Beonic Limited (BEO) Earnings Call Transcript & Summary

Okay. I think we might kick it off there, John, so if you wouldn't mind recording the presentation?

Yes.

Good morning, everybody. Thank you all for making the time to join us today. I trust everyone is keeping safe, healthy and optimistic during this time. Apologies particularly to those of you in Melbourne having to dial in on Melbourne Cup Day and especially after only just being able to enjoy the outdoors after what has been an incredibly tough lockdown period for all of you. Welcome to the FY '21 First Quarter Results presentation for Skyfii. And I'm joined today by Skyfii's Chairman, Andrew Johnson; Skyfii's Chief Operating Officer, John Rankin; and our Investor Relations Consultant, Craig Sainsbury. Q1 has been a solid return to growth for Skyfii across all of our operating metrics. Our pipeline has begun to return to pre-March 2020 levels. And pleasingly, our revenue growth trajectory both at the top line and recurring revenue levels are strong. We've maintained a focus on strict capital management, and we closed the quarter with a cash at bank position up 27% quarter-on-quarter despite certain cash outflows in the quarter relating to the recent acquisition, which we will talk more about during today's presentation. From a product development perspective, our team has continued to advance our suite of products and services, and we've built integrations that will see the company grow further within existing verticals and provide solutions for new vehicles. Overall, we're very pleased with the company's performance in Q1 of FY '21 and are optimistic about the company's continued growth throughout the remainder of the year. Moving to Slide #2. Our vision is to improve visitor experience in physical and digital environments through providing a better understanding of consumer behavior. We help our customers deliver value to their customers and in their operations through the application and use of this data. And this practice is called omnidata intelligence. And this category best defines our business offerings since it relates to the practice of collecting, analyzing and actioning data from a multitude of data sets, most of which exist currently within physical and digital spaces. And I'll go on to explain some of these data sets in the following slide. So we believe, therefore, any of our current and prospective customers, the pathway to a successful data strategy requires a combination of 3 key elements: number one, choose the right data; number two, make sure we work with the appropriate technology; and number three, engaging experienced people who understand data and technology. Moving to Slide 3. The technology that we have developed which collects all of this data and underpins our services offering is called the IO platform, and it is 100% proprietary to Skyfii. Now data itself is not particularly valuable unless it can be captured, analyzed, aggregated, correlated and visualized in a form that delivers insights and action for the business. This is why Skyfii's platform is such a critical tool for our customers, most of whom are not technology companies and therefore do not traditionally possess the in-house capability to collect, analyze, visualize and often action this data. So our suite of Software-as-a-Service products includes Connect, which is our data collection and centralization product; Insights, which is our BI dashboard and automated reporting products; and Engage, which is our multichannel marketing product suite; IO Labs is our research and innovation environment. And each of these products and services contribute to a different stage of the customer's data journey and often buying life cycle. We expect that the Blix reporting suite, which is the company that we recently acquired, will be integrated into the IO Insight product offering so that it becomes a core offering to the Skyfii business. Moving to Slide #4. So what are the kinds of data sets that we collect and analyze? Well, anything that delivers data basically is a data set that we can capably ingest and correlate and analyze. The sets that we typically work with most often include data gathered from cameras, people-counting sensors, WiFi networks, beacons, mobile device applications, social media platforms and point-of-sale systems, to name a few. And what we do with all of this data is we stitch it together to form actionable insights on customer behavior. For example, in shopping centers, we provide heat maps, which detail where people are congregating, which retailers they are visiting or not visiting, which parking bays are open versus occupied. In airports, we provide real-time monitoring on travel times from check-in through gate lounge or queue times through security. In universities, we provide accurate attendance registers to determine which curriculums are popular and, importantly, which students are performing and who is likely to drop out. For restaurants, we help to build and optimize loyalty programs through the collection of a marketing database and by driving targeted content to patrons to increase their visitation likelihood. And now with the acquisition of Blix and their market-leading penetration of the automotive industry, we deliver footfall insights and sales conversion metrics to help salespeople track success and to help leadership managers forecast their sales performance. In today's world, a great deal of our services are being used to help venues manage occupancy levels, monitor social distancing, facilitate contact tracing and deliver alerts when thresholds are met, all to assist venues abide by regulations but also, most importantly, to help customers feel safe in this environment. So with that, I will move to Slide #5, where I'll hand to John Rankin to take you through the exceptional financial results delivered through the quarter.

Thanks, Wayne. So moving to Slide 6. So look, at the start of FY '21, the business decided to make a decision to, I guess, simplify the way in which we report our revenues into 2 key categories: repairing revenues, which we've talked about before, as well as the second type of revenue which is nonrecurring revenues. So recurring revenues or SaaS revenues, for those that haven't joined the call before, are revenues generated from ongoing subscriptions for access to the Skyfii IO platform, and recurring revenues are charged as a fixed price per venue per month and typically contracted on 1, 3 and 5-year terms. Monthly recurring revenues can range from $50 per venue per month up to $10,000 per venue per month, depending on the size of the venue and the products nominated for the subscription. Number two, nonrecurring revenues. Our revenue is generated from a combination of professional services generated by our data and marketing services teams, the deployment of hardware, infrastructure implementations and upfront setup fees, which always underpin our recurring revenue story. These can include the installation of wireless access points, 2D and 3D cameras, people-counting sensors and AI-driven cameras that can monitor pedestrian, car and bicycle traffic. So moving to Slide 7. So on our last quarterly call, we shared with the audience a few themes of the company's sales and general business performance activity. Some of those key themes included a return of the advanced-stage pipeline under contract negotiation pre-COVID; a reopening of those customers that were shut; and improved sales and marketing engagement with existing and prospective customers; and increased adoption of new products launched by Skyfii such as Occupancy Now, which we've talked about across the last few quarters, all of which have resulted in a build in our sales pipeline and, most importantly, into new verticals as well. So this quarter, it's really pleasing to confirm that improving market conditions have converted into Skyfii delivering a strong result in the first quarter of FY '21. Operating revenue saw a significant jump from our Q4 FY '20, up 21%, with revenues of $3.4 million and in line, as Wayne mentioned before, with pre-COVID revenue performance. We saw a return to growth in our recurring revenues, up 7% quarter-on-quarter. Noting that during the quarter, there still did remain a number of customers who were benefiting from suspension of services as a result of COVID. These benefits are slowly being weaned off those customers as these businesses reopen the trade. When combining the contracted revenues -- recurring revenues from customers of the Blix acquisition, our annual recurring run rate sits at a little over $11 million. And our cash position improved considerably in the quarter with cash at bank of $2.7 million and $1.9 million undrawn in a debt facility, giving the company circa $4.6 million in cash and cash equivalents to continue to run the business. And finally, cash receipts were up 27% at $3.8 million, which has been a product of the increased sales activity generated during the quarter. So in summary, strong sales pipeline performance, a strong return to growth for the quarter, and as we move into the second quarter, the business is well positioned to take advantage of the increased sales activity. Wayne, I'll pass you across.

Great. Thank you, John. A really positive set of financial results. [Operator Instructions] So moving on to Slide #9. In line with our stated objective to grow both organically and by accretive acquisitions, we successfully continued with the acquisition of Blix during the quarter. Blix is an Australian-based venue analytics company with a strong leadership position in both the automotive and specialty retail verticals. The acquisition was completed at a total value of less than 1x ARR, annualized recurring revenues and will deliver a forecasted $1 million in ARR to the Skyfii over the coming year. In addition, it will bring 50 new clients to Skyfii portfolio, including blue chip customers such as Porche, Volkswagen, Toyota, Country Road Group, Swarovski, Chanel and Watches of Switzerland. The company has a commanding position in small- to mid-sized retail venue types where it delivers business-critical footfall and conversion metrics. So in addition to the revenue accretion and EBITDA accretion, we're excited about the opportunity to roll out a more cost-effective solution in those vertical types to all Skyfii regions. And as I mentioned, we will be migrating that functionality to become a core part of software products in Insights and also the increased cross-sell opportunities for Skyfii suite of software products into the Blix customer base over time. In addition, we also announced during the quarter the global partnership that is now in place with NASDAQ-listed WiFi service provider, Boingo, who lead the delivery of wireless DAS and small cell across -- small cell networks across airports, commercial and retail environments throughout EMEA and the Americas regions. We see great potential from this particular partnership, which has already yielded a substantial airports contract in Brazil, which we announced a couple of quarters ago. And we anticipate more deals to be announced in the near term. Moving to Slide #11, where I will take you through a summary of the new product offerings that we've released over the last couple of quarters. So at the end of March this year and in response to the guidelines that will be getting to become imposed on physical venues in response to COVID-19, we launched a product toolkit off of our existing technology which we call OccupancyNow, which focuses on real-time occupancy counts and alerting as well as social distancing monitoring and contact tracing facilitation. We utilize existing WiFi and/or camera infrastructure to deliver this toolkit, which has resulted in already several new contract wins, some them in new verticals that prior to March 2020 were not as relevant to Skyfii. As various venue types and countries have experienced delayed openings or indeed impacts from the second wave, we have certainly seen this toolkit continue to drive lead generation and pipeline activity which is beginning to be converted. On Slide 12. As a follow-on to the OccupancyNow toolkit, we built out a customer-facing application which gives customers a simple indicator of when it's safe to enter a space with a Stop and Go feature. This has been very well received by venue operators that need to manage live occupancy limits. And it allows customers more visibility on wait times. And we also recently introduced a face mask detection as part of the object classification algorithm, which adds an additional level of safety and comfort for customers of the venues. Slide 13 there. So more recently and mostly during the first quarter of FY '21, we have launched a suite of artificial intelligence-driven video analytics applications which utilize algorithms to detect, classify and track people, vehicles and objects in both indoor and also outdoor environments. Unlike the vast majority of camera analytics solutions in the market, most of which focus on indoor, ours utilizes artificial intelligence to perform accurate object classification, including being able to determine trucks and vans from cars, bikes, pedestrians and even electric scooters and wheelchairs. Next up, we have recently completed an integration which allows us to deliver predictive analytics to optimize HVAC energy consumption based on customer traffic and real-time in-store or in-venue behavior. Now this is definitely a sort of predetermined move for us into more IoT-based applications to assist us in delivering more value to our existing customers. Moving on to Slide 14. Continuing on with the revenue growth strategy piece within our existing customer base and in keeping with the trajectory of the Beonic service offering, which is an acquisition that we completed in July of 2019, Skyfii, in addition to the various Software-as-a-Service products that I've outlined, we now offer a full managed service capability, which means we are capable of delivering an end-to-end customer infrastructure and software deployment. Now this broader service offering has provided us the room to be able to earn a greater share of the opportunities and ultimately provide a more holistic and stickier products and services offering to our customers. And we plan to meaningfully grow this offering into our international markets this year. Finally, on Slide 15. Our most recent products toolkit development that we've launched is a product offering that we have called the Sky Drone. This offering combines the latest drone technology and the artificial intelligence computer vision technology that we -- I described earlier to provide crowd management analytics in real time particularly for outdoor, highly traffic, highly dense and public spaces. We've launched this particular product recently to assist councils with monitoring crowd at beaches and to ensure that social distancing practices are being maintained. The same is applicable for parks and recreation centers as well. We're confident that this product will see strong demand as public spaces continue to open and are utilized and, in particular, the beach areas as we move into the summer months. Moving to Slide 17, the outlook. In closing, and as stated at the outset, we are very pleased with the way the business has performed through the first quarter of FY '21. And in particular, the trajectory of the business is back on for the full year FY '21. Our pipeline is growing again. Our products are evolving, and our operations are becoming increasingly efficient, all of which has resulted in a bounce-back in Q1 to positive recurring revenue growth and double-digit total revenue growth alongside continued strong cash management. Our key objectives remain very clear. We intend to continue to invest into marketing and lead generation activities. We intend to continue to grow our reach in existing and new verticals; to continue to launch new products and services to increase revenue growth in both new and existing accounts. We will, as always, maintain a focus on cash management and in delivering a positive operating EBITDA. We plan to increase the efforts into driving growth within our accounting solutions practice and sensor-based artificial intelligence solutions, both locally and internationally. And following the successful acquisition of Blix, we, as always, will continue to pursue complementary accretive acquisition opportunities as we seek to become the #1 omnidata intelligence company globally. So with that, I thank you all for your time today, and we will now move into the Q&A session. As a reminder, I will hand to the moderator, to Craig, to manage this process. But if you could either raise your on hand or publish your questions into the Q&A box, that would be appreciated.

Thanks, Wayne. We've got now a couple of questions in via e-mail and some via the question function, I'll start with the e-mailed ones first. Just in terms of new vertical development pre-COVID, question there on hospitals, municipalities and what other verticals you're seeing an increase in level under engagement for the IO platform?

So I think outside of those 2, which have been, I think, documented already, the other growth area -- 2 areas have been grocery. So as an essential business, grocery assets really have remained busy and occupied, and so they've faced some challenges around occupancy monitoring. So still definitely some growth in that vertical. And then the other one would be corporate office spaces. So we're seeing a lot of demand as offices are, I guess at the moment, deciding how to reopen and how to reshape potentially the office environment solutions, again, around managing occupancy in lift wells, managing occupancy in meeting rooms and then reorganizing the space within the workspace itself. So those would be the 3 (sic) [ 2 ] verticals outside of the ones you mentioned.

Got it. And the follow-up question from that one was on, again, product development. OccupancyNow has started to generate some clients and some revenue. What do you see in terms of product development in those new verticals as you're continuing to design things such as growing with advanced OccupancyNow, advance the baseline, as you have people out there continuing to evolve the product suite?

Absolutely. I mean we're a software development business at the core, so we are releasing new product features every 2 weeks regardless of, I guess, response to customer requirements. We have a road map that continues to build out over time. But the key focus really is going to be around continuing to aggregate more and more data sets together. I guess the single most important solution we provide, other than detailed analytics, is helping customers to consolidate data together into get the best value out of that data. So more integration such as the HVAC integration that I mentioned moving into sort of workspace automation products potentially into more IoT-based applications as well, there's definitely a key stream within the road map.

Yes. And then a follow-up on that one was, in terms of signing new clients in the COVID environment. We're sort of trading up in this with social distancing policies, restrictions on travel. Are you finding any impediment to installing those systems? And do you actually need to install extra hardware? And how do you go back within that?

So the good news is we don't need to -- in 99% of our deployments, we don't need to install any hardware. So we can do our integrations remotely, so we don't acquire anybody to be on-site or have to get any special permissions or access. So that applies to 99% of the deployments. In cases where we are introducing cameras or WiFi infrastructure that doesn't exist then, yes, we have to go through planning approvals and ensure that people are on-site, but it's really a really, really low percentage in terms of the business that we generally generate and mostly only in Australia at this point. So yes, 99% of it is remote software deployment.