end of May. This product gives the company more than half a million business locations across the country in which to sell its products.
Managing Director Sol Lukatsky put it simply when he said:
"This is a game-changer in terms of organic growth for Spirit."Managing Director,Sol Lukatsky
With more acquisitions in its line of sight and a throng of new customers available soon, Spirit Telecom is set for some substantial growth. The only question, then, remains: will investors hop on board now, or will they miss the opportunity?
Spirit’s latest investor update presentation is available here.