Beam Communications Holdings Q3FY24 Report

Beam Communications Holdings Ltd (ASX: $BCC) has reported a solid Q3 performance with revenue of $9.3m, marking a 5.5% increase from the previous corresponding period (PCP). The growth was primarily driven by the increased sales of ZOLEO hardware and higher ANZ sales of core Beam terminals, handsets, and accessories. The company's annualised subscription revenue has surged by 38% on the PCP, reaching $2.6m, including a 45% increase in ZOLEO royalty revenue. At the end of March 2024, Beam had $2.7m cash at bank and anticipates this balance to further increase in the final quarter of FY24 due to robust free cash flow performance.

Executive Commentary on Q3 Performance

Q3 was a solid quarter with revenue growth of 5.5%. Beam's higher margin subscription revenues are growing strongly. We are confident with the growth trajectory and cash generation of the core business, noting that profitability from period to period remains impacted by the lumpiness of hardware sales, albeit this impact is reducing due to growth in subscription revenues. Beam maintains a strong balance sheet with ample cash reserves, providing us liquidity to support the current business plan and the ZOLEO arbitration. Consistent with our guidance from February 2024, we expect to generate positive free cash flow in both the second half and full year, net of arbitration costs.

Outlook and Conclusion

Beam Communications Holdings has reaffirmed its outlook for the second half of FY24, expecting weaker revenue than the PCP due to order deferment into FY25. The company anticipates normalised EBITDA to be within the range of $3.1m to $3.6m, excluding ZOLEO arbitration costs of around $1.6m. Positive free cash flow, including approximately $3m for capital expenditure, is expected for FY24 and the second half. The potential conclusion of ZOLEO arbitration and continued strong growth in recurring revenues are anticipated catalysts for the second half of FY24. Beam looks forward to providing further updates on the arbitration process, with a finding expected in mid-2024.