Beonic Limited (BEO) Earnings Call Transcript & Summary

[Audio Gap] Following our biggest-ever recorded revenue quarter during Q1, we're extremely pleased to have been able to deliver double-digit revenue growth in Q2, with our topline recurring revenue and ARR revenue lines growing strongly quarter-on-quarter. Of particular note, is that our cash collections were up 66% quarter-on-quarter, and we delivered a positive net cash flow result during the quarter, demonstrating that our cash outflows have also begun to normalize, following the conclusion of the CrowdVision acquisition. We've stated that FY '22 is a year, where the company has made the carefully-planned decision to invest into its operations, in order to lay the foundation for accelerated growth in FY '22, and to set the business up to be able to deliver significant operating leverage in FY '23 and beyond. We focused our investments in the first half of FY '22, largely into sales and marketing functions, globally. And I'm pleased that we have already seen strong contribution to pipeline growth and sales conversion, having delivered over $4 million in contract value during the second quarter. Our second-half investment will be focused more on customer support and project management resources to support delivery of these contracts. We're paying particular attention to ensuring that our cash receipts remain high. And furthermore, we expect the second half of FY '22 to outpace the first half, in terms of revenues, with cash outflows to continue to normalize during the second half. And we're, therefore, highly confident that the business will return to a positive EBITDA position in FY '23, as we start to demonstrate true operating leverage. So with that, we'll move to Slide #2. Skyfii, as many of you know, is a data services company, focused on applying the methodology of omnidata intelligence to help venues 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 and influence relationships between people and the places they visit. Our vision is to help our customers use data to create a complete understanding of experiences across the physical and digital world. Some key stats about the business today. We process over 11 billion data points every day. We support in excess of 90,000 IoT devices, globally. And we actively work with and ingest data from over 200 different data sources, today. And I'll talk a bit more about some of those in the following slide. And finally, we have our technology deployed across more than 11,000 venues and across 11 verticals around the world. Moving to Slide #3. 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 collect. The data sets that we work with, most often include data gathered from cameras, people counters, LiDAR sensors, WiFi networks, beacons, mobile data and device applications, social media platforms, IoT sensors and point-of-sale systems, to name a few. What we do is, we stitch all of these different data sources together to form actionable insights, in real time, on customer behavior 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 and overall improve customer safety and security. Moving to Slide #4. So the business provides venues with a complete turnkey end-to-end solution for all of their technology needs. Our products and services offering is summarized broadly in 3 key areas: number one, Technology Solutions, which refers to the design, procurement, delivery and implementation of infrastructure to deliver deployments of people counting, wireless camera detection or LiDAR-based solutions were acquired. And quite often and more and more these days, as businesses are upgrading their infrastructure, we're actually brought in right at the beginning of that decision-making process to advise and then also then, in most cases, to actually deliver. So Technology Solutions is then supported by delivery of our SaaS products of Connect, Insight and Engage and also the remote management and support services for the infrastructure, all of which is built on a recurring revenue basis and today makes up approximately 70% of our revenue base. Finally, the Professional Services offering, really, really important part of the revenue mix, which refers to, in most cases, fixed-retainer consulting services in the areas of digital and data strategy, data science and digital marketing projects, all of which really helped to solidify the SaaS revenues and entrench our Service offering further. To date, we have successfully deployed resources across the business to capably sell across all 3 areas, predominantly in the ANZ market and are currently, as part of this year's investment strategy, resourcing our U.K. and U.S. operations to be able to deliver across these 3 revenue lines in the second half of FY '22 and moving into FY '23. So we move to Slide #5, where I'll talk a bit more about some of the more typical use cases we deliver through our solution set. So here, we've highlighted some of the key use cases across 5 of the 11 verticals that we are specifically focused on, today. These use cases are the reason Skyfii is and continues to be a critical component of the technology and data strategy for these kinds of customers. 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 things like space utilization to optimize the layout, design and tenant mix in their venues. Approximately 6 months ago, we also announced a partnership with BrainBox AI, who do HVAC usage monitoring. And now, as a combined offering, we help these large venues predict and optimize their HVAC usage to drive better cost efficiencies across the portfolio. Retail properties use Skyfii to understand audience by things like age, gender, behavior and trade area. And they use these insights to better engage with and service these customers, both in and out of the venue. Transportation hubs use Skyfii for queue management and occupancy monitoring and to optimize things like passenger throughput from to gate in most of the airports and to drive more traffic and therefore revenue within the restaurant and retail tenancies across the concessions. Stadiums and event centers use the product for -- or center their focus, I should say, around fan engagement, event attribution, sponsorship and advertising monetization and also to drive more ROI through the concessions. And finally, cultural institutions such as museums use the product, again, to understand occupancy, to understand what drives customer engagement and for event attribution, so that they can continue to deliver exhibitions and events that drive footfall and maximize engagement. So moving to Slide #7, where I'm going to hand to John to take you through the key financial highlights delivered during the quarter and also to provide some commentary on the specific area of investment we've made, so far, in FY '22.

Thanks, Wayne, and welcome, everyone, to the December quarterly highlights. We'll begin with the quarterly highlights. Total operating revenues of $6 million represented a 50% increase year-on-year and an 18% increase quarter-on-quarter. Recurring revenues of $3.6 million represented a 30% increase year-on-year and a 5% increase quarter-on-quarter. Our cash receipts of $6.9 million were a record for the company, reflecting both the growth in business and an improved focus on working capital during the quarter. Our annualized recurring revenue, at the end of the period, is $15 million, which shows the quantum and value of our growing customer base. These recurring revenue contracts are typically 3 years or more, on average, across the business. With a churn rate of less than 5%, the ARR is a strong reflection of our ongoing baseline revenue generation. Moving to cash. We ended the quarter with cash-at-bank of $5.4 million, and the company continues to have access to a $2 million debt facility, which remains completely undrawn. As Wayne stated in the introduction, the Q2 results were in line with our internal targets, and we're pleased to confirm that we are successfully executing on our stated plans to deliver strong revenue growth in FY '22. So let's move to Slide 8. Slide 8, first-half FY '22 results. The first-half results represented a period of strong growth and record results for the company. Our topline revenue for the first half of FY '22 was $11.1 million, a 50% improvement on the prior period. Of that revenue, approximately $7.1 million was generated from recurring revenue, which was a 41% uplift on the prior period. And we delivered a strong cash-receipts performance with a record $11 million received for the period. Importantly, these results are part of a sustained period of growth for the company. Our operating revenue has grown at a CAGR of 44% across the last 4 years, and our recurring revenue has grown at a faster pace of 49% over the last 4-year period. These significant growth rates have, with a degree of seasonality across the quarters, been delivered consistently, quarter-on-quarter. Moving to Slide 9. We're presenting today a little bit more of an in-depth analysis of our cash flows. The December quarter saw Skyfii return to positive cash flow, delivering $800,000 of cash flow from operations. Part of the return to positive cash, was a result of: one, an improved performance in accounts receivables, including a catch-up in collections from Q1; and secondly, increased sales conversion, as we delivered quarter-on-quarter revenue growth of [ 18% ]. Our cash flow, over the prior quarters, has been impacted by payments for the completion of the CrowdVision acquisition, which we made in April of 2021. As a part of the completion of the CrowdVision acquisition, a total of $3.1 million in nonrecurring payments were made -- were required to settle CrowdVision's legacy net debt, including aged payables. That $3.1 million cost was offset against the total purchase price, paid to the vendors of CrowdVision. However, under the accounting standards, these payments were required to be classified as cash outflows from operating activities. The outflows of $3.1 million have, to date, been settled and paid as followed: $1.3 million in Q4 FY '21; $1.3 million in Q1 FY '21; and $220,000 in Q2 of FY '22. Prior to those cash payments, the chart does indicate that Skyfii was able to deliver strong periods of positive cash generation while delivering topline growth. As stated, we have been ramping up our investment in growth, in FY '22 to fast-track revenue growth and operating leverage into FY '23 and beyond. As the chart on the right-hand side represents, we've always run a robust balance sheet. Today, with $5.4 million cash at bank, access to a further $2 million loan facility, which is currently undrawn, and the return to positive cash flow, we are exceptionally well placed to continue to invest in growth initiatives, which are driving an increase in revenues as well as our deal pipeline. So before I hand you back to Wayne, I just wanted to restate that the company is very well placed to continue to deliver growth, as venues and our customers look to Skyfii to harness the power of AI, machine-learning techniques, to deliver meaningful value analytics, to help our customers maintain safe and compliant operations, aid in the reduction of venue management overheads and enhance the experience of hundreds of millions of customers, who visit our portfolio of venues every year. Thanks, Wayne.

Thanks, John, and congratulations on delivering another record quarter. Following on from John's financial summary, as John mentioned, we were pleased to convert over $4 million of total contract value during the quarter by securing a series of net new revenue contracts and also a key renewal during Q2. Firstly, we secured our largest customer in the Middle East region, signing a 3-year contract across an initial [ 15 ] shopping centers with MAF Group, arguably the largest and most recognizable retail brand in the Middle East. MAF has over 50 malls, several large department store brands and entertainment precincts under their portfolio, so we do anticipate further growth in this particular account. Now continuing the growth trend in the Middle East, we also successfully signed a 3-year deal with McDonald's, across all of the current restaurants in the Middle East region. In our U.K. and EU business, we signed a 3-year contract extension with McArthurGlen, who is the designer outlet mall group. They've also been a very strong customer of ours. And this is actually their third, consecutive 3-year renewal. Back across the Atlantic in the U.S., through our newly-acquired CrowdVision LiDAR technology solution, we secured two new airport customers in Charlotte International and Las Vegas McCarran Airport, both of which are top 10 U.S. airports by passenger volume. And then finally, we secured a 5-year deal with Adelaide Airport in South Australia, who are also deploying the CrowdVision LiDAR-based queue management solution. So moving to Slide 12. We will just talk a little bit about the 12-month rolling pipeline. So the 12-month rolling pipeline remains strong at approximately $37 million, and approximately 45% of this is actually sitting -- with an impact in the second half of FY '22. Currently, we have approximately $3 million sitting in either contracting or committed stages and then a large pool of over $10 million worth of deals in the client evaluation stage that is one stage back from being committed or contracted. It's also worth noting that the approximately 62% of the opportunities in our current 12-month rolling pipeline, are deals within the international markets. So it's pleasing to see the offshore investments starting to pay off. So as we mentioned earlier, we expect the second half of this financial year to outpace the first-half result of $11.1 million, and we expect that revenue to be -- to come from what's sitting in the pipeline as we see it today. Finally, we've successfully converted $16 million in total contract value already during the FY '22 year, with the majority of this value to fall across the next 3 years. Moving to Slide 13. As I stated at the outset of today's presentation and as John has highlighted as well, FY '22 is a year where we are making investments into the operating model and our resource base, as we look to scale our operations to deliver accelerated growth across the next 3 years and beyond. I wanted to be very clear, however, our investment strategy is not a blind approach to investing for growth at all costs. It is and has always been a measured and calculated investment strategy, which is intrinsically linked to our operating performance. Our goal is to deliver greater than 50% revenue growth this year, with our organic business delivering the lion's share of this growth to prove beyond doubt that the underlying business model is strong and scalable. And in delivering this growth, we will return the business to operating profitability in FY '23. To be more specific, based on current forward bookings already secured and the outlook from the pipeline that we've presented, we expect total operating revenues in the second half to outpace the record revenue results we've already achieved in the first half. Whilst we have further investment activity planned into our [ entire ] operating model for the second half, we expect cash outflows to normalize further in the coming two quarters. And we are working towards a positive operating EBITDA result into FY '23. Looking ahead to FY '23, we expect our cost base to significantly reduce year-on-year, in terms of the investment. And with continued revenue growth expected, we will see true operating leverage become evident in FY '23 and beyond. We're very proud of the operating performance of the business, so far, and in this first half. And with the results delivered, we're very, very well set up to deliver an even larger step-up in revenue in the second half. So with that, I thank you for your time today. Thanks for your ongoing support of Skyfii, and I will now take any questions.

[Operator Instructions] The first [round ] of questions coming in line, is just around the second half, the leverage and the future. So I'll just group all these together. First one is, what level of revenue do you think you need to see to be sustainably cash flow positive as a business?

Well, look, I guess, that, sort of, depends on what our investment strategy is around the cost base. But what I would say about that is, we will definitely outpace the first half. So I think, some of the reports out there are picking us at around that $25 million mark for the full year, in terms of topline revenues. We're comfortable with that estimate. We think, that's probably going to get us very close to being positive at the cash flow level. Cost investments for next year, as I mentioned, are going to be lower than they were for this year. So certainly, year-on-year cost increases will be much lower next year than they were this year, relative to revenue performance, which we expect will be similar, if not continue to grow at a similar pace, next year. So all [ ours ], on FY '23, has been that year, where the true operating leverage starts to become apparent. And we certainly expect EBITDA profit next year, and we'll come very close as well to the cash profit.

Great. Next question is on the second half. You mentioned second half should be better than the first half. How much of the deal pipeline needs to convert to deliver that better revenue growth in the second half?

Look, we're not providing formal guidance yet on the second-half finished position, but suffice to say that we can see the $25 million or north of $25 million total operating revenue number in today's pipeline, based on what's already committed and what's sitting in that sort of bottom -- in those bottom two stages. We're very comfortable that the revenue is already there, rather than we're, sort of, going out there for the next 6 months and hoping to hook a whale. It's already in the pipe. It's really just about pipeline management and conversion, from this point.

Great. Another one on growth is, where you see the most interest coming from, in the vertical? You mentioned 5 at the start. Any of those in particular? And also geographic, what regions you're seeing the most growth in interest coming from?

Yes. Good question. So I think, I made the comment around the pipeline opportunity, is about 62% or thereabouts of that pipeline, in terms of net new revenue opportunities that's coming out of the international markets, so largely the U.S. and the EMEA regions. So that's certainly where we're seeing the majority of the interest. Not to say Australian operation isn't continuing to grow, it is. But it's actually -- it's part of the strategy to start to see more of a contribution from the international market. So we're happy with that trend. So that's geographically where it's coming from. In terms of verticals, look, the main growth, at the moment, has come from commercial real estate and airports. The -- moving forward, certainly expect that trend to continue along with stadiums. It's definitely on the rebound. We announced a partnership with Verizon, I think, in the last [ quarterly ]. That is starting to pay off. We're starting to see a significant amount of pipeline development as -- largely the NFL season wraps up here in the U.S., we're seeing a lot of those stadiums start to look at their 5G strategy. And as part of that, Verizon is rolling out the CrowdVision solution. So we're pretty bullish on the stadium vertical over the next 6 to 9 months as well.

A question again on growth, but more of a risk to growth. Momentum is coming through in the business. What do you see as some of the biggest risks of [indiscernible] the second-half expectations and continue that momentum into 2023?

Yes. Look, it's a great question as well. And we are definitely seeing a lot of momentum, and we're very pleased with how things are moving through the pipeline. The big risk we have, which we're addressing through the investment strategy in the second half, is just delivery, right? There's almost an insurmountable amount of demand out there, relative to how we're looking to grow in the next, call it, 1 to 2 to 3 years. It's all going to come down to our ability to actually project manage and deliver these projects and bring them in. So hence, why the strategy for this year has been front-ended. First-half strategy was around investment into sales and marketing. And we're seeing that investment start to pay off in the pipeline momentum and the conversion. Second half, and it's already started. The second-half investment, you'll see more around project management, service-delivery functions, customer-support functions, just to make sure that we've got the capacity in the business to deliver that and continue to deliver that sort of scale.

Great. Moving away from growth. The churn rate, can you please provide an update of what the last 12-month churn rate was? And was there anything disclosable, in terms of the type of customers that you saw within that churn?

Sure. So I think, John made the comment around the sort of net result being around 5%. That's probably a fairly-consistent figure, in terms of what's churned over the last 12 months. Probably the biggest vertical, where we saw that churn, was the automotive sector and largely just around our Blix product offering, as there's been -- as it's been widely publicized, the chip shortages and the various supply chain issues that have had a knock-on effect, particularly in the automotive sector around the world. That's been an area that we've just seen some of that churn come from. Having said that, we just rediverted our focus, perhaps temporarily, away from that vertical, and we're pushing the Blix offering into more retail and other publicly-new deployments at the moment. So that's really where it's come from.

A couple of more granular questions. December quarter nonrecurring revenue was strong at $2.4 million. Is that sustainable through the rest of this year and in 2023? Or was there some one-offs that occurred in that quarter?

Yes. Look, I'd say, it's a little high, in comparison to other quarters. Look, we certainly -- I think, we do generally forecast about 1/3 of our revenues to be nonrecurring, relative to the rollout of new deployments, essentially, at SaaS. In the last quarter, we definitely saw more of a [ weighting ] to CapEx projects. And largely, that's actually come down to the fact that we are in the background. I think, we've made the comments. We're actually working really hard to bring the various technology products that we own, under one product, essentially. So we're doing a lot of rationalization of tech, at the moment. Because part of that -- our teams reaching out to customers, as they're migrating customers from legacy systems on to Skyfii's core product that's resulting often in the customers actually looking to upgrade technology, which is good. So we're taking carriage of that CapEx, which will be a lead indicator for OpEx or SaaS, should I say, moving forward. So it is a little bit of an anomaly. But having said that, we don't -- we obviously still continue to expect there to be a reasonable contribution from nonrecurring, moving forward.