Beam Communications Posts Positive Cash Flow Despite $3M Arbitration Hit
Beam Communications delivered a positive adjusted free cash flow of $753K in Q2FY25, overcoming a $3 million arbitration expense. The company expects a strong cash flow rebound in the coming quarter driven by cost savings and order timing.
- Adjusted free cash flow of $753K excluding $3M one-off arbitration costs
- Net operating cash outflow of $2.2M due to ZOLEO arbitration expenses
- Recurring revenues grew 36.4% year-on-year, with SatPhone Shop hardware sales up 12.5%
- Cost rationalisation program on track to deliver $2.5M annual savings
- Total available funds stood at $1.3M at quarter end, with positive outlook for Q3FY25
Beam Navigates Arbitration Costs to Deliver Positive Cash Flow
Beam Communications Holdings Limited (ASX: BCC) has reported a challenging yet resilient quarter ending 31 December 2024 (Q2FY25). Despite incurring a significant $3 million one-off cost related to the ZOLEO arbitration process, the company managed to generate a positive adjusted free cash flow of $753,000, marking a $1.1 million improvement over the previous quarter.
The arbitration costs, including a $2.6 million payment to Roadpost Inc., led to a net operating cash outflow of $2.2 million. However, when excluding these non-recurring expenses, Beam's core operations showed robust cash inflows driven by lower operating expenses and strong growth in recurring revenues.
Revenue Growth and Cost Discipline
Beam's recurring revenue surged 36.4% compared to the prior corresponding period, reaching $854,000 for the quarter, or an annualised $3.4 million. This growth was supported by double-digit gains in ZOLEO royalties and airtime sales. Additionally, hardware sales through Beam's SatPhone Shop increased by 12.5% year-on-year to $392,000.
While sales of Beam-branded equipment and OEM devices (excluding ZOLEO) dipped 4.1% year-on-year to $6.6 million, this figure represents a 59.3% increase over the previous quarter, reflecting the timing of orders rather than a decline in demand.
Beam's ongoing cost rationalisation program, initiated in October 2024, is progressing well and is expected to yield annual savings of approximately $2.5 million. Further efficiencies are anticipated from a new employment contract with Managing Director Michael Capocchi, details of which will be disclosed shortly.
Cash Position and Financing
At the end of December 2024, Beam held total available funds of $1.3 million, comprising $1.2 million in cash and $81,000 in undrawn overdraft facilities. The company also secured a $513,000 loan from Adia Venture Limited, linked to non-executive director Carl Hung, on commercial terms.
Despite the short-term cash outflow pressures, Beam forecasts a significant improvement in operating cash flow for Q3FY25. This optimism is underpinned by the absence of further arbitration costs, the timing of new orders, and the ongoing impact of cost-saving initiatives.
Outlook Amid Transformation
Beam continues to navigate uncertainties associated with its transformation program aimed at right-sizing the business. The company remains confident in its ability to sustain operations and meet business objectives, supported by the positive adjusted cash flow and cost discipline demonstrated this quarter.
As Beam moves forward, the market will be watching closely how the company balances growth in its satellite communications offerings with the financial discipline required to stabilize its cash position.
Bottom Line?
Beam’s ability to generate positive adjusted cash flow despite arbitration costs sets the stage for a potentially stronger Q3FY25.
Questions in the middle?
- How will the new employment contract with CEO Michael Capocchi impact future cost savings?
- What is the expected timeline for the resolution of the ZOLEO arbitration’s financial impact?
- Can Beam sustain recurring revenue growth amid ongoing business transformation?