61.4k subscribers, $3.1m revenue and 1.4 quarters of funding

Subscriber growth collides with a short cash runway

Spacetalk Ltd (ASX:SPA) is growing its Mobile customer base, but the quarter exposed the cost of getting its software-led transformation off the ground. Active Mobile subscribers rose 20% year-on-year to 61.4k, while quarterly revenue fell 32% to $3.1 million and net cash used in operating activities reached $3.8 million.

The company ended 30 September with $5.2 million in cash after completing its $10 million placement. That balance equates to 1.4 quarters of funding at the reported operating cash outflow rate, with no unused finance facilities available. Spacetalk says it does not expect cash outflows to remain at that level, but any improvement depends on cost reductions, product launches, network migration and customer adoption.

TPG and Vodafone agreements move into execution

The quarter was the first full reporting period after Spacetalk signed binding agreements with TPG Telecom (ASX:TPG). The arrangements cover the migration of Spacetalk Mobile to TPG’s wholesale network and a Vodafone Australia co-branded family safety and digital wellbeing offer powered by Spacetalk’s platform. The company says the network deal should improve wholesale economics and give it more flexibility to design customer plans.

The agreements build on the TPG MVNO agreement, which was reported as supporting a shift towards recurring revenue. Spacetalk says the Vodafone arrangement includes contracted minimum recurring software fees from its first year, although the timing of revenue and cash receipts depends on contractual commencement terms, delivery of the co-branded App and customer adoption. A separate non-binding memorandum with a UK telecommunications operator remains at the discussion stage, with no monetisation model finalised.

Revenue declines as devices and legacy products run off

Device revenue plunged 62% year-on-year to $648,000 after printed circuit board and component shortages extended manufacturing lead times. Spacetalk said some customer orders were fulfilled after quarter-end and attributed the disruption to industry-wide demand from artificial intelligence and data-centre infrastructure, as well as supply interruptions associated with the conflict in the Middle East.

Recurring revenue made up 79% of quarterly revenue, up from 62% a year earlier, but recurring revenue itself fell 13% to $2.4 million. Mobile revenue increased 4% to $2.0 million, while App revenue dropped 43% to $294,000 and Schools revenue fell 68% to $101,000. The company plans to exit the Schools business in the December quarter; its ARR had fallen to $400,000 from $1.4 million a year earlier.

New products and cost savings carry the next phase

Three new device variants are scheduled to launch progressively from the December quarter, with expected device gross-margin improvement of approximately 10 percentage points or more compared with existing products, subject to product and sales mix. Spacetalk has also identified approximately $3.5 million in annualised cash cost savings, which it says are being implemented progressively through FY27 and were only partly reflected in September-quarter payments.

Capitalised development investment rose to $1.1 million from $800,000 a year earlier as Spacetalk worked on its App, platform, data systems and technical integration for the TPG and Vodafone arrangements. The company also plans a pilot of its Sibyl predictive health and fall-safety product in the second half of FY27. The immediate test, however, is whether improved device margins and new software fees arrive quickly enough to narrow the gap between the company’s cash burn and its available funding.