Spirit Technology to restructure into three core units to target SMB, midmarket and enterprise

ASX-listed Spirit Technology has announced it will restructure its business around three new business units to simplify the company’s operations.

Called Spirit 2.0, the company will combine its small business offerings under the Nexgen brand, mid-market offerings under the Spirit brand and the corporate and enterprise offerings under the Intalock brand.

The company said the new structure is part of its aim to become Australia’s leading provider of modern and secure digital workplaces by simplifying the operating structure and clearly defining new products and target markets.

Nexgen will primarily offer data and voice services to small businesses with employees between five to 100, while Spirit will offer telco services including data, voice, cloud solutions and managed services to mid-market businesses with employees between 100 to 500. Intalock will specialise in specialist cyber managed services including professional services, security operations and specialist cyber software to corporate and enterprise customers with at least 500 employees.

Spirit also released its financial results for the six months ended 31 December 2021, reporting revenue and earnings growth, as well as a drop in profits.

Revenue for the period was $65.9 million, up 54 percent year over year from $42.8 million, while earnings were $5.5 million, up 62 percent from $3.4 million the previous year. Net profit after tax was $3000, a 99 percent year over year drop from $508,000.

Profit was impacted by a one-time tax benefit Spirit received in FY21 of $230,000, which was replaced by an income tax expense of $386,000. The company also cited impacts from ongoing corporate scaling, investing in a mid-tier sales team, wage inflation and chip shortages.

Revenue growth was driven by product and geographic diversification, with cybersecurity services accounting for 24 percent of revenue and voice services accounting for 23 percent. In comparison, their shares of revenue during H1 FY2021 were at 5 and 4 percent, respectively.

Spirit also said it saw cost pressures from maintaining staff levels through the multiple state lockdowns and for scaling investment in corporate functions, but price rises across the business offset some of the costs.

“Over the past year, we have successfully executed upon our strategic plan to shift our focus from fixed wireless assets towards digital solutions with sustainable recurring revenue streams at attractive margins,” Spirit managing director Sol Lukatsky said.

“The acquisitions of Intalock and Nexgen increased our product and geographic diversity, and we are pivoting our investment into technology solutions for workplaces. The strong revenue growth in these first half results show the resilience of our business model in the difficult business environment over the past six months.”

Looking ahead, Spirit is continuing the process of the sale of its fixed wireless
tower assets, now entering an exclusive period of due diligence with the preferred buyer.
The company is also expecting to return to “more normal” trading conditions and expects to report H2 FY2022 revenue of $75 million and full year revenue of around $104 million.

Lukatsky added, “Spirit has enormous upside, its actual intrinsic value is yet to be realised. The operating businesses are all in high growth markets which are going through structural changes as employees demand best in breed digital workplace solutions at home or in the office.”

“Employers will need to invest in their workplace technologies, to ensure they retain their talent and increase productivity. Spirit is positioned at the heart of this market opportunity.”