There are two truths that most long-term investors come to learn: Not all ASX shares are created equal and not all shares live their glory days at all times.

In fact, some quality ASX shares have tumultuous moments – as evidenced by these stocks that hit their lowest point in years this week.

2 quality ASX shares hitting long-forgotten lows

Spirit Technology Solutions Ltd (ASX: ST1)

For those unacquainted with Spirit Technology Solutions, the company provides business-focused technology and telecommunication services.

The quality company officially hit the ASX in 2016 with its shares trading at around 12 cents for their first few weeks on deck. From there it garnered enthusiasm, reaching a high of around 43 cents in January 2021.

But the past 17 months have been rough on the telco small cap. Its share price has tumbled around 85% since then to trade at 5.8 cents on Tuesday.

In fact, it closed at a new 52-week low of 5.1 cents yesterday. Today, it's recording a 13.75% gain.

The telco has a market capitalisation of approximately $34 million according to the ASX.

Freelancer Ltd (ASX: FLN)

Freelancer is another quality ASX share reaching a new multi-year low this week.

The crowdsourcing marketplace floated on the ASX in 2013 after offering new shares for 50 cents apiece under its initial public offering (IPO).

It peaked at around $1.80 in 2016 and, in 2021, it hit a multi-year high of around $1.25.

Today, the stock reached an intraday low of 33 cents, marking its lowest point since March 2020.

Sadly, the quality ASX share has been on a downwards slope for nearly 12 months now. Its tumble was exacerbated by a quarterly update last month.

The Freelancer share price slipped 2.4% when the company announced that, over the three months ended 31 March, its cash receipts had dropped 6.1% on those of the prior comparable period.

That was made worse by the Australian Dollar depreciating against the US Dollar. The depreciation brought the company a 6.3% tailwind last quarter.

According to the ASX, Freelancer has a market capitalisation of $147 million.

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The Spirit Technology Solutions Ltd (ASX: ST1) share price was looking greener than usual in early trade on Monday.

Investor excitement resonated following the telecommunications company's announcement to sell its fixed wireless assets. Shares in Spirit were trading 11.8% higher to 85 cents apiece near the open. However, they have since lost some ground and are currently trading at 78 cents, up 2.63%.

Joining the telecom trend

Spirit Technologies is the latest ASX-listed telecommunications company to sell its infrastructure assets. The announcement this morning coincidentally lands at the same time that TPG Telecom Ltd (ASX: TPG) is revealing the sale of its mobile tower and rooftop assets for $950 million.

According to the release, Spirit has entered into a binding sale agreement with Maret Infrastructure Pty Ltd (Maret Group). As part of the deal, the company will divest its wholesale fixed wireless assets for up to $21 million.

The total consideration will comprise an upfront $15 million payment, in addition to a $6 million performance fee over the next 12 to 24 months.

What did management say?

Commenting on the deal, Spirit managing director Sol Lukatsky said:

[…] this transaction returns a material amount of capital for a company of our size. Combined with the divestment of the consumer business last October, the proceeds of this sale, (once completed), will have returned over $20M in cash to our balance sheet in FY22.

Spirit is also undertaking an internal transformation project (Spirit 2.0) to reduce costs and ensure it is well-positioned to capitalise on the growth we are seeing for our services in the SMB market and Cyber solutions.

Much like other tower sales we have seen from Telstra Corporation Ltd (ASX: TLS) and Optus, Spirit will retain its customer relationships and revenues associated with the network. Meanwhile, Maret Group will charge Spirit a wholesale 'last-mile' services fee for the provision of services.

Furthermore, the partnership between Spirit and Maret also unlocks the use of Maret's own spectrum licensing assets for the ASX-listed telecom company. Following this, Spirit plans to bring new fixed wireless products to market under a broader network.

How has the Spirit share price performed?

Despite growing revenue by around 94% year over year and turning profitable, the Spirit share price has been a doozy over the past year.

Specifically, ASX-listed Spirit has tumbled nearly 80% during the 12-month period. Meanwhile, staples of the communications sector, such as Telstra and Uniti Group Ltd (ASX: UWL), have rallied 14% and 78% respectively.

Undoubtedly, Spirit shareholders will be hoping this latest deal represents a pivotal moment for the share price.

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The Spirit Technology Solutions Ltd (ASX: ST1) share price has lifted today after the company announced a positive trading update.

Spirit is an IT and telecommunications provider with a range of product and service offerings including traditional internet products, managed IT services and cloud-based business solutions. 

At the time of writing, the Spirit share price is up 2.90%, trading at 35.5 cents.

Spirit share price higher on record growth, integration

Today, the company reported "very strong growth again in FY21" with a 150% increase in recurring and S&P (solutions and projects) revenue to $35.7 million between January and April this year. Recurring revenue increased 94% year-on-year to $16.6 million, while S&P revenue growth surged 224% to $19.1 million. 

Spirit notes the strong Jan-April growth represents an 8% increase off the seasonally high September-December 2020 period. September to December was further boosted by a school infrastructure renewal project, while January typically represents a quieter B2B holiday period followed by the Easter holidays. 

On the lookout for merger and acquisition (M&A) opportunities, Spirit has acquired some 13 cloud, IT and telecommunications companies in the last two years. With so many different companies coming under the Spirit brand and business, integration represents an integral part of maximising the value of its acquisitions.

Spirit's update highlights that 8 of 13 companies are completely integrated across people, systems, processes and brand. By June, 10 of 13 companies will be integrated with only Reliance, and recent purchases of Intalock and Nexgen remaining.

From a technology perspective, the company has decommissioned 35 of 45 systems across the acquisitions, with 29 of 45 scheduled integration events completed. 

The Spirit share price so far 

Spirit has marked 10 consecutive quarters of recurring revenue growth to March 2021 alongside numerous growth accretive acquisitions. However, the Spirit share price has stayed level since August 2020.

The company is in its early days of profitability, delivering a net profit of $508,117 in the first half of FY21. Despite the lack of recent share price upside, Spirit remains confident of achieving organic revenue growth through the integration of its acquisitions, building its product portfolio and national expansion. 

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The S&P/ASX 200 Index (ASX: XJO) has risen 0.8% in the final day of the quarter to 6,791 points.

These are some of the highlights from the ASX today:

Zip Co Ltd (ASX: Z1P) wins a big new merchant

Zip announced today that it has entered into a partnership with JB Hi-Fi Limited (ASX: JBH).

If you didn't know, JB Hi-Fi operates both JB Hi-Fi stores and The Good Guys. It's one of Australia's largest technology and entertainment retailers.

Zip will provide its interest-free payments solution for both of JB Hi-Fi's businesses, both in-store and online.

Peter Gray, the co-founder and chief operations officer of Zip, said:

We are delighted to partner with the JB HI-FI Group. We look forward to providing customers with choice at checkout, empowering them to own the way they pay at JB HI-FI and The Good Guys. This strategic partnership provides Zip customers with access to even more of Australia's favourite brands, further delivering on Zip's mission to be the first payment choice everywhere and every day.

Zip is anticipating this partnership will be launched to market in April 2021.

The Zip share price grew by 0.4% today.

Suncorp Group Ltd (ASX: SUN)

Today, Suncorp gave an update on the expected financial impact from the heavy rainfall and flooding across NSW, South East Queensland and Victoria.

The ASX 200 share has received over 7,600 claims across all three states. The insurer is expecting that number to rise as customers gain access to affected regions and the extent of damage becomes clear.

The CEO of Suncorp, Steve Johnston, said:

Suncorp continues to work with our customers, particularly in the hardest-hit areas of the mid-North Coast of NSW and Western Sydney.

Floods too frequently devastate communities across Australia, which is why as a country we must address this risk. Unfortunately, many homes in Richmond, Windsor, Penrith, Port Macquarie and Taree are in medium to very high flood risk areas.

As a country, we need to address how we can protect homes in flood-prone regions through government investment in mitigation infrastructure. We must also improve planning decisions to ensure we are not building new homes in high-risk areas.

Based on claims lodged to date and the group's preliminary assessment of damage, Suncorp estimates net claims costs in relation to this event will be $230 million to $250 million. Suncorp expects the majority of claims to be attributed to a single event across all three states for reinsurance purposes. The costs of this event will be capped at $250 million under the group's main catastrophe program.

Spirit Technology Solutions Ltd (ASX: ST1)

Spirit Technology announced an acquisition today.

It's acquiring Nexgen, which has over 5,500 data and voice business customers with 4,000 being contracted and recurring. The average contract term is 4.5 years with no customer concentration. It also has more than 100 sales team members that will be joining Spirit to sell Nexgen products and cross-sell Spirit's internet, cloud, voice, mobiles and cyber security.

Nexgen is expected to generate $36 million of revenue and is tracking to a forecast of FY21 earnings before interest, tax, depreciation and amortisation (EBITDA) of between $7.2 million to $7.6 million. The implied multiple is 6.5x with the completion payment (including a deferred component of $10 million) capped at $50 million.

Spirit Technology will have over 10,500 business customers after the acquisition.

To fund this, it has successfully conducted a placement to institutional and sophisticated investors raising $23.8 million and its debt facility has been increased by $10 million to $25 million.

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In early afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a strong gain. At the time of writing, the benchmark index is up 1.6% to 6,845.9 points.

Four ASX shares that are climbing more than most today are listed below. Here's why they are storming higher:

Aristocrat Leisure Limited (ASX: ALL)

The Aristocrat Leisure share price is up 4% to $34.97. This appears to have been driven by a broker note out of Credit Suisse this morning. In response to its virtual investor round table event, the broker has retained its outperform rating and lifted its price target by 10% to $38.00. Credit Suisse was pleased with the updates provided for both its land-based and digital businesses.

Opthea Ltd (ASX: OPT)

The Opthea share price has surged 12% higher to $1.60. This follows news that the biotech company has received an initial Pediatric Study Plan (iPSP) waiver from the US Food and Drug Administration (FDA) for OPT-302. The iPSP waver means Opthea will not have to conduct an additional study in the paediatric population.

PointsBet Holdings Ltd (ASX: PBH)

The PointsBet share price has stormed 4.5% higher to $12.81. This follows the release of a positive broker note out of Goldman Sachs this morning. According to the note, the broker has initiated coverage on the sports betting company with a buy rating and $17.50 price target. Goldman believes the company is well-placed to benefit from a US sports betting market which is expected grow by a compound annual growth rate of 40% through to 2033.

Spirit Technology Solutions Ltd (ASX: ST1)

The Spirit share price has jumped 8.5% to 38 cents. The catalyst for this gain was news that Spirit has acquired Nexgen for up to $50 million. This will be paid 70% in case and 30% in shares. According to the release, the acquisition of the data, security and voice products provider is expected to add over five thousand new B2B clients and generate $36 million in revenue. Approximately 80% of this is recurring. To fund the deal, Spirit has undertaken a $23.8 million institutional placement and increased its debt facility.

The post Why Aristocrat Leisure, Opthea, PointsBet, & Spirit are storming higher: appeared first on The Motley Fool Australia.

The Spirit Technology Solutions Ltd (ASX: ST1) share price is up this morning, after news of the company's biggest acquisition to date. The telecom company has acquired software company Nextgen, saying it expected the acquisition to generate $36 million of revenue.

At the time of writing, the Spirit share price is up 5.7%, trading at 37 cents. 

Let's look closer at Spirit's new acquisition.

Acquisition of Nextgen

Spirit ended a two-day trading halt this morning with news of its latest acquisition.

According to the company's release, its purchase of Nextgen has doubled its business to business (B2B) customer base and brought 100 new salespeople to Spirit. Those salespeople will continue to sell Nextgen products while cross-selling Spirit's internet, cloud, voice, mobiles and cybersecurity products.

To purchase the B2B software company, Spirit conducted a $23.8 million placement to institutional and sophisticated investors. It also lifted its debt facility with the Commonwealth Bank of Australia (ASX: CBA) from $15 million to $25 million.

The acquisition's total cost is capped at $50 million, with $10 million of that to be deferred. 

All vendors are to remain with Spirit for at least 18 months (on a performance-based earnout) and will take 30% of the consideration in Spirit shares and 70% in cash. The cash component will be funded from the capital raising and CBA debt facility.

According to Spirit's announcement, Nexgen expects to record $7.2 million to $7.6 million of EBITDA through the 2021 financial year.

The acquisition news comes nearly a fortnight after Spirit announced it would shift its focus to its business market, divesting its consumer infrastructure assets.

Spirt share price snapshot

Today's news may be the boost the Spirit share price needs to dig out of its 2021 ASX slump. It has dropped by 7.5% year to date. However, the Spirit share price is still up by 164.29% over the last 12 months.

Spirt has a market capitalisation of around $191 million, with approximately 547 million shares outstanding.

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The Spirit Technology Solutions Ltd (ASX: ST1) share price is up 1.3% in afternoon trading. This was slightly down, having been up more than 8% earlier today. At the time of writing, the Spirit Technology share price is sitting at $0.39. 

We take a look at the telecommunication and cloud services provider's results for the financial year ending 31 December (H1 FY21) below.

What financial results did Spirit Technology report for H1 FY21?

The Spirit Technology share price got a boost from this morning's ASX release, revealing revenue and other income of $44.0 million for the half-year. That's a 253% increase from the prior corresponding period (pcp). Additionally, total recurring revenue leapt 99% from the prior corresponding period to $21.1 million.

Spirit indicated that securing higher value recurring revenue contracts for longer durations has helped drive the total revenue lift. Undoubtedly, this was credited to its ability to cross-sell its premium managed services and cybersecurity offerings atop its data offerings.

The company rebounded from a net profit after tax loss (NPAT) of $740,000 in H1 FY20 to report a positive NPAT of $508,000.

Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) increased 176% year-on-year to $4.4 million.

Spirit Technology reported a positive operating cash flow for the half-year of $4.3 million. Additionally, with $23.3 million of cash and available debt as at 31 December.

Comments from the Director

Regarding the half-year results, Sol Lukatsky, Spirit Technology's Managing Director, said:

It is particularly pleasing to deliver a profitable H1 21 in a period of investment in scaling up the business, building a national brand and integrating multiple acquisitions. We've been able to adeptly respond to the changing needs of business, as their IT&T needs become increasingly complex by delivering a comprehensive bundled offering across cloud, voice, data, managed services and cyber security with a strong customer focus.

Looking ahead, Lukatsky added, "We have further growth in our sights as we launch new products, continue to expand our reseller network and realise the benefits of the investments made over the past year and during 2021."

Spirit Technology share price snapshot

The Spirit Technology share price has been an outperformer over the past 12 months, with shares up 95%. That compares to a 0.4% gain on the All Ordinaries Index (ASX: XAO) over that same time.

Year-to-date the Spirit Technology share price is down 2%.

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The Spirit Technology Solutions Ltd (ASX: ST1) share price is shooting higher today. This comes after the company announced record results for the first-half of the 2021 financial year.

In early-morning trade, the company's shares swapping hands at 44 cents, up 10%.

How did Spirit perform for H1 FY21?

The Spirit share price is soaring today after the tele-communications company advised it had achieved record growth across all key business segments.

For the period ending 31 December, Spirit reported first-half total revenue of $42.7 million, reflecting a 243% increase year-on-year (YoY). The second-quarter did most of the heavy lifting, contributing $27.1 million, a jump of 338% YoY and 73% on the first quarter of FY21.

The robust result for Q2 came from recurring revenue which stood at $11.5 million, indicating a 116% lift YoY. In addition, its solutions and projects revenue delivered $15.6 million to the company. This represented a mammoth 1,768% growth YoY and 155% on the prior quarter. The projects department however did receive government grant infrastructure revenue, driving the sound performance.

Total contract value (TTV) sales soared to $14.1million, accelerating 303% YoY. This was credited to the strong demand for Spirit products from customers. Notably, pending installations, and IT services and technology are in the order book, worth $15.1 million and $6.6 million, respectively.

Earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to be between $4.1 million and $4.4 million. On the prior corresponding period (H1 FY20), EBITDA came in at $1.6 million.

The group recorded positive cash flow of $4.3 million from operating activities for the first-half.

Spirit maintained a healthy balance sheet with $23.3 million in cash at the end of the calendar year.

What did the managing director say?

Spirit managing director Sol Lukatsky welcomed the positive results, saying:

We have had an exceptional first half for FY21. Our record growth has continued as businesses seek to modernise their IT & Telco systems. We're now building scale and taking significant market share across SMB, essential services and corporate segments.

…The integration of Spirit's acquired businesses into a bundled offering is proceeding at speed, is ahead of schedule and already showing significant commercial results – as seen in our Q2 21 numbers. We are still expecting additional upside as the operating model matures in the market in H2 21.

About the Spirit share price

The Spirit share price has tracked well over the past 12 months, gaining more than 100% for investors.

Its shares hit a low of 12 cents in April, and reached a multi-year high of 45 cents in September.

Based on the current share price, Spirit commands a market capitalisation of around $172 million.

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The Spirit Technology Solutions Ltd (ASX: ST1) share price has more than doubled this year following a series of acquisitions and the achievement of triple digit revenue growth. The Spirit share price will be one to watch today after the internet and IT provider delivered a market update and announced the acquisition of Intalock, one of Australia's leading cyber security services businesses.

About Spirit 

Spirit has developed its own advanced, fixed wireless network which provides Australian small to medium-sized businesses (SMBs) with sky-speed internet, along with managed IT services and cloud-based business solutions. The company is rated as Australia's fastest internet service provider with symmetrical internet speeds ranging from 25Mbps to a whopping 1Gbps. The company complements its strong organic growth with acquisitions, having made more than ten acquisitions in the last two years. 

Intalock cyber security acquisition 

Intalock provides a comprehensive cyber security offering with blue chip customer portfolios across corporate and government. The company generated revenue of $23.6 million and normalised earnings before interest, tax, depreciation and amortisation (EBITDA) of $2.3 million in FY20. Spirit is making an upfront consideration of $15.0 million as a combination of 85% cash and 15% equity with a deferred consideration component. An additional earn-out consideration is also available for out-performance in FY22 capped at a maximum total transaction value of $22.5 million. 

The acquisition will allow Spirit to cross sell and bundle its internet and IT services with cyber security services. Spirit will also leverage Intalock's position in corporate markets as part of its market expansion strategy for FY21.

Cyber security a rapid growth market

According to Spirit, Australia's revenue from cyber security could triple over the next decade and is forecast to reach $6 billion by 2026, at a compound annual growth rate of 10.6%. Spirit sees the current cyber security market as highly fragmented with disparate solutions. Over three-quarters of the market is dominated by foreign companies, mostly with local bases employing Australians. 

Record revenue in October and November

Spirit Group's October revenue was $6.5 million, up 16% on September and 196% year-on-year from $2.2 million. The company experienced record sales and total contract value of $6.9 million in November, up 166% month-on-month and up 565% YoY, with pending installations at $2.8 million and IT services & technology sales of $12.1 million. Its growth was driven by large new business wins with cloud, voice and data products being sold in bundles across health, education and corporate segments. 

The Spirit share price has increased more than 95% in year-to-date trading.

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Spirit Telecom Ltd (ASX: ST1) is a telecommunications company which provides internet, cloud solutions, telephony services and phone names in Australia. The company has a market capitalisation of just $200 million but is making headway in revenues and scale. With the Spirit Telecom share price up more than 85% this year, could it become the next Telstra Corporation Ltd (ASX: TLS) share price?

About Spirit Telecom 

Spirit is a disruptor in the IT&T industry. It developed its own advanced, fixed wireless network which means it can provide Australian small to medium-sized businesses (SMBs) with 'Sky-Speed' internet, along with managed IT services and cloud-based business solutions. It is rated as Australia's fastest internet service provider with symmetrical internet speeds ranging from 25 Mbps to a whopping 1Gbps. 

Q1 FY21 update 

On Tuesday, Spirit provided an upbeat business update for Q1 FY21. The business highlighted record growth and scale with total revenue at $15.6 million, up 149% year on year and 30% on Q4 20. The company has a balance sheet of $30.1 million of cash and available debt as of 30 September. Its flexible balance sheet position has allowed the company to build its acquisition pipeline with multiple targets currently under consideration and due diligence. 

The company has a number of growth initiatives coming in Q2 and Q3 including: 

• 70+ new resellers signed nationally 
• New Spirit branded mobile products and bundles to be launched nationally across Q2 to Q3
• Federal government budget tax incentives for businesses refreshing IT&T needs 
• NBN enterprise ethernet promotions 
• Acquisition opportunities 

The company currently has a revenue run rate of circa $80 million and is targeting circa +$85 million revenue run rate by the end of CY2020. 

The next Telstra share price? 

Spirit and Telstra are very different companies despite operating in the same sector. Telstra is a mature company but has struggled to deliver shareholder value in recent times. I believe there is little value in the Telstra share price from defensive, growth and yield perspectives. I feel there are far better ASX shares out that can more reliably deliver these benefits. 

The size and loss making nature of Spirit does make it a more risky investment than the likes of ASX 200 companies. However, the company is trading at a cheap revenue multiple with a strong balance sheet and business tailwinds to propel its earnings. I believe the company could be suitable for investors focusing on growth and capital gains, and the Spirit share price represents good value at today's prices.  

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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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The Spirit Telecom Ltd (ASX: ST1) share price has surged 7.3% today following the announcement of a capital raise and acquisition. The news comes on the back of the company's release of record FY20 results earlier this week. 

Capital raise and acquisition

Spirit Telecom is seeking $23.2 million in a capital raise to provide immediate geographic expansion. The tele-communications company wants to do this through the simultaneous strategic acquisition of three IT managed service providers across Sydney Metro and Central NSW.

The three businesses bring strong intellectual property, products and engineering skills and generate $12 million in combined revenue. More than 60% of revenue is recurring and earnings before interest, taxation, depreciation and amortisation (EBITDA) is $2.5 million. 

Furthermore, the IT companies acquired will be re-branded as Spirit Solutions Partners. 

Spirit Telecom is seeking to disrupt the major telecommunications companies in addition to the major expansion plans. Funds raised will be allocated to further acquisition opportunities, to accelerate the development of the cloud product range in the Spirit X Digital sales platform, and to market the Spirit brand and products nationally. 

Record results for FY20

Spirit Telecom announced record FY20 results with revenue up 100% to $34.9 million resulting in a 'transformative' year for the company. Recurring revenue growth was up 48% to $23.5 million and solutions and projects revenue up to $11.4 million.

Underlying EBITDA surged 88% to $3.73 million which was at the upper end of the guidance range.  

The company has a healthy balance with $14 million of cash and available debt at end of FY20 with a $6 million drawdown. 

Spirit Telecom managing director  Sol Lukatsky was pleased with the result, saying FY20 had been a year of "phenomenal growth and transformation".

Mr Lukatsky said:

The July trading update shows we're off with a fast start to FY21 and we continue to pursue an aggressive growth agenda both organically and via a range of acquisition options.

In FY21 our priority is to bring our entire cloud and IT offering onto our digital sales platform, Spirit X, and expand our wholesaler dealer network – creating an even stronger engine for organic growth. We'll continue with our disciplined M&A strategy, to find right-price, right-fit businesses that support the expansion strategy, as well as continuing to focus on integration and optimising growth synergies.

What's ahead for the Spirit Telecom share price?

It has been a fast start in FY21, which bodes well for the Spirit Telecom share price.

July new sales of $2.3 million were up 165% month on month from June FY20 to July FY21. Sales were bolstered by the recent acquisition of Gold Coast-based Voice Print Data Group (VPD). Organic demand for Spirit products is also driving the growth.

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The Spirit Telecom Ltd (ASX: ST1) share price is finishing the week with a bang after the small-cap ASX telco announced an acquisition.

At the time of writing, Spirit Telecom shares have jumped 12.2% to 23 cents after rallying as much as 17.1% in early morning trade.

Spirit Telecom considers itself a disruptor in the IT&T (information technology and telecommunication) industry. The company has developed its own advanced fixed wireless network, through which it provides Australians with 'Sky-Speed Internet'.

Along with providing internet access, Spirit offers a full range of managed IT services and cloud-based business solutions. It also offers internet products from ASX-listed telcos TPG Telecom Ltd (ASX: TPM), OptiComm Ltd (ASX: OPC), and Vocus Group Ltd (ASX: VOC).

What's the deal?

Spirit is acquiring Gold Coast-based Voice Print Data Group (VPD). VPD will become Spirit's new wholesale business arm, selling a range of cloud, internet and voice services via its Spirit X sales platform.

Consideration for the acquisition has been split into three tranches. Firstly, the gross purchase price is $14 million, comprising a combination of $7 million cash and $5.8 million of Spirit shares. This prices VPD at around 4 times normalised earnings before interest, tax, depreciation and amortisation (EBITDA).

Tranches 2 and 3 relate to future payments when EBITDA performance exceeds targets for FY21 and FY22. All up, the total maximum purchase price is $27.5 million.

Why is Spirit Telecom acquiring VPD?

In an investor presentation released this morning, Spirit summarised the transaction rationale into 4 primary factors.

Firstly, the acquisition expands Spirit's reach further into the New South Wales and Queensland markets.

Secondly, it provides the company with access to new data-hungry verticals of mining, industrials and aged care.

Thirdly, the transaction increases Spirit's scale and adds new high-margin product bundles to its arsenal.

And finally, the VPD acquisition adds a wholesale dealer sales channel for Spirit X, the company's business-to-business digital sales platform. 

What now?

Completion of the acquisition is subject to normal closing conditions and is expected to occur on 1 July 2020.

Following completion, Spirit will have a combined FY21 revenue run rate of between $70 million and $75 million.

Commenting on the acquisition, managing director Sol Lukatsky said:

"This is a game changer for Spirit and through the acquisition of VPD Group, Spirit will build and strengthen its cloud, security, data and managed IT services capabilities whilst providing entry into expanded geographies in QLD and NSW for verticals such as Mining, Industrials and Aged Care."

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The Spirit Telecom Ltd (ASX: ST1) share price is storming higher today on the back of a new NBN service launch. After being up by as much as 10% throughout the day, Spirit Telecom shares are currently changing hands at 21 cents per share at the time of writing – up 5%.

About Spirit Telecom

Spirit Telecom considers itself a disruptor in the IT&T (information technology and telecommunication) industry. The company has developed its own advanced fixed wireless network, through which it provides Australians with 'Sky-Speed Internet'. This super-fast internet ranges from 25 megabits per second (Mbps) to 500Mbps for homes and 25Mbps to 1 gigabit per second for businesses.

Along with providing internet access, Spirit Telecom offers a full range of managed IT services and cloud-based business solutions. It also offers internet products from Opticomm, NBN, DGTek, FG Telecom, Vocus Group Ltd (ASX: VOC), and TPG Telecom Ltd (ASX: TPM).

What's behind Spirit Telecom's share price rise?

This morning, Spirit announced the launch of its NBN Enterprise Ethernet (NBN EE) range to resellers and direct customers via its sales platforms.

NBN EE is an enterprise-grade fibre service which, according to Spirit, offers superior performance to that of legacy internet products. Through the company's Spirit X platform, Australia's largest digital aggregator of business internet products, NBN EE can reach in the vicinity of 2 million businesses.

This new offering expands the market opportunity for Spirit X across Australia. The platform could previously service around 100,000 addresses with fibre internet products. Now it will be able to provide symmetrical data connections across a national footprint.

As a result, the company expects further organic growth for Spirit X as cross-selling opportunities emerge. Additionally, it has plans to move the platform from a data platform to a marketplace in FY21, offering cloud services, IT support and security. This shift will be another potential driver of growth. 

Commenting on the new service launch, managing director Sol Lukatsky said:

"The launch of the NBN Enterprise Ethernet product moves Spirit into a new phase of growth. Additionally, the Spirit X product range is being promoted via our first national marketing campaign. Spirit X has already generated over 6200 service qualifications and leads in a few months. With the ability to service a much larger number of businesses, Spirit can drive greater awareness of the platform and continue to fill the demand for bundled, high-speed internet links and IT services in one offering."

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In morning trade the Spirit Telecom Ltd (ASX: ST1) share price has been a strong performer.

At the time of writing the small cap telco company's shares are up over 2% to 23 cents.

This latest gain means the Spirit Telecom share price is up a sizeable 35% since the start of the year.

Why is the Spirit Telecom share price on the charge today?

Investors have responded very positively to news that Spirit Telecom has successfully secured a new and increased debt facility with banking giant Commonwealth Bank of Australia (ASX: CBA).

According to the release, the new debt facility will allow the company to draw down up to $8 million and comes with a margin of BBSY plus 3.85% on drawn amounts. It also includes $900,000 annual amortisation which is due to be paid quarterly commencing September 2019.

Why has Spirit Telecom secured a new debt facility?

Management advised that this increased facility provides the company with additional funding as well as the agility to execute on existing acquisition pipeline companies more quickly.

The release explains that Spirit currently has a pipeline of potential acquisitions moving through its evaluation and due diligence gates. These include companies providing business grade data, voice, and MSP services.

These potential acquisitions will add to the recent additions of LinkOne Group and Building Connect, which management revealed are integrating well and have "allowed Spirit to enter the Brisbane and Sydney markets and expand its Melbourne network to meet the increasing demand from Australian businesses for super-fast Internet across the East coast of the country."

Elsewhere in the industry, in early trade the Telstra Corporation Ltd (ASX: TLS) share price has edged higher to $3.88. On Monday the telco giant was given an add (buy) rating with a $4.47 price target by analysts at Morgans.

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But these aren't the only stocks to be watching. There're opportunities among the smaller listed telcos as well with Canaccord initiating coverage on Spirit Telecom Ltd (ASX: ST1) and slapping a "buy" on the small cap stock.

The ST1 share price zoomed up 6% to 18 cents during lunch time trade as the SLC share price added 4.7% to $1.90 after the company received a takeover bid from the Queensland Investment Corporation.

The TLS share price is also winning support with the stock jumping 0.9% to $3.39 at the time of writing, which takes its 2019 gain to 22%, which is nearly double the gains on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index.

The telco with big growth potential

But Spirit Telecom could be where the best gains are this year if Canaccord is on the money. The broker believes the acquisitive Melbourne and Gold Coast focused telco offers far better growth potential than its larger peers.

"Australia's telecom services market is dominated by five large players. The large players are struggling for revenue and earnings growth due to margin erosion from the NBN rollout as well as competition," said Canaccord.

"Industry analysis suggests that 'second tier' players are gaining share, albeit at a very low level, with a share approaching 1.5% in 2019. That would still mean c$600-700m revenue on offer for those outside the 'Big 5' and offers scope for growth among those players building scale."

On the re-rating path?

The bullish take from Canaccord couldn't come at a better time for Spirit Telecom after management posted a disappointing first half result in February that sent the stock crashing to a low of 10 cents.

However, Canaccord thinks the past is the past and Spirit Telecom is in good shape to return to growth and that its acquisition of LinkOne is particularly important to the small cap scoring a re-rating.

"[LinkOne brings] useful revenue and earnings to ST1 at a reasonable price, its existing infrastructure assets provide the opportunity for ST1 to access new markets in Brisbane and Sydney," said the broker.

"We expect a materially stronger 2H19 from ST1 with that momentum continuing into FY20 and FY21, with Commercial revenues the key drivers of organic growth."

If Spirit Telecom can deliver the growth Canaccord is counting on, the stock should trade at a premium to the sector and that's why the broker has put a 25 cent per share price target on the stock.

That's close to a 40% upside, which is far better than what you can expect from its bigger rivals even on a good day. But that's assuming you are comfortable with the volatility and higher risk profile of Spirit Telecom – aptly named given it needs "animal spirits" to come alive on the market to win that coveted share price re-rating.

If you are looking for other higher risk, higher return opportunities on the ASX, you will want to read this free report from the experts at the Motley Fool.

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The post The latest emerging telco to score a broker "buy" recommendation appeared first on The Motley Fool Australia.

The net profit translated in 0.26 cents of earnings per share over the period, with the group declining to declare a dividend.

Spirit also reported an underlying EBITDA (operating income total that excludes acquisition related costs) of $3 million, which is an amount almost 50% above the prior corresponding period. The group had a net cash position of $4.6 million at the end of the financial year after raising around $7.6 million from the issue of new shares over the year.

Spirit describes itself as a wireless alternative to the national broadband network (nbn) in delivering "super fast broadband" to residential apartment blocks or business customers. It reports that this business plan has helped it now record 12 consecutive quarters of organic revenue growth as new clients sign up to its unlimited data plans alongside what it calls flexible contract options.

Over the year the group invested $2.7 million in network expansions and upgrades, with a total of 510 buildings now on-net.

Investors appeared to like the result sending the stock up 2.6% to 20 cents today, with the group's tiny market cap of not much more than $50 million meaning this is still a speculative business that could offer investors big upside or downside from here.

Spirit remains vulnerable to technological disruption itself, while there's also the prospect of the government writing down the value of the nbn which may allow the nbn to drop charges in a move that could make Spirit's 'nbn alternative' business plan less attractive.

Management declined to provide any specific profit or sales guidance for the year ahead, although shareholders should expect more investment in growth via network expansion.

Other innovative junior internet service providers to watch include MNF Group Ltd (ASX: MNF) and Over The Wire Holdings Ltd (ASX: OTW).

The post Why Spirit Telecom Ltd shares lifted on its profit report appeared first on The Motley Fool Australia.

Spirit grew its number of connected apartments by 10% during the half, with over 21,000 apartments now connected. Currently, 60% of Spirit's residential customers get download speeds faster than 25Mbps, compared to 16% of NBN users. Apartment growth and faster speeds together are a sign that Spirit's proposition is gaining traction.

Apartment penetration also grew to 19% during the half, suggesting that more customers in connected apartments are signing up to use Spirit's services. This is an important metric because once a building is connected to Spirit's network, it requires relatively little extra cost to add customers – so the overall network becomes more profitable and more of the revenue drops through to the bottom line as profit.

Management stated they were pleased with Spirit's progress and that they continue to work on new product developments and more channels to market, which should be coming to fruition in the near future.

For the second half, Spirit reiterated its positive outlook and "anticipates continued half-on-half growth in overall revenues." Spirit has $3.4 million cash in the bank, $5.7 million debt, and generated positive operating cash flow of $0.7 million during the half, so the business appears sustainable. However, if management wishes to make further acquisitions or expand aggressively, the company may need to borrow more or raise capital.

Spirit is an interesting company with an attractive business proposition and I think it is worthy of closer investigation.

The post Why the Spirit Telecom Ltd share price is ripping higher today appeared first on The Motley Fool Australia.