Beonic Limited (BEO) Earnings Call Transcript & Summary

Good morning, and welcome to the Skyfii's Third Quarter FY '23 Results Call. I'm Craig Sainsbury, Investor Relations. With me today, Wayne Arthur, CEO; and John Rankin, COO. Wayne will be giving a presentation with John, and followed by Q&A [Operator Instructions]. So with that, Wayne, I'll hand it across to you.

Thanks, Craig. Good morning, everybody. Thanks for your time. Welcome to the third quarter results for 2023 financial year. This quarter was one where we continued to grow our footprint with a focus on creating more efficiency within our operating cost base. We continued to solidify our position as a global leader in the data analytics space, particularly for large venues, airports, transit hubs, retail and commercial properties and QSR chains. And I'm pleased to present another quarter of total operating revenue positive growth and also delivery of some exciting new contract wins and also notably some key renewals as well. So with that, we'll move to Slide #2. So before we delve into the financial results performance, I wanted to provide an upfront summary of the current operating environment, some of our outlook for the remainder of FY '23. But first of all, we are continuing to see strong demand and engagement for our product and services offering. And that's justified by the contracts that we've secured over the course of the year amounting to just over $11 million worth of new contracts. Year-to-date, that is -- our solutions remain in strong demand, particularly in the airport vertical where we're seeing a lot of continued momentum. Unfortunately, what though, while the end customer demand has been strong. We had experienced some project delivery delays as a result of a number of factors, internal resourcing bottlenecks, production and delivery delays, particularly from our hardware vendors, so some of the supply chain challenges. And also installation cabling contractors on behalf of our customers that have also been delayed that have been a little bit out of our control. So whilst demand is strong, forward bookings is still strong. The commencement of the ARR from some of the recent contract wins has subsequently been pushed into the first half of FY '24. So we're responding to these challenges by ramping up our already successful offshoring strategy to ensure essentially, we can increase the availability of staff. We're working closely with our supply chain partners to ensure better logistics management of some of the key hardware packages and the installation scheduling. And then we're obviously prioritizing -- sorry, our internal resources around delivery of these high-margin projects as well. Due to the delays in the commencement of some of the new projects or the wins that we've announced, we've also revised and are revising our guidance of our exit ARR run rate to between $17 million and $18 million for the end of FY '23. On a more positive note, given the focus on ARR projects throughout the course of the year and a subsequent higher quality earnings, coupled with our continued cost and efficiency initiatives, we are maintaining our original guidance to deliver positive operating EBITDA -- positive EBITDA, sorry, in the second half of FY '23. We'll start with slide #3. For those not familiar with our core software offering, we developed a data intelligence platform that's what sits at the core of our operating model and the core of our revenue base. We collect and analyze data from a multitude of data sources and we visualize the insights that help to drive improved operational performance, leading to cost and revenue efficiencies for the operators of the venues and through improvements in the experience for the customers. We work today with over 200 different data types, ranging from wireless network, data, LiDAR data to point-of-sale and CRM-related data as well. And our platform processes over 11 billion data points every single day. Our sales efforts are focused on 4 main verticals, including retail, transport, QSR and stadiums, and our resource base is located in 3 core geographies of APAC, EMEA and the Americas. Moving to slide #4. Skyfii business provides venues with a complete turnkey end-to-end solution offering for all of their technology needs. And our products and services offerings are summarized in 3 key areas: Firstly, Technology Solutions, which refers to the design, procurement, delivery and implementation of infrastructure, the People Counting Wireless, camera detection or LiDAR-based solutions were acquired. This has been supported by delivery of our artificial intelligence driven business intelligence products, consisting of Connect, Insight and Engage, all of which are billed on a recurring revenue basis and today make up approximately 70% of our revenue base. And finally, our professional services offering, which is a really important part of our revenue mix, which refers to fixed retainer consulting services in the areas of digital and data strategy, data science and digital marketing, all of which helped to solidify the SaaS revenues and entrench our services further. With that, we'll move to Slide #5, where we talk a little bit about some of the typical use cases that we're delivering using our solutions set. On Slide #5, we've highlighted some key use cases across 6 industry verticals. These use cases are the reason Skyfii has the critical components of the technology and data strategy for these customer types. This year, we have narrowed our focus to 3 core verticals: retail, transit and QSR, which is where we see the highest growth potential over the next 3 years. We recently announced a landmark deal with McDonald's in the U.S.A. More recently, we announced several new deals in the airport and also retail verticals, including an upgrade of our existing footprint at London Heathrow Airport, expansion of our footprint with JFK Airport and several key renewals across our retail customer footprint. So moving to Slide #7, where I'll now hand over to John Rankin to present the key financial and operating highlights delivered during the quarter.

Thanks, Wayne. Moving to Slide 7. Quarterly performance summary. In the March quarter, we delivered total operating revenues of $6.2 million, up 8% from the previous constant period and 9% quarter-on-quarter. Recurring revenues for Q3 of $4 million were up 6% on the previous corresponding period and stable quarter-on-quarter. Quarterly cash receipts of $6 million was collected during the quarter. And we finished March with cash at bank of $5.4 million. Annualized recurring revenue for Q3 of $16 million was flat, as Wayne explained earlier, due to delays in content delivery, shifting recurring revenue to extent dates into Q4 and beyond. Our churn rate remains steady, sitting just below 2.5%, and our full year CAGR total operating revenue averaged at 29% and 32% of recurring revenues. Moving to Slide 8, the key performance metrics. Year-to-date FY '23 highlights, we delivered total revenue of $17.3 million and cash receipts of $21.9 million, up 3% and 27%, respectively, on the same period in FY '22. Gross margin held steady at 58%, in line with our FY '22 results. Year-to-date churn, it's slightly ahead of our sub 4% target moving to 5%. Moving to the next slide. Slide 9, net cash flow from operating activities. In Q3, the company experienced a cash outflow from operating activities of $0.5 million. The cash outflows for Q3 is a result of the seasonally lower number of projects billed and collected during the quarter. More importantly, our year-to-date net operating cash inflow from operations is positive at $1.8 million, which is a significant improvement on the cash outflow of $2.5 million for the same period in FY '22. Our improvement in cash flow year-to-date is a positive reflection of the increase in the scale of our business as well as the focus we've taken internally on cost control and other initiatives such as our offshoring strategy with the growing pipeline of projects and focus on higher margin revenues and anticipate a continuation in positive cash flows across the coming quarters. We move to the next slide, Slide 10, new contract wins. The company delivered a number of contract wins in the quarter across a range of geographies and verticals, delivering a new business total contract value of over $4.7 million. And year-to-date in FY '23, we've secured over $11 million in new contracts, new contracts with the value of $11 million in new contracts on a TCV basis. Most notably in the quarter, 76% was generated from our international operations, evenly split between the Americas and EMEA. In travel hubs, mainly airports and rail was the most active accounting for just over 50% of total contract value completed during the quarter. Thank you for your time. I'll now hand you back to Wayne to talk through some of our recent contract wins announced during the quarter.

Thanks very much, John, and we have pleasing results through the positive operating cash flow for year-to-date and some of the comments that we've made and I've made recently around the business's intention to create more cost efficiency in the operating model. Good to see that's paying off, and we expect that position to sustain moving forward. So just on Slide #11. Throughout the course of the financial year, I have also indicated the significant revenue growth potential that is prevalent -- present, sorry, within our current customer base. This year, we've dedicated more focused unlocking this. We'll continue to do that, obviously, moving forward. And our recent deal announced with London Heathrow, which is obviously Europe's biggest airport is an example of this. We've extended our existing partnership to sign a new contract to deliver our LiDAR key management system across our terminal 2 and terminal 4 check-in and terminal 5 integration areas in a bid to help improve the wait time of passengers in these areas. And it's a deal that's worth $1.8 million, very significant from both CapEx and assets and ARR perspective moving forward. But just one example of the opportunity that exists within the current portfolio of customers, JFK being the other one where we've also recently expanded the partnership as well. And there's many more sitting in the customer base that we expect to unlock more value on moving forward. It's obviously, customers that are already customers who got less retake to move through in terms of winning the business, and we'll be focusing more on efforts in those areas moving forward. So moving to Slide #12, following on from those comments, just around, particularly the airport sector. As indicated in our pipeline slide, and I'll talk a bit about this as an art, John mentioned this as well. A large component of our qualified pipeline and our recent contracts is being generated from the global airport sector, so airports are increasingly committing budgets towards technologies that can assist them, improve throughput, alleviate bottlenecks, improve operational efficiency and overall improve the customer experience. And we've built a number of products that can help airports achieve these from previous outcomes from our key managing system to our bottom occupancy solution and also QSR monitoring offering, which -- all of which harness data from technologies like camera, WiFi and LiDAR, which we support today. With that, moving to Slide #13. So during the quarter, and John, again, alluded to this in his commentary. We signed and announced several new contracts, including most recently, one with London Heathrow in EMEA. We secured contracts with Mount Auburn Cemetery in the U.S., and expanded partnership with JFK Airport for a new checkpoint. We secured our first major rail contract with Penn Station in the U.S., Ashfield Mall in APAC, Sicredi in Brazil, Central Park Mall in Asia Pacific. And then importantly, we secured key renewals with customers, including London Stansted, ISPT in Australia, Boingo Airport Group in Ferreira, in Brazil, London City Airport in EMEA, Orlando International Airport in the U.S. A. We're working actively on some additional extensions to that agreement in Orlando as well, which we'll talk about hopefully in the coming quarters, and then [ Traffic Center ] in EMEA as well. So not only some significant new contracts, some new vertical opportunities in the rail space or transit as we're calling it, but continuing to also maintain and renew our larger customers in the enterprise space as well. Moving to Slide 15. So subsequent to the comments we've made around some of the just unfortunate project delivery delays for contracts that are confirmed, and we will roll out but just have been subject to some of those delays, and we will -- we expect to bring online in the first half of next year. The pipeline actually has grown quarter-on-quarter. So the 12-month rolling pipeline today remains very strong, particularly that's that middle section of opportunities at $28 million. Currently, we have approximately $2.6 million sitting in the final stage of the contracting and then a larger pool of just about $5 million worth of deals in the client evaluation stage. One stays back from being contracted. I note again that these figures represent actuals over the coming 12 months, not TCV. So meaning specifically if these contracts were all booked today, that time of revenue will fall into the next 12 months. As a reminder, deals and contract negotiation, committed stage are at a 99% likelihood of conversion, really it's variable just in timing. Those in client valuation at 65% and anything above that sort of 30% likelihood to convert based on our performance history. Also worth noting that approximately 61% of the opportunities in our 12-month rolling pipeline of deals in our international markets. So it's pleasing to see that the offshore investments continue to pay off. We've successfully converted about $17 million in new contract TCV on a rolling 12-month basis, $11 million year-to-date, I think this is commonly made over 25% over 1/4 of the pipeline has been generated in the past 3 months. So that speak to the relative short-term decision-making, which is evident in the market and is a positive reflection of the investments we've made. And then finally, airport and retail properties making up around 58% of our qualified pipeline, which is pleased given our focus on those as 2 out of our 3 core verticals. So with that, I'll move to Slide 16 and the outlook. So we're continuing to capture increased customer interest, as I've explained in our product and services offering from a range of customers in our core verticals. We are continuing to focus heavily on cash management and building scalability into our operating model through cost efficiency initiatives, including what has been a very successful offshoring strategy of certain functions with the aim of continuing to deliver cost savings throughout FY '24, improve margins and most importantly, sustainable operating leverage. We have plans in place to resolve some of the staff bottlenecks that we're just burdened in the last quarter to ensure more rapid conversion of contracts that have been won but not yet delivered, so we can build those recurring revenues. We're actively engaged with our supply chain partners to ensure we have access to the technology we need to commence the projects on time. Pleasing me our year-to-date operating -- positive operating cash flow, coupled with over $5 million in cash on the balance sheet ensures that we remain well positioned to execute and deliver value to our stakeholders. And so with that, we thank you for your time. We -- as I said, we have updated our ARR guidance to between $17 million and $18 million. We've maintained our guidance around second half positive EBITDA. So with that, I will hand to Craig for any Q&A.

[Operator Instructions] And first one is from [ Raymond Haklo ] What sort of market share do you have at Heathrow at the moment in terms of footprint? Are you cross all terminals, ability to [indiscernible] expand further at Heathrow.

Yes. I'll jump on that, John, if you give any more comments to make, feel free given John who's doing the deal now there. But look, we're in 3 terminals at the moment. It's T24 in the check-in areas and T5 in the customer sort of immigration areas. So lots of room to grow basically. We're not -- I'd say we're probably 1/3 maybe, John, of the footprint, maybe 1/4 of the potential footprint for that particular airport. So it's one of the key things of our portfolio as we talk about being present in 32 airports across EMEA and the U.S. and 64 airports globally. And think in the U.S., we're in 13 out of the top 30 by passenger volume. But we're really in 1 or 2 terminals or 1 or 2 checkpoints out of multiple or more of that. So really, it's the biggest opportunity we've got. So I'd say about 1/4 to 1/3 of Heathrow in terms of potential available area that's possible for us to monetize at a time.

Follow-up question for that was, how did that Heathrow contract with the extension that was announced in terms of fruition [indiscernible] competitive tender [indiscernible] with existing [indiscernible] may be across the data control of the real estate.

It is -- look, I kind of reflect back on last summer last year and the challenges that likes of Heathrow and some of these major airports had -- we've passenger throughput. So it's an existing customer. It's an existing contract on board. They saw a lot of benefit around some of the newer technologies that we're integrating with such as LIDAR to extend into areas increasing that were major pain points. So lot of the competitors are in process, but certainly, through our relationships and all the airports we work with globally, they are really talking to each other. So I think our reference point for Heathrow was Charlotte Airport, where we've done some successful technology deliveries in LiDAR, and we use those relationships to share across those 2 airport groups. The benefits of what we were trying to deliver in those key pricings. So those airports get ready for summer, not just summer, FY calendar '23, but also '24. We're seeing more of them focus on [ occurred ] checking halts, security integration and then pushing through to airside retail as well. Just to better understand what that passenger is doing from the time they commence their travel, when they arrive all the way through -- to the gate and on to the point. So good opportunity there.

It's really great you answered that. Next question, but I'll ask meanwhile the expansion in the airport vertical, is that from the proposal coming in from other airports to know your services, are directly going out and targeting these airports and highlighting the solutions, you can provide.

Generally referral, actually, we do attend all of the major airport conferences. So we've got a brand in the airport vertical that's very recognized and strong. And so John and I both recently attended the one in Europe a few weeks ago, which was incredible from that just from the volume of traffic to our stand and we regularly host panels in some of these events. So there is an element of that brand association, but also we actively market those events. But mostly, it's referral based from existing clients either within their own teams, we're extending between terminals and all their colleagues, airports don't see themselves as competitive with each other, unlike other verticals we operate in. So we're extremely careful with them. In fact, we often will list JFK, Heathrow, Charlotte as reference customers for other airports when we call to reference. So yes, it's mostly referral base, which is why it's really -- it's a long-term play for us. We expect it to be a forever vertical that will continue to incrementally grow over time.

Just one follow-up, the airports, you mentioned before, [indiscernible] small amount of checkpoints or areas within the airport. When you expand, is that expanding into white space? Or are you taking over from competition and a subsequent question, is there any competition that's getting into the airport at the moment.

Good question. Look, it's generally white space. The the vast majority of airports are using older types of technology, in some cases, no technology, they're just using observations techniques to understand wait time. So the things like camera-based and LiDAR-based key management solutions are relatively new. So it is generally green space, say, white space when we're moving into new checkpoints, not competitive. The landscape has remained competitive in the last 3 years, we haven't necessarily seen new entrants since the acquisition of CrowdVision and since we are actively in the space. But generally 3 companies, we kind of -- or 3 of us will operate in the key management space. One is [indiscernible], which is a company that uses [indiscernible] enabled solution to deliver right time analytics. And the other company called Xovis, it's a camera-based solution. We support all 3 of those technologies by the way, but we are the only one that's predominantly uses LiDAR as the product offering because it's by far and away, and we can say this because we're agnostic of those other few technologies, by far the most accurate. So yes, it's competitive. We're not going up against nobody, but we would definitely tend to win more than our share because of the quality of the LiDAR solution.

[indiscernible] just changing tech from airports. Question is, how much of the 7.1 safety is very secured this year [indiscernible] from existing clients.

In terms of total contract value I would say it's around about upwards of 65% to 70%. So certainly, the timing within our existing customer base is helping us generate new business at the moment from a revenue perspective?