Beonic Limited (BEO) Earnings Call Transcript & Summary

All right. Well, for the sake of time, we might get started. And if anybody else is looking to join, they can join us through the presentation. So without any further ado, good morning. Thank you all for making the time to join us today. I hope that everybody has enjoyed a Christmas festive break and New Year break and, like all of us and most people, I'm sure, are pleased to see the back of 2020 and looking forward as we are to 2021. Welcome to the FY '21 second quarter results for Skyfii. The Q2 FY '21 results represent the strongest set of financial and operating metrics that we have delivered since the company's inception during an unprecedented period in the global economy. Skyfii has made a remarkable return to growth across all of our operating metrics. At the headline, top line revenue grew 15% quarter-on-quarter, recurring revenues grew 25% quarter-on-quarter, and operating EBITDA grew 13% half-on-half. We've seen a continued increase in demand for our products and services in all of our regions as venues are now conditioned to the need for accurate analytics to manage their venues and to meet the safety requirements and security requirements for their customers and employees. Q2 saw a pleasing contribution of new business from all of our markets, in particular a significant contribution from the North America market, which delivered 6 new customer contracts during the period. And finally, our pipeline has not only restored but has grown significantly since our last pipeline update. So as you might tell, we are very pleased with the company's performance in Q2 of FY '21 and particularly and importantly very pleased on having delivered successive quarters of double-digit growth already in FY '21. So we're optimistic about the remainder of the year. Moving to Slide #2. Our vision remains to improve visitor experience in physical and digital environments through providing a better understanding of customer behavior through data. We help our customers deliver value to their customers and in their operations through the application and use of this data. Now the core of our business is our proprietary tech platform which gathers data from a multitude of sources, aggregates and contextualizes this data and visualizes data insight. And we work on 3 key principles: number one, helping customers choose the right data, working with them to establish what data can be collected and analyzed to help them to solve business challenges; number two, applying intelligent technology to collect and analyze this data; and number three, providing highly experienced people. We have some of the world's leading experience in engineering, data science with Ph.D. research, software development and digital strategists, all who help our customers to deliver on their data and marketing strategy. Moving to Slide #3. The technology that we have developed which collects this data and is at the core of our business offering is called the IO platform. And as mentioned before, this platform is 100% proprietary to Skyfii. Now data itself is not very valuable unless it can be captured, analyzed and visualized in a form that delivers insights or action for a business. This is why Skyfii's IO platform is such a critical tool for our customers, most of whom are not technology companies and therefore do not have -- traditionally possess the in-house capability to be able to make sense and to apply data. Now our suite of Software-as-a-Service products includes Connect, which is data collection and centralization product; Insights, which is our business intelligence dashboard visualization tool and automated reporting product, and it is also where the newly acquired product suite from Blix also now resides; Engage, which is our multichannel marketing product suite; and IO Labs, which is our research and innovation environment. Each of these offerings contributes to a different stage of the customer's data journey and often, their buying life cycle. So on Slide #4. What are the kinds of data sets that we collect and analyze? Well, the answer is any platform that has the capability to transmit data is a possible data source that we collect. The data sets that we work with most often include data gathered from cameras, people-counting sensors, WiFi networks, beacons, mobile data applications, social media platforms, IoT sensors and point-of-sale systems, to name just a few. 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 or being used versus unoccupied. In airports, we provide real-time monitoring on travel times from check-in to gate lounge or queue wait times through security. In universities, we provide accurate attendance registers to determine which curriculums are popular and importantly which students are performing. For restaurants, the use case is all around building and optimizing loyalty through the collection of a marketing database and by driving targeted content to customers to increase their visitation likelihood. And now with the acquisition of Blix and their market-leading penetration of the automotive and specialty retail verticals, we deliver footfall insights and sales conversion metrics to help salespeople in these organizations track success and forecast their sales performance. In today's world, as venues have shifted their focus to facilitate structural and operational changes as well as customer experience management, a great deal of our services are being used to help venues manage occupancy levels, monitor crowd density, optimize staffing levels and improve customer safety and security. Slide #6, operating highlights. The impact of COVID-19 has certainly changed the way venues operate and how they think about customer experience. This shift continues to drive significant global opportunity for Skyfii. Demand for our accurate venue analytics solutions continues to build as many venues who have -- who may have stalled on committing to implementing appropriate measurement technologies have now returned to our pipeline as occupancy monitoring, crowd density management have become standard requirements for public venues in order for them to deliver a safe and secure customer experience. Subsequently, our OccupancyNow solution continues to drive new business opportunities, and I'll talk to some of the latest occupancy in our customers which were converted during Q2. In parallel, smart cities and other outdoor venues such as parks and university campuses have now also begun to ramp up their interest in our artificial-intelligence-driven video analytics solution. And again, we have successfully converted new customers seeking this solution in the previous quarter. And finally, in line with our stated objectives to grow this business and to become the #1 player in our space through organic growth and via accretive acquisitions, we successfully concluded the acquisition of Blix, which we announced in September of 2020. Blix is an Australian-based venue analytics company with a strong leadership position in both the automotive and specialty retail verticals. The Blix acquisition and product offering has proven an extremely valuable offering for SMB and mid-market enterprise. And during the quarter, Blix' revenues grew 13% quarter-on-quarter at the recurring revenue level. In addition to revenue and EBITDA accretion, we're excited about the opportunity to roll out the Blix solution to all of our Skyfii regions and also the cross-sell opportunities for Skyfii's suite of software products into the Blix customer base over time. And to that end, we have already launched several paid pilot contracts in the U.S. market, which we are confident will convert to full rollouts in the near term. Moving to Slide #7, notable contract wins delivered during the quarter. We're particularly interested and pleased with the contract wins delivered in Q2 of FY '21 since they represent both strong new contract and customer conversion as well as very strong existing customer retention, both of which, in our view, further demonstrates Skyfii's value as a business-critical product offering. We delivered new contracts within a variety of verticals, some of which have been the most impacted by COVID-19 but which have begun to reopen with the specific support of our solutions. Firstly, we successfully signed a 5-year contract with the Metropolitan Washington Airports Authority, which includes Dulles International and Reagan National airports in the U.S. market. And we delivered that contract in partnership with our strategic partner, Boingo Wireless. The airports are harnessing the value of our guest WiFi and analytics solution as a means to understand footfall and flow of traffic and to have a medium to be able to communicate and engage with travelers in the airports. Secondly, we successfully converted a 3-year contract renewal with Australia's leading department store retailer, David Jones, who will continue to use Skyfii services to measure footfall, optimize staff rostering and understand sales conversion to help improve their performance. David Jones is also a subscriber to Skyfii's OccupancyNow solution across their portfolio. We signed our first zoo and aquarium complex, contracting a 5-year contract term with Omaha Zoo in the U.S.A. The zoo, which recently reopened, is utilizing Skyfii's artificial-intelligence-enabled video analytics to understand footfall, occupancy and to measure precinct conversion to assist the park with resourcing and layout optimization. We further extended our current partnership with RBS across an additional 36 supermarkets across North America. The supermarkets are specifically using Skyfii's OccupancyNow product to manage venue occupancy and queue wait times and are further interested in our solution to assist them with sales queue monitoring, which we anticipate will be the next phase of their rollout. In the U.K. market, we successfully renewed our partnership with Nuffield Health, who signed a new 3-year contract across roughly 140 gyms, medical centers and rehabilitation facilities. And finally, we brought on board our first university customer in Canada, signing Trent University, who have subscribed to our OccupancyNow solution on a 1-year initial term in order to understand their student usages of classrooms, dining halls and common area precincts. So with that, we'll move to Slide #9, where I'll hand over to John Rankin to take you all through the record financial results delivered by the company during Q2 of FY '21.

Thanks, Wayne. Audio okay?

We're good.

Excellent. All right. So moving to the financial highlights. If we move to Slide 9, we'll just quickly summarize how Skyfii generates revenues. There's 2 revenue buckets we talked through, the first being our recurring revenue or SaaS revenues, which are generated from ongoing subscription fees for access to Skyfii's IO platform. 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 range from $50 per month per venue up to $10,000 per venue per month depending on the size of the venue and the products nominated for the subscription. The second bucket is nonrecurring revenues, which are revenues generated from a combination of professional services generated by our data and marketing services teams and also the deployment of hardware infrastructure, implementations and upfront setup fees, which underpin the recurring revenues. This includes the deployment of technologies such as wireless access points, 2D and 3D cameras, people-counting sensors, AI-driven cameras to monitor objects such as cars, pedestrians and bicycles, IoT centers that detect desk and meeting utilization and also examples such as climate control. So if we move to Slide 10, the Q2 FY '21 results. And certainly following on from really strong results delivered in Q1 where total operating revenues were up 21% quarter-on-quarter and recurring revenues were up 7% quarter-on-quarter, the company has delivered another outstanding result -- quarterly result in Q2 and for the first half of FY '21. The standard result in Q2 was the 25% uplift the company delivered in recurring revenues, of which 13% can be attributed to the Blix acquisition and 12% in Skyfii core business product lines, which is a really pleasing result. The $2.8 million in recurring revenues delivered represented about 70% of total revenues in the quarter. Total revenue tipped the $4 million mark, representing a 15% uplift quarter-on-quarter and represents a continuation in top line revenue growth across both Q1 and Q2. And our annual recurring run rate now sits at $11.5 million and, with a weighted average contract length of 3 years, provides a really strong foundation of future revenues for the company to build upon. The company's cash balance remains very strong, with the company finishing the quarter with a cash balance of $3.4 million, which when combined with the undrawn balance of the debt facility represents around about $4.9 million in cash and cash equivalents available for growth. So at the end of Q2, all key financial performance metrics are all trending really positively for the company. Moving to Slide 11, the first half FY '21 results. So if we now look at the performance for the company in the first half, the company finished the first half delivering a $1.5 million result in operating EBITDA, which represented a 13% improvement in the second half of FY '20. If we compare our top line revenue growth with the second half of FY '20, the company delivered a 10% growth half-on-half. And finally and really pleasingly, the company has recorded both a cash flow positive result for Q1 and Q2. So all in all, very pleasing results for the company across both quarters. The company is really well positioned with a high level of cash reserves. We have a diverse and highly relevant product and service offering and a growing sales pipeline to trade through and out of the changing market conditions. Moving to Slide 12. Now this was a slide we had introduced into some of our quarterlies in a pre-COVID environment. And as we sort of trade out of that environment, we've decided to reintroduce it to provide our investors with some insight into our sales pipeline, its growth and our aspirations for converting that as well. I think probably more importantly, the result of our investment in core staff and valuable partnerships has really enabled us to build a very significant qualified sales pipeline of deals across all markets. So presented today is a snapshot of the qualified or, let's call it, advanced stage sales pipeline on a rolling 12-month basis. It's important to note that this is by no means our total pipeline but merely a snapshot of the rolling 12 months of those deals that are sitting in proposal preparation, presentation pilots or in-contract negotiation. So the 12-month rolling qualified sales pipeline currently sits at $23 million, of which circa $2.6 million sits in contract negotiation, $4.6 billion in pilots, and the balance of $16 million sitting in a proposal preparation or presentation stage. So this really finds the company in a really strong position particularly to deliver on the second half of FY '21 but certainly help set a great platform for calendar year '21 as well. So with that, I'll now hand you back to Wayne to talk through the outlook.

Great. Thank you, John. And congratulations again to the team for a fantastic result, Q2 and first half. So in closing and as stated at the outset, we are very pleased with the way the business has performed in the second quarter of FY '21 and particularly the trajectory of the business is on for the full year of FY '21. It's going to be another record year for the business. Our pipeline is growing again, our products are evolving, and our operations are becoming increasingly more efficient, all of which has resulted in delivery of double-digit revenue growth for 2 successive quarters in FY '21, alongside, as always, strong cash management. Our key objectives remain very clear. We intend to continue to invest into marketing and lead-generation activities to grow our reach in existing and new verticals. We will continue to launch new products as applicable and services to increase revenue growth in both new and existing accounts, maintain our focus on cash management and continuing to deliver a positive operating EBITDA. We're looking to increase the effort into driving growth within our accounting and sensor-based AI solutions. We've seen the results of that in this last quarter in terms of contract conversions already, including Blix, both locally and internationally. And following the successful acquisition of Blix and Beonic previously, we will continue to pursue complementary accretive acquisition opportunities as we continue on our path to becoming the #1 omnidata intelligence company globally. So with that, thank you all for your time. We'll now move into a Q&A session. [Operator Instructions] But for now, I would hand to John to moderate Q&A.

Excellent. We've got a question from Seth. Seth, can you hear us?

Just a couple of quick questions. First one on the pipeline. So I'm just wondering what proportion of that is software versus hardware. Are you able to give us a breakdown of that and then if possible just some potential -- or potentially some conversion rates particularly -- or historic conversion rates particularly as we get down to the pilot or contract negotiation out of the funnel?

Sure, sure. Yes, that's fine. Look, what I was actually going to do, we're just going to reshare that slide because unfortunately, Wayne's presentation didn't update prior to the call. And we just want to make sure that we're presenting the numbers that are consistent with what we posted to the ASX. So I'll just wait for Wayne to refresh and reshare that. But just to kick that question off, look, I don't have the splits, Seth, today that look at the breakdown between what is recurring and nonrecurring. I think just in the efforts of providing the market with some guidance around our pipeline, it can really vary. And when I say vary, typically, in our international markets, we work with partners and those partners are typically deploying the infrastructure. In those cases, then it's a pure SaaS deployment and recurring revenue generated for the business. The Australian market is a little bit different. So look, to answer the question, it bounces around a fair bit. But I think for the purposes of today, what we've presented is what we kind of call our qualified stage pipeline. And if you think about the breakdown of each of those, if a deal is in contract negotiation, it is typically we've been given good indication from the customer that they want to proceed and it may just come down to the timing of when they proceed, so whether it falls into January or February or March and then also the staging of that rollout of that deployment. So that's typically how we look at contract negotiation. It's fairly certain. It's sitting at the 85% mark. Pilot project is typically sitting sort of 55% plus. We've got a really high success rate in terms of converting deals from pilot into contract negotiation because typically, the customer has made a genuine indication they're interested in the technology, they've engaged Skyfii, and we're actually piloting or trialing a technology over their infrastructure within the environments that they have within their property portfolio. And then moving down into proposal, preparation and presentation, that's really beyond the -- if you look at the stages prior to that, we've sort of got inbound lead or lead generation. We've then got a qualified lead. That lead then moves into a product proposal preparation or presentation depending on information that's shared with -- by that customer to help us be able to price out our solution. So typically, they sort of run between sort of 50% and below in terms of probability of conversion. So that's really how we look at it. But as with any sales pipeline, it is prone to movement. You secure contracts and you convert them. You generate the revenue into your P&L, and then you start that process again. I think where we try and invest a lot of our time is in the proposal presentation and pilot phase to make sure that we're pushing all the sales efforts towards, trying to move that deal or deals into that contract negotiation stage. So hopefully -- very long-winded question, but clearly, sales pipelines are always complex because they're relatively subjective in nature.

Yes. No. That's really good color. And then just on the North American market, it seems to be getting a lot of customer momentum over the quarter there, and OccupancyNow was a big driver of that. Could you just talk to sort of the short-term tailwind that's providing but then also the conversations that you're having with these customers about how they're thinking and the longer term and how you expect those relationships to evolve? And then just maybe talk about the region more generally and the opportunity set that's there relative to maybe the other markets that you have.

Sure. Wayne, do you want me to jump on that? Or do you want to jump on it first, the U.S. one?

Yes. I got it. Can you hear me?

Yes.

Seth, yes, so just to talk to the short-term tail then, yes, it's definitely a lot of the conversations we're having. I'd say more than half of the conversations we're having at the moment are with customers who are fairly urgently seeking a solution to help them with things like occupancy counts and crowd management. So most of the conversations are starting there and, as I said, are quite urgent. So we're getting through the sales cycle quicker than we normally would to get them installed at the base level to do those things. And then as we are installed, as is the case with RBS, for example, we started with just kind of outside the supermarkets and providing an accounting solution for people coming in and out of the building. We've now moved inside and having conversations with them about a Phase 2, which would include cameras over the sales checkout desks and understanding queue rates and queue times inside. So that's not an unusual progression basically. We'll start with kind of the baseline and then we'll build on that over time. So that's one example in the U.S. as to how that's progressing. It does vary by vertical. I think the answer I would give you would say -- would be -- it will vary by vertical. That vertical, supermarkets definitely, obviously, a lot of urgency. It's been a business type that's been running right through the COVID period. But we're seeing interest now as schools, universities are reopening. We're getting a lot of inbound inquiries from that particular vertical as well. A lot of hospitals and medical centers who are now anticipating a huge influx of traffic around the vaccine have reached out to us recently. There's a consistent stream of smart city deployments that are sort of in tow or underway. And then not so much at -- are examples, but public spaces like zoos and even stadiums that are beginning to prep themselves to reopen. We all know they'll reopen at some point, but they're getting the baseline technology installed now. So yes, I think we're at the tip of the iceberg here in the U.S., absolutely. It's taken some time to build some awareness and traction and trust and what have you in this region, such a big region. And we've done it on a relatively small resource base, but we're at the tip of the iceberg now in terms of its potential, I believe.

Yes.

I think probably just to answer the balance of that question, Seth, around the use cases. So clearly, there's an obsession with occupancy in venues at the moment because of COVID. We see a long tail. So we see that sticking around for a long period of time, minimum in the next couple of years. But there are a number of use cases that sit off the back of managing occupancy and understanding occupancy in real time. And that's really a lot of the development work that we've done. It's to provide that sort of real-time data and simple things such as helping optimize HVAC, helping optimize your staff, understanding traffic -- real-time traffic numbers versus sales conversion. These are all very relevant, pertinent sort of metrics that businesses are looking at. And clearly, we're helping solve a more immediate issue or need, but there's certainly a long tail in terms of the use cases that we see in terms of how people use the data and insights to help improve the performance of their business.