NVIDIA agreement extension sends Pentanet shares soaring 80pc

NVIDIA agreement extension sends Pentanet shares soaring 80pc

Screenshot courtesy of GeForce NOW, via Facebook.

Telecommunications and cloud gaming company Pentanet (ASX: 5GG) has seen its share price turbocharged today after a partnership agreement with artificial intelligence computing giant NVIDIA (NASDAQ: NVDA) was extended to New Zealand while its close relationship in Australia was reinforced.

Pentanet will be the envy of many other tech small-caps after achieving the breakthrough with NVIDIA, now the world's fourth-largest company, in a deal that sent its share rising by 80 per cent to 9 cents per share.

Pentanet's initial public offering (IPO) in January 2021 was underpinned by an innovative infrastructure model that fixes wireless technology to the roofs of homes and businesses, but also the prospects of its Australian plans for an NVIDIA cloud gaming technology that had only just gone out of beta mode the year before.

The Perth scale-up was the first company to roll out that technology - known as GeForce NOW (GFN) - in Australia, removing the need for expensive gaming hardware and allowing gamers to play supported titles in the cloud, streaming gameplay directly from the company's RTX Blade Servers.

Pentanet has since amassed more than 530,000 members, serviced by infrastructure located in Perth and Sydney, and it is with this momentum that it executed an amendment to the agreement with NVIDIA that "formally recognises New Zealand as a serviceable territory, with a pathway to add neighbouring territories" including Indonesia.

The amendment also allows Pentanet to continue being the exclusive distributor of GeForce NOW in Australia. For every US$1.5 million ($2.3 million) purchase of GFN POD (point of delivery) infrastructure, Pentanet will be able to extend its GFNA exclusivity in Australia in six-month increments.

The company now also has a solid base of paid memberships, effectively covering the fixed monthly recurring costs incurred in the early stages when the service was launched, with Pentanet forecasting significant growth for the offering in the coming years.

"Now that we have demonstrated success with NVIDIA, we are moving to a Capex deployment model more in-line with our requirements, and retain a first right of refusal to continue being the sole distributor for GFN in Australia," says Pentanet managing director Stephen Cornish, who founded the company in 2017.

"With over half a million members now part of the CloudGG ecosystem, Pentanet continues to demonstrate the growing appetite for cloud gaming in our territory."

NVIDIA's vice president of GeForce NOW, Phil Eisler, says Pentanet has fostered a deeply engaged cloud gaming community in Australia with GeForce NOW Powered by CloudGG.

"Its commitment to delivering GeForce RTX 3080-level performance that elevates experiences for gamers nationwide and underscores the company’s dedication to pushes the boundaries of gaming and internet connectivity," Eisler says.

In its interim half-yearly results released late last month, Pentanet reported 7 per cent year-on-year revenue growth to $10.4 million, with the bulk of that sum coming from its telecommunications business at $9.5 million - a figure that was up 3 per cent.

Most of the company's growth has come from its much smaller gaming division, where revenue was up 88 per cent to approximately $900,000.

The group is still unprofitable with a net loss before tax of $7.6 million in FY23, although in the December half its net loss was greatly reduced year-on-year from $4.8 million to $2.7 million. When it comes to the gaming segment, Pentanet emphasises it has maintained positive EBITDA.

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