Pentanet Limited (ASX: 5GG), a Perth-based telecommunications and cloud gaming provider, has reported a solid Q1 FY25, driven by significant growth in its 5G subscriber base, strategic network expansion, and robust performance in cloud gaming. The company’s focus on 5G infrastructure and profitability enhancements is beginning to yield results, with a 51% quarter-on-quarter increase in 5G subscribers to 605 users. Consolidated revenue rose by 3% to $5.4 million, as gaming revenue surged 10% for the quarter, bolstered by ad-supported features and higher-tier gaming plan upgrades.
Pentanet’s Managing Director, Stephen Cornish, commented on the company’s momentum, stating, “In Q1, we maintained our growth trajectory, led by the telecommunications business, with a 51% QoQ increase in net new 5G subscribers. We successfully negotiated a stock swap to change the inventory on our balance sheet to accommodate more 5G expansion. This will allow us to double our 5G coverage this financial year... while significantly reducing our cash burn.”
5G Expansion and Network Efficiency
Pentanet’s growth strategy is heavily focused on expanding its private 5G network to capture high-margin, ‘on-net’ subscribers, who remain connected through Pentanet’s proprietary infrastructure rather than leased networks like nbn®. During Q1, Pentanet secured a stock swap agreement with a supplier, obtaining additional equipment for nine 5G tower upgrades. This agreement provides 5G customer-premises equipment (CPE) for 423 premises, facilitating growth without substantial cash outlay. As part of its ongoing expansion strategy, Pentanet plans to deploy 25 new base transceiver stations across these nine high-demand sites, which will increase the company’s 5G coverage footprint and add capacity for an additional 3,000 subscribers by Q2FY25.
The company’s churn rate demonstrated improvement, with on-net churn dropping from 1.43% to 1.21%, as more customers shifted to Pentanet’s high-speed 5G plans. Although off-net churn rose slightly due to price adjustments on lower-speed tiers, overall churn remained stable at 1.32%.
Pentanet also recorded stability in its average revenue per user (ARPU), holding steady at $93, with growth among higher-speed plan subscribers. Its average recurring revenue per user (ARRPU) increased slightly to $89, reflecting strategic shifts toward higher-margin on-net services. The company’s telecommunication revenue climbed 2% to $4.9 million, underpinned by subscriber growth and a resilient ARPU.
Strong Gaming Revenue and Growing Cloud Gaming Market
Pentanet’s exclusive partnership with NVIDIA continues to pay dividends, with its GeForce NOW cloud gaming platform generating a 10% QoQ revenue increase, reaching $0.5 million. This growth has been attributed to the introduction of ad-supported queue revenue and the discontinuation of the Basic plan, which prompted a shift to premium plans. Pentanet reported a 7% rise in gaming ARPU to $14 as more users upgraded to higher-tier plans, especially in the popular Ultimate tier that offers high-performance gaming experiences on-demand. This transition to premium memberships supports Pentanet’s broader strategic focus on driving profitability within the gaming segment.
High-profile game releases such as Black Myth: Wukong and Space Marine 2 increased user activity among Ultimate plan subscribers, reinforcing demand for high-resolution cloud gaming services. Additionally, Pentanet’s CloudGG membership grew 5% quarter-on-quarter, reaching over 621,000 users. The company anticipates further ARPU growth as more users transition to higher-tier plans and engage with the expanding CloudGG game library.
Financial Overview: Improved EBITDA Loss and Cost Management
Pentanet’s Q1 financial performance saw its consolidated gross profit rise by 2% to $2.4 million, supported by steady telco gross profits and a 56% increase in gaming gross profit to $0.1 million. Telecommunications gross profit margins were slightly impacted, dropping from 48% to 47% due to higher wholesale costs; however, targeted price adjustments on lower-tier off-net plans helped minimise this effect. Overall, Pentanet’s recurring revenue now comprises 96% of its total revenue, thanks to increased service adoption and strategic pricing.
Operationally, Pentanet reduced its EBITDA loss by 52% quarter-on-quarter to $0.4 million, including a one-off $0.25 million restructuring cost that is expected to reduce ongoing employee overheads by $375,000 for the remainder of FY25. In line with its commitment to cost efficiency, Pentanet lowered overhead expenses by 10% to $2.8 million, with reductions in employee expenses and marketing costs.
Cash Flow and Financial Position
Pentanet reported cash receipts from customers totalling $5.4 million, a 2% quarter-on-quarter increase. Net cash used in operating activities fell by 15% to $0.6 million, with positive adjustments from cost-saving initiatives despite the one-off restructuring expense. Cash flow from investing activities totalled $2.4 million, with notable outflows for its fourth annual payment of $1.6 million on a 5G spectrum licence and additional network equipment purchases.
The quarter concluded with a cash balance of $1.8 million, supplemented by available financing facilities of $6.8 million. Pentanet’s stock swap arrangements and equipment financing provide the company with ample resources to pursue its 5G expansion plans in FY25.
Strategic Outlook for FY25
As Pentanet advances through FY25, the company aims to double its 5G network coverage, enabling higher service catchment with low capital outlay. The company’s prioritisation of 5G subscriber growth, combined with a disciplined capital expenditure approach, supports Pentanet’s goal to achieve EBITDA breakeven in the second half of FY25.
In the gaming segment, Pentanet plans to capitalise on the demand for high-performance cloud gaming by driving ARPU growth through premium memberships. The company’s integration with NVIDIA’s Graphics Delivery Network (GDN) also opens new revenue streams, enabling Pentanet to support applications beyond gaming, such as digital twins and augmented reality.
Pentanet’s quarterly performance underscores a firm growth trajectory supported by strong subscriber growth in telecommunications and cloud gaming, strategic cost management, and ongoing expansion into high-margin areas. With a robust pipeline of new 5G installations and premium gaming service demand, Pentanet is positioned to capture value and drive shareholder returns as it scales its network and gaming capabilities in the coming quarters.
