Inabox Group Limited (ASX:IAB) MD & CEO, Damian Kay talks its Hostworks business, plans to improve metrics and strength of the underlying business.
Jessica Amir: Hi I’m Jessica Amir for the Finance News Network. Joining me now is Inabox Group Limited (ASX:IAB) Managing Director and CEO, Damian Kay. Hi Damian, welcome back.
Damian Kay: Thank you very much.
Jessica Amir: For those new to the company, can you give us a quick introduction?
Damian Kay: Inabox started more than 10 years ago as a wholesale telecommunication provider. Today with over three channels, 300 staff and 13 offices, we operate as a leading managed telco, cloud and IT provider in Australia.
Jessica Amir: Moving to the company’s share price, which has halved. Tell us what happed and what you’re doing about it?
Damian Kay: Firstly, I want to apologise to our investors. As the CEO, I take full accountability for what has happened last week and I want to take you through exactly what happened. In a review of the business, we determined that the traditional levels of project revenue were not coming through, predominantly from three large enterprise customers. As it turns out, this was a leading indicator and those customers have indicated their intention to rationalise and reduce their spend, with the Hostworks business.
What we’re doing about it is really, really important. First and foremost, we’re looking to rationalise the size of the business and align our costs with the revenue. So we’re looking at where we can make cuts to our staff and to other costs in the business, in order to make that alignment. Furthermore, we’ve invested quite heavily in bringing Cloud Inabox, which is leveraging the Hostworks infrastructure and capability. And being able to offer that to our indirect and direct channel partners, in order to make the most of what that acquisition was originally done for.
Jessica Amir: Do you believe the Hostworks business is still the right fit for the Inabox Group?
Damian Kay: Hostworks was acquired in February, in order to fast track our capability to take advantage of the trend that’s happening in the market, which is tin to cloud. As such we acquired Hostworks to give us that capability. What has happened is a timing issue. The timing issue is that some of the revenue from some of our large enterprise customers has come off faster than anticipated, before the productisation of our Cloud Inabox product could be lodged to our market, to our customers in the market.
Jessica Amir: That’s all sounding really positive. But tell us, why should investors remain confident moving forward?
Damian Kay: That’s a really fair question. This current situation is isolated to three enterprise customers in the Hostworks business. The rest of the business continues to perform strongly with double-digit growth, in both the enablement channel and also in our wholesale indirect channel. What else I want to highlight is that the rest of our direct channel, which Hostworks forms part of, is moving strongly in cross-selling the telecommunications, cloud and other products that we have, in order to grow that channel. So in all, the business is performing strongly and this is isolated to that one part.
Jessica Amir: Last question now Damian. What can investors expect in terms of news flow over the next six to 12 months and even longer-term?
Damian Kay: We’re working really hard to bring some of those national retailers, into the enablement channel that we’re in advanced negotiations with. But what investors can expect from me, the Board and my team is an absolute dedication to getting this business back on track and driving the business forward, and realising the opportunity that we have in front of us.
Jessica Amir: Damian Kay, thank you so much for the update.
Damian Kay: Thank you for having me.