Spirit Technology (ASX:ST1) share price on watch after cyber security acquisition

The Spirit Technology Solutions (ASX: ST1) share price is on watch after the company announced a cyber security acquisition and market update.

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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.

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has recommended SPIRIT TC FPO. 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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