Internet service provider Hubify (ASX: HFY) is seizing a new lease on life, literally, as it calls time on the Optus Small Business Program—providing telecom and internet services to small businesses—and takes on bigger fish, including Optus Enterprise Services itself.
Hubify’s subsidiary company and mobility division, Broadland Solutions, has entered into a new five-year agreement with Optus to sell Optus Enterprise Services to Australian Businesses. The new agreement supersedes the current agreement signed in April 2021 which terminates on March 31, 2023.
The longer five-year agreement, from April 2023 to April 2028, allows Hubify to place its focus on the Enterprise Market segment. The estimated revenue from its new venture is approximately $12 million based on the current run rate.
Hubify CEO, Victor Tsaccounis, commented, “We’re pleased to refocus our partnership with Optus for another five years to introduce Optus Enterprise products and services to our customers. The various partnerships and agreements between Hubify and Optus have benefited both companies for over eight years across Hubify’s Mobility, Managed Services and Smart Data Divisions. We look forward to the next five years and continuing our strong track record in delivering enterprise sales growth.”
Hubify will exit from the Optus Small Business Program on May 1, 2023, and Optus will pay Hubify a $2.28 million termination payment. This will push Hubify’s cash position to over $4.6 million, with no debt after May 1, 2023.
In line with the exit from the Small Business Program, Hubify will realise administration cost savings of approximately $1.69 million per year in addition to the savings of $1.56 million per year from the restructure in H1 FY23. Hubify’s new annualised recurring revenue run rate after this change will be $17.8 million per year.
A huge reason Hubify decided to make this move is because it was incurring major losses with the Optus Small Business Program. An average small business customer would have less than ten employees and required ICT (information and communications technology) support and managed services. Because of that, in H1 FY23, revenue from the Optus Small Business division declined by 31%, and its territory sales model was no longer compatible with Hubify’s strategic focus and national sales approach.
By leaving the program, Hubify gets to tap into multiple benefits besides an improved cash position and savings. It will refocus the entire team on ICT Mid-Market and Enterprise Business across all Hubify divisions. It will maintain the Company’s recurring revenue percentage at over 80% and enable Hubify to focus on scalable divisions namely, Managed Services and Professional Services and in the Mid-Market and Enterprise segments
On April 1, 2021, Hubify and Optus entered into a five-year agreement where Hubify would sell Optus services to small businesses. Since then, Hubify has expanded its service offering to include Managed Services and Cyber Security to Medium and Large Enterprise. It has been gearing itself up for bigger things.
The new agreement and restructuring of its relationship with Optus allows Hubify to focus its resources on the mid-market and enterprise market segments to grow the Company.
Alinda is a Business Reporter for The Sentiment
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