Beonic Limited (BEO) Earnings Call Transcript & Summary

Good morning, and welcome to the Q4 FY '21 results presentation for Skyfii. I'm joined today by our Chairman, Mr. Andrew Johnson; Chief Operating Officer, John Rankin; and our Investor Relations Advisor, Craig Sainsbury. Q4 saw a return to life in several of our international markets and also a significant rebound to domestic air travel due to effective rollout of the vaccine, particularly in the U.K. and North America regions. This has resulted in a strong increase in our sales pipeline across both core business and CrowdVision as businesses in the public sector look to invest in technology to support safe, efficient and compliant operations in their venues. We're extremely pleased to have announced a good quarterly result and a full year result which was in line with the upper ends of the guidance we provided to the market in April and a result which has set us up for a record year in FY '22. Moving to Slide #2. Skyfii is a data services company focused on applying the methodology of omnidata intelligence to help venue operators improve their operations and the experience of their customers. Our mission is to be the world's most trusted partner for responsibly using technology and data to positively measure, manage, influence relationships between people and the places that they visit. Our vision is to help our customers use data to create a complete understanding of experiences across the physical and digital worlds. Some of the key stats about the business today. We currently process over 11 billion data points every single day. We also support over 90,000 different IoT devices and sensors per day as well. We've integrated over the last 7 years with over 200, and we support over 200 different data sources and integration partners across the globe. And we have deployed our product and have subscription services running in more than 11,000 venues across 11 verticals, including shopping malls, airports, smart cities, smart buildings, casinos and retail outlets, to name a few. Moving to Slide #3. Now the Skyfii business provides venues with a complete turnkey end-to-end solution for all of their technology needs, and our product and services offering is summarized in 3 key areas. Number one, technology solutions, which refers to the design, procurement and implementation and delivery of infrastructure to deliver people counting, wireless networking, camera detection or LiDAR-based solutions for physical venues. This is then supported by delivery of our Software-as-a-Service solutions of Connect, Insight and Engage and also the remote management and support services for the infrastructure, all of which are billed on a recurring revenue basis, typically on 3- or 5-year contract terms. Finally, our professional services offering is another really important part of our revenue mix and refers to the fixed retainer consulting services that we charge customers in the areas of digital and data strategy, data science projects and digital marketing projects. And to date, we have successfully deployed resources to capably sell across all 3 areas in our ANZ market and are currently resourcing our U.K. and EMEA options and the U.S. operations to be able to deliver all 3 product and services offerings beginning in FY '22. Moving to Slide #4. So what are the kinds of data sets we collect and analyze? Well, the answer is any platform that has the capability to transmit data is a possible data source that we can collect. Now we support, as mentioned, over 200 different data sources today. The ones that we work most often with 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 a few. What we do with all of this data is we stitch it all together to form an actionable view and deliver insights on customer behavior in real time in these venues. 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. Moving to Slide #5, where we'll talk about some of the key use cases that we deliver on using these data sets. So here, we've highlighted some key use cases across 5 of the 11 industries that we are focused on today. These use cases are the reason Skyfii is a critical component of the technology strategy for these industries. For example, in the commercial property industry, venue operators use Skyfii to understand and manage occupancy levels across floors, buildings and tenancies. They use the data insights to understand space utilization and optimize layout, design and often tenant mix in their venues. Recently, we announced a partnership with BrainBox AI, who do HVAC usage monitoring. And now as a combined offering, we can help large venues predict and optimize their HVAC usage to drive better cost efficiencies across their portfolios. Retail properties use Skyfii to understand their audience by age, gender, behavior and trade area, and they use these insights to better engage and service customers both in and out of their venues. Transport hubs, such as airports, use Skyfii for queue management and counting and to optimize passenger flow right from the curb to the gate lounge. For stadiums and event centers, the use cases center around fan engagement, event attribution and sponsorship and advertising monetization. And finally, in cultural institutions such as museums and galleries, the key driver for engaging with Skyfii is to manage occupancy, understand what drives engagement and for event attribution so that they can continue to deliver exhibitions that drive footfall and customer engagement. Moving to Slide #6, where we will outline our key verticals and market opportunity. Skyfii's solutions are applicable really in any environment where there is movement of people or objects across both physical and digital environments. To date, we are focused on these 10 verticals. In fact, we have representation in 11 verticals, which collectively represents several million venues across just EMEA, ANZ and the Americas, which are our core regions. We believe Skyfii is the largest player in a small group of competitors who, to date, collectively would represent approximately 1% or less of the total addressable market across just these key verticals and just in these geographies. And so I guess the point to make here is that our white space opportunity is extremely large. Subsequently, FY '22 is the year where we will be investing into our operating model to unlock a larger sales force to accelerate conversion into these markets. Moving to Slide 7, where we will outline the broader secular trends in the industries that Skyfii operates within. We believe Skyfii, including the CrowdVision business, sits at the intersection of 4 major and large secular trends, all of which are experiencing billions of dollars of investment and forecasting very strong compound annual growth over the next 3 to 5 years. And these sectors are people counting where the current growth is being driven by video-based counting solutions in venues such as malls, airports, stadiums and smart cities. All core verticals for Skyfii and video-based counting solutions is a core revenue offering for the CrowdVision business. Location analytics, where the key driver is to understand better spatial analysis, to understand changing consumer trends, and more recently, to improve health and safety. Once again, a key part of our people counting product and service offering. Data monetization through the integration of data sources to drive revenue generation through targeted marketing, advertising and improved sales conversion. And finally, indoor location services, where the main focus is on better way finding, customer path analysis and improving customer satisfaction. Skyfii delivers solutions that intersects with each of these sectors, whereas our core focus lies within the people counting and location analytics industries. Moving to Slide 8, where I'll hand over to John Rankin to take you through the key financial and operating highlights delivered during the quarter.

Thanks, Wayne. So moving to Slide 9, I'll quickly take you through the Q4 results. So to begin with, total operating revenues in Q4 of $4.9 million, represented a 72% increase when compared to the same period last year and a 36% increase quarter-over-quarter. Recurring revenues of $3.3 million represented a 59% increase when compared to the same period last year and a 14% increase quarter-on-quarter. So as we finish the quarter, the company remains well capitalized, finishing the quarter with $8.6 million in available cash and access to a $2 million debt facility that remains undrawn. If we move to the next slide, the full year results. We're pleased to confirm the company has delivered in line with the guidance provided to our investors on the last quarterly call. Total operating revenues of $15.9 million represents an 18% increase year-on-year and in line with the guidance of $15.5 million to $16.5 million. Recurring revenues of $11.3 million represents a 28% increase year-on-year and was in line with the guidance of $11 million to $12 million. And the company delivered an operating EBITDA of $1.6 million, which was down when compared to last year, but was in line with the company's expectation when taking into consideration the inclusion of CrowdVision from an acquisition perspective from the 6th of April, and notable one-off transaction costs linked to that acquisition that were incurred in the quarter. And finally, the company carries forward an annual recurring revenue run rate of $14 million, which represents a 40% increase on a year-on-year basis. So in summary, a great result to finish the financial year with. And the business is well placed to deliver double-digit growth in FY '22. If we move to Slide 11, notable contract wins. So during the quarter, we secured, firstly, 2 key renewals with the GPT Group and Nando's in the U.K., both agreeing to extend their services for a further term. And other -- 4 other notable contract wins. First of all, National Gallery of Australia, which is in the public venue sector which is a key growth vertical the company; 2 retail property groups secured with Land Securities in the U.K.; and Pareto Group in South Africa which are both prominent property REITs in their respective countries; and finally, a great brand with a deal secured with Virgin Hotels in the hospitality vertical. Moving to Slide 12, just a quick update on the CrowdVision acquisition. Firstly, I think we're really pleased with the integration of the CrowdVision business across the last 3 months. All CrowdVision employees have been fully on-boarded and integrated into Skyfii's operating systems. And the acquisition really has expanded our product and service offering. And through the combination of the 2 offers, across Skyfii and CrowdVision, we can confirm it's been really well received by the collected customer basis with strong cross-sell opportunities already underway. And then just a final point. The sales team have been busy responding to a number of RFIs and RFPs in the airport and actually the casino vertical, which has resulted in a noticeable increase in sales pipeline as stated in the final point. If we move to Slide 13, just a quick call out regarding global airport -- air travel. And certainly, we're really encouraged by the strong recovery in air travel, particularly across the North America and the EU. With North America travel sitting at circa 85% of the pre-pandemic sort of travel rates through airports. And similarly, this trend is experience -- is being experienced in the EU as well where air travel is sort of sitting at sort of 75% of the pre-pandemic level. So I guess what this recovery really demonstrates or is resulting in is an increase in sales activity in the form of RFIs, RFPs and certainly a recovery of the pre-COVID deal activity. So we really find ourselves in a very good position as of today. So thank you for your time today. I'll pass you back to Wayne.

Great. Thanks, John. If we move to Slide 15, a couple of themes to talk about. John mentioned that growth rate in the pipeline, which has been experienced since the last pipeline update that we gave in April. So we've seen both the core Skyfii pipeline and the CrowdVision pipeline increase in terms of volume over the last 3 months. And particularly in relation to our international markets, where we've both seen sort of a rebound to semi-normal operations across Skyfii, core verticals of retail, office buildings, to an extent, smart cities. And then also, as John mentioned and pointed out, the rebound that's been experienced in terms of air travel, particularly domestic air travel in Europe and America. So these 2 sort of forces combined has seen an increase in sales activity and pipeline activity. We've recorded about an 11% growth in the pipeline since April. And reminding everybody this is kind of our sort of advanced stage pipeline opportunity now. I'm not sure we can expect 10% to 11% quarter-on-quarter growth every quarter. But certainly, there has been a bit of a resurgence as these countries have sort of reopened, and the vaccine rollout has been advanced. And so the pipeline growth has been very strong. We're sitting on, as John mentioned, a number of different RFPs and RFIs that we expect to convert either in Q1 or Q2. So right now, as we look at it, pretty excited about what FY '22 represents. Now I did just want to point out before we move on. In talking about some of those long-term secular trends in some of those compound annual growth rates that are being experienced across those 4 key industries that we operate in, interesting to note that Skyfii's growth over the past 4 years has significantly been greater than any of the CAGRs represented in those verticals. So we're certainly, albeit on a smaller relative basis, we're growing at a quicker rate than the market industry sectors are as well. So moving into FY '22, pretty excited about what we're going to be delivering. So moving on to Slide #16. FY '22 is going to be a year of investment. We're investing this year into our operating model. We have slated to introduce 19 new head count roles into the business, and we've already started to do that. We expect most of those roles to be implemented before the end of the first half to give us time to actually have those roles be effective in FY '22. The investment's going to be broadly across all the operating functions of the business, predominantly sales and marketing or sales and sales-related roles in marketing. But then also support roles, project management roles, engineering roles, and we've also invested in the people and culture function this year as well. And so the aim this year is going to be to invest. We have the cash in order to do that. We are forecasting, and you'll note there is some analyst guidance in the market which forecasts that we will see an impact to EBITDA in FY '22. That's expected, and we've got the cash to do it. But we are looking to deliver a significant increase in terms of revenue and ARR growth in FY '22. Looking at towards $17 million to $20 million ARR in this year is what the analysts have guided for. In addition to that though, FY '23 certainly will see a return back to more normal OpEx costs. We don't expect that to be a particularly high investment year. So we expect '23 to be that year where we'll start to demonstrate some significant operating leverage. So specifically, we will continue to invest in marketing activities to drive quality lead generation. And we've already begun to see marketing events begin to return to the roster. We're laser-focused on delivering growth and market share across airports and stadiums in particular, with the integration of the CrowdVision business into the core Skyfii product offering. As always, we'll continue to build and release new product integrations to drive additional revenue opportunities where possible. Alongside the investment in marketing, we have already begun to invest into growing our sales, support and services head count. The new roles, as mentioned, are going to be to improve sales growth and conversion to support our core focus in FY '22, which is investing to deliver that -- on that ARR growth in line with the analysts' estimates. The result of the activity in FY '22 will certainly, as mentioned, impact EBITDA but we expect that to be in line with analyst reports and then forecasted to rebound again in FY '23. And finally, as John mentioned and pointed out, the integration of the CrowdVision business has performed well in its first full quarter. And one of the key goals for the business in this next financial year is to ensure that we integrate the CrowdVision solution into the Skyfii technology solution over the next 12 months. Now at the moment, we're selling the 2 products side by side. It doesn't hamper our ability to cross-sell or to convert on the pipeline. But certainly, for a cost efficiency perspective, we want to make sure that the 2 platforms are combined, and that's a key goal for our technology team over the next 12 months. And so with that, I thank you all for your time today, for your ongoing support of Skyfii as we look to deliver another record year in FY '22. And I will now open the call for any questions.

Thanks, Wayne. [Operator Instructions] So first question for you. Regarding the 3 CrowdVision airports ERPs talked about in the previous quarter. Could you please clarify which bracket of the pipeline they fit in at the moment?

Sorry, just to clear. The 3 CrowdVision ERPs?

Yes. The question, with the 3 CrowdVision ERPs talked about in the last call, which part of the pipeline are they sitting in at the moment?

Oh, I see. Okay. Those are sitting in the contract negotiation stage at the moment. So we've got a number of different deals that we -- I guess, we expected to convert in this previous quarter. But for one reason or another, things have just moved sideways into Q1. So those are sitting right at the bottom end of that funnel.

Great. Next question. Just an update in the split of domestic versus international. Can you talk about how much of the recurring revenue is coming domestic versus international? And what's the split of the pipeline as well, please?

So pipeline split would be roughly 50-50 between international and domestic. So a significant uplift from prior quarters and largely, as I said, due to the CrowdVision pipeline that's come in, particularly in EMEA and the U.S. In terms of the split of recurring, we expect CrowdVision to be something like 1/3 of the recurring revenue growth in FY '22. So that will come across EMEA and the U.S. markets. And then the balance of that will be Skyfii core business. We do anticipate both businesses to deliver near on double-digit growth over the next -- over the coming quarters. But certainly, CrowdVision off a bit of a lower base will probably grow marginally ahead of the Skyfii core business.

Great. Thanks. There's just a few questions on pipeline. So I'll just lump them all together for you, Wayne. In terms of the pipeline, what's the single biggest vertical that's represented in the pipeline? And where have you seen the most growth in the pipeline by vertical?

The -- I thought it would probably be a fairly even split between retail and aviation as the 2 kind of big areas where the pipeline has been filled currently. And by retail, I mean property REITs and commercial real estate buildings, largely -- large CapEx projects that are being worked on in all markets, really, but a lot of it in ANZ. And then the aviation sector, mainly across the airport portfolio in Europe and the North America region. In addition, though, and we mentioned this during the acquisition, we've secured a partnership with Verizon which has started to yield some significant pipeline opportunities in the stadium sector as well as that is rebounding. So those would be the top 3 verticals that would be the leaders in terms of the pipeline generation.

Great. Thank you. Next question is, I guess, a definition one here, is how do you define ARR? And what percentage relates to the software solution product?

So ARR is the annualized recurring revenue run rate. And so it's determined at the end of the month or the month that's being reviewed, or the end of the quarter, in this case. And it's a forward position from that last month's deliverable in terms of revenue -- recurring revenue. And it relates only to the software or the recurring revenue lines, which is the SaaS -- which are the SaaS products.

Great. Just a question on customer churn. What are the customer churn rates like at the moment? And have you seen any impact from the resurgence of COVID domestically in Australia?

Yes. Look, we did. We had some customer, not terminations, but a number of suspensions that we'd accrued revenue for which we had to take credit notes on which happened in the quarter. So there was some legacy impact over the course of the year, which we had to bear the brunt of in Q4. And so around about $250,000 worth of credit notes came out of the quarter, which impacted our quarter-on-quarter growth rate from a recurring revenue level strictly. But if we back that back in, there was actually a reasonable amount of growth in the quarter. We did have -- we did explain, I believe, in the Q3 presentation report that we had a few very small customer cancellations, which added up to around about $15,000 to $18,000 in recurring revenues, monthly recurring revenues, which were canceled in Q3 and obviously ran through into Q4. We do then have about, in addition, about $150,000 worth of temporary suspensions, which will -- we expect to return back into the P&L over the coming quarters. So it was one of those -- obviously, at the end of the financial year, one of those periods where we had to recognize and do a make good across the year. And the impact was in Q4, but it was kind of an impact that was blended across the year. We do expect that to kind of be the bottom of the road, so to speak. And certainly, the focus in Q1 is in conversion of new prospects, and we've already kind of demonstrated growth in that forward position.

Great.