Calnex acquires iTrinegy, tops full-year forecasts

Telecommunications test and measurement technology company Calnex announced the acquisition of iTrinegy on Tuesday, in a deal worth up to £3.5m.

The AIM-traded firm described iTrinegy as a “leading developer” of software-defined test networks technology, for the software application and digital transformation testing market.

It said consideration, calculated on a cash-free, debt-free basis, was £2.5m cash on completion, with up to a further £1m payable depending on agreed financial targets.

Calnex said iTrinegy's customer base included Juniper Networks, JPMorgan Chase, Ubisoft Games and both government and military in the UK and the United States.

It said it planned to scale the business by using its sales and marketing capabilities to build, support and grow a reseller network, particularly into the US, to accelerate sales.

iTrinegy generated revenues of around £1.4m in the year ended 30 September, with a gross margin of around 80%.

Approximately 60% of iTrinegy's revenue was from North American customers.

Calnex said the consideration comprised an initial cash payment of £2.5m, with up to a further £1m potentially payable in a combination of new shares in Calnex and cash.

The earn-out payment would be subject to the achievement of certain sales targets from iTrinegy products in the year ending 31 March 2024, with a maximum of 322,579 new shares to be issued under the earn-out.

“We are delighted to welcome the iTrinegy team to Calnex,” said founder and chief executive officer Tommy Cook.

“With both businesses developing high quality, complex, technical testing solutions, trusted by some of the world's most demanding organisations, we are particularly excited by the strategic fit of the two organisations.

“The cloud migration taking place across multiple sectors and the growth in internet-based applications is fuelling demand for test solutions that can analyse, predict and verify application performance over complex, distributed networks.”

Looking at its current trading, Calnex said it made “solid progress” on its strategy in the financial year ended 31 March, and was still experiencing high demand for its range of test and measurement solutions.

The company said in a trading update on 1 March that it experienced reduced availability of certain components in the final quarter of the financial year just ended, in line with the “well documented and ongoing” global semiconductor shortages.

It said on Tuesday that it had “successfully managed” those constraints, and shipped all orders scheduled for March as planned.

As a result, the board confirmed that the results for the year ended 31 March would be “slightly ahead” of current market expectations.

Calnex said its order book was still building, and currently sat at record levels heading into the new financial year, providing the board with confidence in the group's ability to deliver “significant, sustainable growth” over the coming years.

“We see great opportunity ahead for the NE-ONE technology and look forward to working together to accelerate iTrinegy's growth and open up new customer segments for Calnex,” Tommy Cook added.

“Following a strong 2022 financial year and a record order book heading into the new financial year, we look to the future with confidence.”

Calnex said it would release its final results for the year ended 31 March on 24 May.

At 1125 BST, shares in Calnex Solutions were up 0.95% at 159p.