Pentanet share price rips 10% higher on double-digit profit growth

Shares are rocketing after Pentanet posted its earnings today.

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Key points

  • Pentanet posted its FY22 earnings today with a strong set of results
  • Subscriber base grew which also fed a double-digit increase in revenue and gross profit
  • The Pentanet share price has climbed more than 6% higher in the past month of trade

The Pentanet Ltd (ASX:5GG) share price is blasting into the green today following the release of the company's FY22 earnings results.

At the time of writing, shares in the internet, gaming and telecommunications provider are trading 10.29% higher at 37.5 cents apiece.

Double-digit revenue and profit growth

Key takeouts for the quarter include:

  • Revenue of $16.8 million, a gain of 54% on the previous ear FY21
  • Gross profit of $7.4 million, another 55% improvement on FY21
  • Gross margin increased by 100 basis points to 44%
  • Net loss after tax of $7.9 million, an improvement from the FY21 reported net loss of $13.7 million
  • Balance sheet well positioned with $13.4 million in net cash at 30 June 2022
  • Recurring revenue increased by 59% to $15.2 million – now 90% of total revenue in FY22

What else happened for Pentanet?

Telco subscribers were up 34% from the previous year to 16,674, with low churn of around 0.95%. Fixed wireless customers now comprise 40% of total subscribers at the end of FY22.

As a result, revenue grew 54% and gross profit also expanded by 55% year on year to approximately $7.5 million.

The bolus of this revenue – 90% to be exact – is now derived from recurring revenue sources.

As a result, Pentanet came in with a net loss of around $8 million, an improvement from last year's after-tax loss of $13 million.

Moreover, average recurring revenue per user (APRU) also increased from $80 to $82 in FY22, whilst fixed wireless APRU remained steady year on year at $87.

Management commentary

Speaking on the announcement, Pentanet managing director Stephen Cornish said:

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.

Pentanet share price snapshot

In the past 12 months, the Pentanet share price has slipped more than 43% into the red, but has climbed 17% higher in the past month of trade.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Pentanet Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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