The NEXION Group Ltd (ASX: NNG) share price zoomed up 6% in early trade following news the company has completed a new acquisition agreement. The business to business (B2B) cloud and tech company will purchase Blue Sky Telecom, a B2B telecommunications company.

At the time of writing, the NEXION share price has lost some ground and is now trading at 22.5 cents, up 2.2%. Let's look closer at NEXION's announcement.

New acquisition

In today's release, NEXION stated that the acquisition was part of its expansion strategy. It would enable NEXION to supplement its core services while reducing the running costs of Blue Sky's "to seamlessly connect all its products and services".

The acquisition has cost NEXION $2 million with additional earn-outs. An earn-out means a business's seller can get compensation if the business achieves certain objectives after its sale. The $2 million is to be made up of 10 million shares in NEXION, a valuation of 20 cents apiece.

According to today's release, Blue Sky's revenue has grown by 20% in the 2020 financial year, with the company making $2.9 million so far this financial year.

NEXION said Blue Sky's growth was mainly driven by its new enterprise and satellite divisions. It expects the acquisition to be completed in the fourth quarter of the 2021 financial year.

Commentary from management

NEXION co-founder and CEO Paul Glass welcomed the acquisition, saying.

Blue Sky is a fast growing business with an outstanding product offering. As a result, NEXION will be a stronger combination of infrastructure and products that should yield material cross-sell opportunities and the possibility of lower costs.

The terms of the acquisition have been designed to strongly align the vendor with NEXION's ongoing success and should the terms of performance milestones be met all shareholders can be expected to benefit strongly in coming years as NEXION's revenue will have grown very significantly.

… It has been a key objective of the company to materially improve the proportion of recurring revenue in NEXION's revenue mix and this acquisition is a huge step towards this goal.

Blue Sky Telecom's founder and CEO Daniel Fairbairn said he was committed to continuing Blue Sky's success and create stronger commercial propositions for its customers.

By bringing these two businesses together under the NEXION Group, the company will be able to leverage and combine their respective in-depth expertise and ability to build commercial solutions that adds real value to our customers.

NEXION share price snapshot

Investors will no doubt welcome some positive news after the NEXION share price made a poor start to its time on the ASX.

The company was listed on the ASX in mid-February this year, and its share price has since fallen by 10%.

NEXION has a market capitalisation of $14 million, with approximately 111 million shares outstanding.

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The Nexion Group Ltd (ASX: NNG) share price plummeted this morning despite good news announced by the tech company.

The global cloud and technology company announced it has partnered with Aryaka Networks, a California-based cloud technology service provider, to build its OneCloud node internationally for the first time.

Despite the news of its overseas expansion, the Nexion share price is down 4% at the time of writing after recovering from an 8% drop this morning. Its share price is currently 24 cents.

Nexion's overseas expansion

Nexion Group's subsidiary Nexion Networks Pty Ltd and Aryaka are to build a software-defined wide-area network (SD-WAN) point of presence (PoP) in Auckland, New Zealand.

A OneCloud node consists of processing and storage capacity, which can be rented by customers to integrate their corporate operations into public cloud services.

The new nodes will allow Nexion to provide its clients in Auckland with access to high-speed, low latency international bandwidth to more than 40 locations on the Aryaka network.

The first of the company's network nodes to make it over the ditch will be its third partnership with Aryaka. It has another two nodes positioned at Aryaka PoPs in Australia, located in Perth and Sydney. Nexion also has nodes in Melbourne and Adelaide.

Nexion's business model

Nexion says that each OneCloud node and Aryaka PoP it builds will increase its capacity to generate long-term, high-value recurring revenue from hybrid cloud hosting and high-speed data connectivity services.

The company says it's in a "sweet spot" of a swing towards pay-as-you-go cloud data storage. Nexion believes the swing to be one of the fastest-growing segments of the IT industry, as corporations move away from owner-operated computer resources.

Currently, Nexion is aiming its OneCloud and Public Cloud services to corporations in need of flexible cloud infrastructure. The company hopes that its new location will aid it in negating clients' reliance on traditional telco services.  

Nexion share price snapshot

Nexion was listed on the ASX in February 2021. Since then, the Nexion share price has dropped 4% from its opening price of 25 cents.

It has a market capitalisation of $15.91 million and approximately 111 million shares outstanding.

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The Nexion Group (ASX: NNG) share price is racing higher following a multi-million deal signed with IBM Australia Ltd (NYSE: IBM).

During the late afternoon trade, the information technology service provider's shares are up 8.3% to 33 cents. It's worth noting that when the market opened, the Nexion share price hit an all-time high of 41 cents.

What's the deal?

According to its release, Nexion advised it has secured a contract with IBM Australia for a term of 5-years.

Under the agreement, Nexion will deploy a number of its products to IBM for a project located in Western Australia. This will include Nexion OneCloud infrastructure-as-a-service (IaaS), network links, session initiation protocol (SIP) voice services, security, and desktop support as well as managed services.

The deal is expected to generate revenue of around $4 million for Nexion. This follows a previous significant IBM solutions contract in the Nexion W1 Data Centre signed in the last 12 months.

Words from the Nexion CEO

Nexion CEO Kevin Read welcomed the deal, saying:

We are excited to be working with IBM, a recognised global technology leader. This deal helps underpin our global growth strategy based on key partnerships and to have a company of IBM's caliber select Nexion is a phenomenal outcome.

Hybrid Cloud is one of the fastest-growing cloud segments and NEXION is proud to be an emerging global cloud, security, networking and data centre player.

Growth strategy in progress

Management noted that the newly signed contract, along with the go-live of its Perth Aryaka points of presence (PoP), was a major milestone for the company.

Nexion plans to expand its presence through deploying OneCloud Nodes across strategic locations. So far, existing OneCloud nodes are in Perth, Melbourne, and Adelaide. Others are expected to come to other Australian capital cities.

Furthermore, Nexion will look to penetrate the New Zealand market and abroad.

About the Nexion share price

Since listing on the ASX boards in the middle of this month, the Nexion share price has doubled in value.

The company offered up to 40 million shares with a price of 20 cents apiece to raise $8 million.

Based on the current share price, Nexion has a market capitalisation of around $21.3 million.

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The Nexion Group (ASX: NNG) share price has been on fire since hitting the ASX boards last week.

In afternoon trade the shares of the leading hybrid cloud, network, security and data centre company are up a massive 36% to 38 cents.

This means the Nexion share price is up 90% since its IPO last week.

The Nexion IPO

Nexion commenced trading on the Australian share market last Thursday after raising $8 million via the issue of 40 million shares at $0.20 per share.

This gave the company a market capitalisation of $25.4 million at the time of listing. This has now increased to just under $50 million following today's gain.

Among its major shareholders are co-founder and CEO Paul Glass and fellow co-founder and COO Kevin Read. They collectively own 21.4% of its shares outstanding. Including the rest of its management and board, a total of 28.7% of its shares are in the hands of insiders.

The company believes this provides a high degree of alignment with investors.

What does Nexion do?

Nexion offers private cloud infrastructure coupled with public cloud products such as Amazon AWS and Microsoft Azure to create a hybrid cloud service called OneCloud.

It uses software-defined wide-area network (SD-WAN) technology to connect its corporate customers to its OneCloud Nodes.

OneCloud Nodes consist of compute and storage capacity, bonded globally via SD-WAN that customers rent to deploy their corporate applications and integrate their operations into public cloud services offered by the likes of Microsoft, Amazon and Google.

The company currently operates in Perth, Adelaide, and Melbourne. However, it is aiming to become a global operator of Hybrid Cloud SD-WAN infrastructure. Capital from the IPO will be used to fund its expansion.

This will include a staged expansion into New Zealand, Canada, and Africa.

Financials

In FY 2020 the company's revenue almost doubled year-on-year to $4.5 million. It also achieved EBITDA profitability in FY 2020 after the business demonstrated outstanding scalability with operating costs increasing only 14%.

Management believes the outlook for Nexion is favourable and should support strong growth in revenue and EBITDA over the medium to long term time.

Mr Glass commented: "We are extremely pleased by the level of support from investors and the success of the IPO is testament to the market's enthusiasm for our business. On behalf of the Board, I would like to welcome our new shareholders to the Company."

"Since we founded the Company in 2017, NEXION has demonstrated outstanding growth in our initial target market of Australia, but we believe that the best is yet to come. The capital raised will allow us to expand the business in a staged approach beyond its existing domestic footprint and into global markets. Our strategic relationship with Aryaka is instrumental to our global ambitions."

"NEXION is a business with strong revenue growth potential, a high level of recurring revenue, excellent scalability and a vast market opportunity driven by an irreversible trend towards pays-as-you-go IT platforms. I look forward to reporting on the continued success of the Company," he concluded.

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