Beonic Limited (BEO) Earnings Call Transcript & Summary

[Audio Gap] for our FY '26 results presentation and FY '27 preview. Joining me on the call representing Beonic as we have our Chairman, Mike McConnell. Mike is joining us from California. As you can see in Mike's bio, he is a very experienced Chairperson and Director. We also have Marc Thompson. Marc Thompson is currently joining us from Tokyo. He is in Tokyo right now presenting to one of our very large airport customers, Narita Airport. Narita Airport is a long-standing Beonic customer. They happen to be a top 5 airport globally for service quality. And therefore, I think it makes perfect sense that they are one of our customers. And Marc is over there presenting our new Vision product. I'm just going to hand over to Mike, who wants to provide some opening remarks.

Thanks, Billy. Welcome, everyone, and thank you for joining us today. I'll open with a couple of comments to talk about what has roughly been a 3-year transformation at Beonic. Transformations are difficult, especially when facing both capital and operating scale limitations. The 4 key elements of our specific transformation have been leadership, strategy, cost structure and our balance sheet. Let me comment briefly on each of these. Leadership. Billy was hired a little under 3 years ago. And since then, approximately 50% of the employee group is new. And importantly, nearly every C-suite position, including Marc Thompson, who's with us today. This represents enormous change in a very short period of time for any business. One indicator that this has gone well is our internal Net Promoter Score over this time period has risen from negative 7 to 52. Next, strategy. Focus is a force multiplier. We've oriented to airport and retail and rearchitected the tech stack, eliminating a lot of tech debt and harmonizing on one scalable platform. Additionally, Beonic Vision represents a significant strategic product response in our market to seamlessly deliver incremental value to our customers. Importantly, this product and approach gives us the right to win in a very, very large global market. Number three, we have to rightsize the cost structure and embed through the use of metrics and data, a cost discipline in all that we do. Because of our scale, this was and is a foundational and necessary reset. We will continue to instrument the business to be operating cash flow breakeven or better by being focused, smarter and efficient. Number four, and finally, as most of you know, our balance sheet and capitalization was thin to say the least. Fixing this naturally occurred in phases. The historical debt obligations were strangling the company and unsustainable. Transformations cost money, particularly those with long-serving employees. Tech debt doesn't disappear on its own. I would like to thank our shareholders, old and new, and in particular, our major shareholder, Thorney, for their support over the last 18 months. Taken together and based on my experiences, this team has done a remarkable job navigating all of which I just mentioned, while at the same time, assessing and upgrading the employee set, setting a go-forward tone and culture, assessing and rearchitecting this tech stack to a modern, scalable platform and notably securing and implementing the biggest contract in the company's history. Further, I'd be remiss if I did not thank my Board colleagues, Bob Alexander and Kristy Rankin. Thank you for your wisdom and support to all of us throughout this process. In a moment, Billy will speak to our go-forward focus on sales acceleration. The building blocks are in place and as evidenced by our FY '25 guidance, which you will see today, we forecast double-digit growth in ARR this coming fiscal year. Again, thank you for your time. And with that, I'll turn it over back to Billy.

Thank you, Mike. So no question that Beonic was not in great shape in FY '23. There have been too many historical acquisitions that had not been fully integrated causing an enormous amount of technical debt and also cultural debt and process debt and financial debt. There is insufficient operating leverage to fully enjoy SaaS margins as you would expect of a business of this type. And in spite of having an installed base that's quite impressive over 10,000 venues at that time, it still wasn't able to reach any sort of operating leverage. So the first critical data point that I want to draw attention to as was announced in today's results is an $8.9 million EBITDA swing from FY '24 to FY '26 to $4 million EBITDA result in FY '26. It's a data point that I'm very proud of, and I think it is by far the clear signal of the work that's been done right across the business. We've enjoyed a 17.2% EBITDA margin and 78.4% gross margins across the company. We're also operating cash flow positive. We're expecting further improvement in margins in FY '27 and from -- those are from ongoing improvements in our operating leverage. The secured facility of AUD 4.3 million was retired on time in January 2026. Since FY '23, there has been a clear trajectory in the numbers and the results that we are seeing today. In spite of having pretty flat revenues, and if anything gone backwards slightly since '23 resulting from the churn of unprofitable and low margin revenues including some acquisitions that were previously made with Causely and Blix also which were exited in FY '24. We are projecting top line growth in FY '27 of around 9% year-on-year and margin improvement to just shy of 80% gross margin. Also producing $20 million of ARR by the end of FY '27. It's worth noting that Beonic's gross margin is already within the top tier of SaaS businesses with a 75% to 80% range, where Salesforce is currently at 77%. So we feel again, very proud of that. That's an incredible achievement. I want to spend a little bit of time just talking about the Beonic business and the addressable market. In the slide, I referred to Beonic's target customer as a retail venue, store, mall or airport. And in many ways, we see those venues as being actually quite similar. It is a huge fragmented and compounding base of customers at 18.9% a year. That's retail broadly. There is no scaled incumbent, and our rivals serve one sensor or one type of venue only. Fragmentation is an opportunity for a business like ours. We are 80 people, very agile and quick to move. So let me just talk a little bit about how the Beonic platform actually works. We collect data from sensors, and I'm going to hand over to Marc, who can go into a little bit more detail. We collect data from sensors such as people counting sensors, which are quite ubiquitous in retail store environments, LiDAR assist fast spinning laser devices that create a three dimensional view of physical space, WiFi and more recently, CCTV. We unify all of that sensor data along with third-party data and our own AI and we add that to the operators -- we add to that the operator parameters, their rules, their thresholds, their service levels. And we present that data back to the customer in a way that I'm going to show you at the very end of the presentation, along with a series of instructions to them regarding things like staffing, specific performance thresholds, breaches of those thresholds, both historical real time and projected. I want to bring some life to that in a couple of ways. So for instance, in a very large retail chain that we support, we provide store-by-store performance benchmarks that they can use to give feedback to the store management of any particular high performing or low performing store. We normalize their performance data including till receipts for things like footfall and other factors. In airports, we balance staffing against certain targets such as queue times to avoid overservicing queues. In an airport, a 12-to-15-minute queue is a very bad thing for the passenger, but a 1-minute queue for less is a terrible thing for the airport because the cost to serve goes through the roof, and we want to help them avoid that. They want to meet their service level ambitions, and we help them balance those conditions. That's particularly the case for instance in our U.S. airport customers, where they have to pay the TSA, a US$190 an hour for the time they spend [indiscernible] airport and we can allow them to send direct messages to the TSA to flex that staffing level up and down based on known conditions provided by Beonic. In a mall environment, we provide evidence to help rent adjustments for tenants. So we provide supporting information and we also provide [ accreditations ]. And we measure the throughput of places like bathrooms and almost any public space that allow our customers to set cleaning schedules to actual traffic conditions, as well as closed loop NPS again that avoids expensive overservicing of those facilities. All up, when dwell time is up in a retail context and the cost to serve the passenger, shopper, visitor is down, those venues make more money, and that's what they come to Beonic for. Let me just hand over to Marc, who's going to provide a bit more context.

Thanks, Billy. So a core objective over the last year was really to unify the technology behind the Beonic platform. This transformation has led to a single spatial data pipeline and a unified customer experience. This allows us to take data from any sensor and calculate any metric for different industries and all our customers. We know that LiDAR, whilst working incredibly for complex environments like airports, is just too expensive for our retail customers and our new platform allows us to use their existing hardware, primarily security cameras to generate the same level of value as we can for LiDAR for airports. If you want to just move to the next slide? So whilst Beonic has a long history in computer vision and computer vision systems, it's really the recent advancements in AI that have really allowed us to develop a next-generation camera solution, which we call Beonic Vision. It was built in 6 months. It is now live with customers, and it's capable of generating both the flow analytics, which is the core value of our platform, but also incredible advanced analytics such as retail funnel conversion and queue abandonment. So we have it live in an existing retail chain in Australia. And as well as counts, we're looking at queues. We're looking at POS, where we have [ staff or POS ], and we can calculate the ratios between staff members and queuing customers, and we can look at the abandonment from those queues. So people that join the queue but leave because it's too busy or too long as well. So we've had huge interest across our whole portfolio of customers, both retail airports. Airports are also interested in Vision because it allows them to expand into areas such as the retail areas as well as the security and immigration areas that which is where we deployed traditionally. And that's why I'm here in Narita, they are interested in a hybrid solution. They are interested in looking at LiDAR metrics for the immigration areas, but also really looking at how we can use Vision like across the whole airport to bring an incredible amount of value to them for an optimized amount of cost. So super excited. We are ready to hit the ground -- hit the ground running and get this shipped and scaled over the next 12 months.

Thanks, Marc. And I want to congratulate Marc for having built a tremendous technology team, the R&D function at Beonic is, I believe, world-class and the products that they're shipping, the features that they're shipping for our existing base of over 10,000 customer venues is a proof point of that. Let me just dwell a little bit on why airports. So for a long time though we have talked about airports has been a very attractive target of customer base and we're thinking increasingly about airports really is just malls with very high friction at the entrance. And our job is to help manage that friction to achieve the maximum possible retail dwell time at the minimum possible cost to serve. Airports already operate very high yielding mall sties over 3.3x revenue per square meter of yield meaning they are high functioning, they have got a captive audience and often times with holiday shoppers or holiday travelers, they are ready to spend. The airports are increasingly dependent on non-aeronautical revenue. So over 40% of their [ all up ] revenue is non-aeronautical that is largely from the retail mall and quick service restaurants. And there is an incredible amount of pressure on airports to growth their footprint to accommodate increasing flows of passengers, which tend to double every 10 years or so. And so, it is a experience across individual stores, malls, and also those airport entries that give us incredible level of defensibility globally. We face no single competitor, who operates across those sectors and we not faced no single competitor, who can work across the range of devices that we operate and especially and in particular, like [ you've seen ] devices meaning existing technology that's been installed. So I want to talk again about the team that we've assembled. I'm very proud of this team. We've done a really good job in 3 years, we've worked super hard. Alongside our Chief Operating Officer, John Rankin, who's been in the business for -- since 2016, but who will exit in November this year, we do have an incredible bench of talent. We have one remaining open role in this leadership team, which is the VP of Marketing and the VP of Marketing will work alongside our agency, The Garden to build the Beonic brand to be recognized as a retail strategy leader that it is. Many of you, some of the -- our investors who might consider themselves long suffering from back in the Skyfii days will have realized that the business transition from Skyfii to Beonic. But in truth, much of the market did not. We were forced to rebrand the business when confronted with a trademark issue in the U.K. over the use of the word Sky. And we made a snap decision or that snap decision was made in 2023 to rebrand Beonic and it was done very hastily and a lot of the value of Skyfii was left behind. That is job #1 for our new VP of Marketing. Although in addition to attracting a great suite of talented leaders to the business, we have also entirely rebalanced our spend to focus on product-led growth, increasing R&D as a percentage of labor spend from 23% to almost 50%, albeit the overall labor costs are lower for the business as a whole. The balance sheet has been cleaned up, and we now have no secured debt. We are cash flow positive from operations, and that is a $1.4 million turnaround based on FY '25. Also, where the transformation really shows up is in margin and earnings growth. We had only a 5.5% increase in revenue resulted in a 53% swing in earnings growth. So for FY '27, our guidance is that exit ARR of around $20 million and that is 15% up year-on-year, revenue up 9% to $25.3 million, this is guidance, whilst improving EBITDA margin to 19%. There are contributions from our new Vision product, which also has a incredibly healthy pipeline, has made a very fast start in the short amount of time. The Morocco deal that Mike mentioned was our biggest deal ever signed, plus improved customer retention that also supports that guidance. From FY '23 to FY '26 has been a really challenging journey for the business. We've emerged a leaner, stronger business, and it's my assertion that we are poised to have our best year yet in FY '27. We have a tremendous team in place that I've told you about today, an unrivaled customer base and a product offering that is unmatched by any competitor all the way across retail, and this is the largest commercial arena in the world. I want to thank you for joining the call today and provide an opportunity now to ask any questions that you may have.

[Operator Instructions] I can start by asking a question that was asked prior to the beginning of the call, which was, do you think investors who have supported this company over a long period will ever see a return on their investment? And if so, when? That's a tough question. So look, I hope having watched the presentation, this question was asked prior to the presentation. I hope having watched this presentation, you might share my confidence that the business has truly turned a corner. It has been a tremendous journey of transformation over the last 3 years. and that we are now very much through operating leverage, through margins, we're now seeing a very healthy business emerge. And it is my assertion that FY '27 will be the best year yet, and I truly hope that our investors feel the same way. Whether or not those investors will see a return on their investment, that's very hard to predict. And I'm not about making long-term predictions, but I'm very confident in where we are at today. I have many questions coming through on the chat. Let me ask this one. What are your medium-term goals for the business? In fact, a number of people have asked a very similar question. Can it be $50 million to $100 million in revenue over the next 5 years? Look, internally, we very much have strong ambitions for the business that are not misaligned with your suggestion of $50 million to $100 million in revenue. Long-term predictions are very hard to make. But based on our suggested transformation that it is now largely complete and that in FY '27, we'll enjoy a 9% increase in revenue as well as further improvements in margin. Again, it's my assertion that we are well on our way. Someone has asked about the pipeline of forthcoming opportunities. Look, we talk about a $37.1 million qualified pipeline and over $6 million of which is in the Vision product. We also have very, very large deals that we don't tend to consider qualified pipeline until we are in the final selection process of an RFP. But I think there's 2 ways to think about pipeline in a business like ours. 10,678 venues in 58 countries means by far our greatest opportunity at the lowest acquisition cost is for us to sell to our existing base of customers. And so it has been a strategy of ours since the consolidation of our platforms into a single spatial stack that we build features primarily to sell to our existing base of customers. You can do the math with over 10,000 venues and the amount of revenue that we have today around $23 million, the average revenue per user and average revenue per venue is relatively low. But we have a billing relationship and a technology relationship with those venues, and they are primed for us to upsell and expand those venues with new technology features such as NPS, such as Vision and such as the other products that we're shipping. So I feel very good about the pipeline for new logos, but I also feel incredibly good about our ability to both retain and expand the existing customers that we have on the platform. Marc or Mike, if you have any thoughts that you want to contribute at any time, please feel free just to jump in. Question is, do you anticipate a revenue split between the first half and second half of FY '27? Look, FY '27, to some extent, is about the people that we've hired recently to help post transformation accelerate the business from a sales and marketing point of view. There's going to be a lag, no question. We have our new VP, our Global VP of Sales joining us in mid-October, [indiscernible], very experienced sales leader -- and no question, he's going to take around until Christmas time to hit the ground and actually start to have an accelerating effect. I'm very confident that he'll make a big difference to the business. He will take over from the good work that John Rankin has done to build pipe. We have many customers already in consideration, but there will be a lag. So I expect H1 to be softer than H2. As such, yes, I expect a revenue split between first and second half, but I do expect to see acceleration through the middle of the year. There's a question -- I'm going to hand over to Marc, and apologies because you can't see this question, but what are the benefits you're now seeing come through from the unified platform?

So for a stock, it is a consolidated technology platform. So it is easier, faster for us to work on, to ship new features on. We don't have to replicate functionality in different parts of the system. So from a team acceleration perspective, it's providing us to just go faster, which is amazing with more confidence. It is also allowing us to add new spatial sensors to the offering without adding additional work into the core platform itself. So Vision is an amazing example of this. So like right from the start, we've done a lot of work on standardizing the spatial platform for LiDAR. And then when we made the decision to put offer down with Vision, there was a very quick inflection point, where we knew that we could just use all the existing single stack that we'd used for LiDAR, which is incredible. So a lot of the Vision platform was already built because we've already built a single-stack LiDAR platform, which is incredible. And that just allows us to look forward and look at other sensors that we can add to the platform to add more utility, thermal sensors, door sensors, like all those kinds of sensors can now be run through the single stack and be available to everybody. So prior to having a single stack, there was a lot of technology that was specifically related to WiFi or specifically related to people counters or LiDAR and delivering value to each one of those customer sets involve multiple pieces of work, and now that's all a single piece of work. We've unified the design system. We've unified our reporting platform, the way we do maps. So any feature we now add for an airport on a 3D map is now available to the -- like a shopping mall in a precinct. So yes, it's just allowing us to deliver value much, much quickly -- much more quickly than we were able to [indiscernible].