Hubify Limited (ASX:HFY) has acquired the database assets of Queensland based telecommunications provider ‘Nethoster’ for $80,000 in cash, a move that will add $400,000 EBITDA and $1 million in annualised recurring revenue (ARR) to the company’s existing earnings base.
This will expand the geographical footprint into the Queensland market and build on the company’s geographical footprint in mainland Australia with a physical presence now in New South Wales, Victoria, Queensland, South Africa and Western Australia.
The acquisition also includes offshore resources that will be expanded to reduce the company’s overall back-office costs.
According to the Hubify, acquiring Nethoster will result in 15% growth in annual EBITDA run-rate compared to the first half of 2021 and the Hubify’s annualised recurring revenue (ARR) run-rate in FY21 will be more than $12.5 million post-acquisition, up 62% from the $7.7 million in FY20.
Progressing dual-pronged growth strategy
Hubify CEO Victor Tsaccounis said: “Following the recent release of the company’s first half of 2021 results, which demonstrated strong organic growth in the core business, we’re pleased to show shareholders that we are progressing on the other part of our dual-pronged growth strategy in acquiring a strategically compelling, complementary and earnings accretive business in the telco space.
“I would like to thank Elias Briffa the CEO of Nethoster for his efforts in this process.
“As we continue to build out our growth strategy, the purchase of the Nethoster database represents the addition of a solid customer base built over time with good retention rates.”
Nethoster database acquisition
Nethoster provides data, voice, mobility and managed services to business customers predominantly in Queensland and Northern NSW.
Nethoster will continue as a business separately and the acquired customer database will be migrated to Hubify on February 26, 2021.
The acquisition comprises 203 small to medium business customers with annual recurring revenue (ARR) of $4,900 each, totalling more than $1 million.
Future strategy
Hubify will take over the overseas support team, which are expected to deliver further synergies across the business in addition to wholesale pricing synergies identified above.
Tsaccounis said: “We will take the same approach as we have with prior acquisitions to implement our cross-sell strategy using our experienced sales staff to service these new Hubify customers and generate additional revenue streams.
“While we are conscious of maintaining a disciplined approach to acquisitions and integration processes, with a strong underlying organic business and a robust Balance Sheet ($6 million cash post-acquisition), we remain committed to pursuing further accretive acquisitions in the near term, and look forward to updating the market as our pipeline materializes.”
Acquisition funding
The acquisition will be funded by an $800,000 cash payment to be made on February 26, 2021.
The gross price paid for Nethoster Databases represents a multiple of 3.2 times expected EBITDA, which reduces to two times post synergies.