• Pentanet delivered improved financial results in FY22 with continued strong growth in revenue and margins:
o Revenue of $16.8 million, up 54% on FY21
o Gross profit of $7.4 million up 55% on FY21
o Gross margin increased to 44% (FY21 43%)
o Underlying EBITDA -$4.4 million (FY21 -$2.4 million)
o Reported Net Loss after Tax of $7.9 million (FY21 Reported Net Loss after Tax of $13.7 million,
including one off costs of $8.4 million related to the IPO funding and staff equity payments).
• Telecommunications subscribers were up 34% to 16,674 with churn remaining low at 0.95%.
• On-Net (Fixed Wireless) customers made up 39% of total subscribers at 30 June 2022.
• Recurring revenue increased by 59% to $15.2 million, representing 90% of total revenue in FY22 (FY21 87%).
• Balance sheet has significant growth funding capacity with $13.4 million in net cash at 30 June 2022, after significant investment in expanded network capacity and cloud gaming in FY22.
• Cloud gaming presence in Australia continued to grow rapidly with over 182,000 users as at 30 June 2022.
Focus on boosting recurring service revenue in FY23.
Pentanet Limited (ASX:5GG, Pentanet or Company) has delivered improved financial results in FY22, with strong subscriber growth in the telco business continuing to drive increased revenue and gross earnings for the 12 months ended 30 June 2022.
Telco subscribers were up 34% to 16,674 driving 59% growth in revenue to $16.8 million and 55% growth in gross profit to $7.4 million, demonstrating improving financial results as the business continues to build scale. Gross margin for the period was 44% versus 43% for FY21. Reported Net Loss after Tax for FY22 reduced to $7.9 million from $13.7 million in FY21 (FY21 included one off costs of $8.4 million related to the Company’s IPO and retiring pre-IPO funding).
Pentanet Managing Director, Mr Stephen Cornish, said that Pentanet’s improved FY22 financial result was
achieved during a period of significant investment in network capacity and in establishing the first to market cloud gaming business.
“The last 12 months have seen Pentanet secure its place as a leader in both telecommunications, cloud gaming and esport in Australia. We seized the opportunity to bring new products and technology to market, and now the foundations have been laid for accelerated sustainable growth across our complementary business sectors.
“At the same time the business continued to deliver substantial growth in subscriber numbers, which generated a strong uplift in revenue and gross profit. Earnings quality remained high with recurring earnings making up 90% of revenue and the churn rate remaining below 1%.
“I’ve said it before and I want to reiterate for you today – Pentanet is so much more than just another telco. With our ongoing focus on impactful innovation, we are not only contributing to the development of Australia’s digital future but also improving and increasing the ways we connect digitally and IRL.
“We aim to continue the growth of our active audience by attracting and retaining subscribers, while deploying cutting-edge technology to our owned and operated wireless network to deliver next-level customer experience. By continuing to invest in our business in line with our strategy, we will continue to increase margins across our suite of complementary products and services. We are wholly focused on delivering the best customer experience and network performance to drive positive shareholder returns.”
OPERATING AND FINANCIAL UPDATE
The Reported Net Loss after Tax for the Period was $7.9 million versus a loss of $13.7 million in FY21. The FY21 loss included one-off significant items of around $8.4 million associated with the IPO, pre IPO funding and staff equity payments.
Earnings before interest, tax, depreciation, and amortisation (EBITDA) were ($4.4) million compared to ($2.4) millio in the prior financial year. This reflected increased operating expenses primarily around investment in people, marketing and network coverage expansion efforts.
Subscribers, revenue and gross profit review The Company increased its subscriber base by 34% YoY by adding 4,188 new subscribers to the network organically, resulting in 16,674 subscribers at 30 June 2022. This was somewhat impacted by capacity constraints on the Company’s traditional fixed wireless network in the second half. These are expected to ease with the commercial launch and deployment of neXus resulting in upgraded and extended network coverage.
Notwithstanding the capacity constraints, growth in the subscriber bases was the primary driver of 54% YoY revenue growth to $16.8 million.
Revenue quality remained high with recurring revenue of $15.2 million accounting for 90% of total revenue, and growth in recurring revenue outpacing total revenue at 59%. Customer churn remained low at 0.95%, relating mainly to customer relocations from lower magin-off-net NBN customers. Pentanet maintains strong customer satisfaction results across internal and external feedback metrics.
The Average Recurring Revenue Per User (ARPU) on recurring revenue increased from $80 in FY21 to $82 in FY22, driven by a marginal increase in demand for higher speed tier plans. ARPU for off-net nbn™ services improved by 2%, from $71 to $73. Fixed wireless services ARPU remained consistent at $87 for FY21 and FY22.
Gross profit is up by 55% to $7.4 million. The Company has seen a further gradual improvement in gross margin from 43% in FY21 to 44% in FY22, helped mainly by the strengthening margin of on-net fixed wireless services from 83% in FY21 to 86% in FY22.
The Fixed Wireless service offering provided strong margin growth. Margins increased from 83% in FY21 to 86% in FY22, further highlighting the benefits of the on-net service offering and the potential for future margin expansion as the Company’s coverage increases.
6,535 on-net fixed wireless customers accounted for 39% of subscribers in FY22, down from 43% in FY21. The decline was mainly impacted by lower growth of on-net subscribers in the third and the fourth quarters of FY22, as demand for on-net services remained substantially above the Company’s traditional fixed wireless network capacity.
Conversion of subscribers from off-net to on-net remains a focus for the Company
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