Pentanet Turns EBITDA Positive, Accelerates 5G Growth and Cloud Gaming Revenue
Pentanet has reached a key financial milestone by turning EBITDA positive in H1 FY25, driven by strong 5G subscriber growth and cloud gaming revenue expansion. The company is on track to double its 5G network coverage this year, underpinning future growth.
- Pentanet reports positive EBITDA of $0.6m in Q2 FY25, reversing prior losses
- Consolidated revenue rises 7% year-on-year to $11.1m, with gross margin expanding to 49%
- 5G subscribers grow 17% quarter-on-quarter to 709, with network coverage set to double in FY25
- Cloud gaming revenue surges 31% year-on-year, driven by pricing adjustments and subscriber growth
- Net operating cash flow turns positive at $0.9m in Q2, supported by cost efficiencies and stock swap deals
Pentanet Hits EBITDA Positive Milestone
Pentanet Limited (ASX: 5GG) has marked a significant turning point in its financial trajectory by reporting positive EBITDA for the first half of FY25. The company swung from a $0.4 million EBITDA loss in Q1 to a $0.6 million positive EBITDA in Q2, reflecting a $1 million quarter-on-quarter improvement. This milestone underscores the effectiveness of Pentanet's strategic focus on expanding its 5G network and optimising its cloud gaming platform.
Revenue and Margin Growth Across Segments
Consolidated revenue increased 7% compared to the prior corresponding period, reaching $11.1 million for H1 FY25, with a 6% quarter-on-quarter rise to $5.7 million in Q2. Gross profit followed suit, growing 6% year-on-year to $5.2 million and 17% quarter-on-quarter to $2.8 million. Pentanet’s consolidated gross margin expanded by 5 percentage points to 49%, driven by improvements in both telecommunications and gaming segments. Telecommunications gross margin rose to 48%, supported by recurring revenue growth and NBN margin optimisation, while the GeForce NOW cloud gaming segment saw its gross margin jump to 66% due to pricing adjustments and operational efficiencies.
5G Expansion and Subscriber Gains
Central to Pentanet’s growth story is its accelerated 5G network rollout. The company has upgraded 14 towers to 5G with five more planned for completion in the second half of FY25, aiming to double its 5G coverage within the financial year. This expansion supports a 17% quarter-on-quarter increase in 5G subscribers, now totaling 709. Pentanet’s churn rates improved slightly, with overall churn down to 1.2% and on-net churn to 1.1%, reflecting stronger customer retention amid network enhancements. The company’s subscriber base also grew modestly, with total subscribers increasing 2% quarter-on-quarter to 17,732.
Cloud Gaming Momentum
On the cloud gaming front, Pentanet’s GeForce NOW platform continues to gain traction. Gaming revenue surged 31% year-on-year to $1.1 million for H1 FY25 and 27% quarter-on-quarter, driven by strategic pricing changes and subscriber growth. The average revenue per user (ARPU) for cloud gaming rose 23% quarter-on-quarter to $17. The company’s focus on optimising NVIDIA Cloud GPUs and retiring lower-tier memberships has enhanced profitability and user experience. High-profile game releases such as Path of Exile 2 and Call of Duty: Modern Warfare III have further boosted engagement, particularly among premium subscribers.
Improved Cash Flow and Cost Management
Pentanet’s operational improvements translated into positive net operating cash flow of $0.9 million in Q2, a notable turnaround from a $0.6 million outflow in Q1. The company’s cash balance stood at $2.2 million at quarter-end, supported by available financing facilities of $6.8 million and a stock swap arrangement that secured 25 5G base stations and 423 customer premises equipment units, reducing capital expenditure needs. Cost efficiencies, including lower employee overheads and supplier expenses, contributed to disciplined financial management and sustainable expense control.
Looking Ahead
Pentanet’s dual focus on expanding its 5G network and scaling its cloud gaming platform positions it well for continued growth and profitability. The company’s ability to leverage its ultrafast 5G capabilities alongside a monetised CloudGG platform could drive further subscriber gains and revenue diversification. However, the success of these initiatives will depend on execution and market dynamics in both telecommunications and cloud gaming sectors.
Bottom Line?
Pentanet’s positive EBITDA and strategic 5G expansion set the stage for accelerated growth, but execution risks remain as competition intensifies.
Questions in the middle?
- How will Pentanet’s 5G coverage expansion impact subscriber growth and ARPU in the coming quarters?
- What are the risks and opportunities in scaling the GeForce NOW cloud gaming platform amid rising competition?
- Can Pentanet sustain its cost efficiencies while investing heavily in network upgrades and marketing?
