IKE - IKE GPS Group

[Hectorplains]

To be fair, it's a bad update either, and certainly not a yIKEs update.

Subs revenue has shown good growth and their cash situation is strong.  It's that trans revenue that needs further explanation - it's all very well to dismiss a 60% yoy drop as "outsized customer activity" but why?  Similarly, with the trans rev guidance of, "a wide range of potential growth profiles and as such represents higher risk – both upside and downside." Can anyone explain why this is so potentially lumpy? 

[Untamed]

Subscription revenue is set in concrete - it is predictable income. Transaction revenue is unpredictable in terms of timing, as this income is what customers pay (in layman's terms) when they "do stuff" using the IKE platform. Given the nature of the sectors IKE supports eg: electricity and telecommunications, IKE has zero control over when the customer "does stuff." There will be transaction income, but my understanding is that it cannot really be accurately projected by IKE - the customer decides when and how often they "do the stuff" that generates the transaction income.

Terrible explanation, but this is why transaction income is so lumpy and unpredictable. Which is why IKE is trying really hard to build subscription revenue, as that is the one they can control.

For example, an electricity company might have a plan to run a check on a section of poles, using IKE tools/platform (which is what they get access to with their subscription). But the weather might turn to shit, there could be a storm, or there could be some other delay which means they don't get that project done this month. Those things are out of IKE's control. They do know that at some point the project will happen, but the timing of that, is out of IKE's hands.

With regards to the previous year's "outsized customer activity" - again, I am guessing a customer had a significant project on during that year - major investment in whatever it was - which was a one-off, and not "usual activity" that occurs every year. So that project would have generated a significant amount of transaction revenue, which was out of the ordinary.

Anyway, this is my take on it, OR I could be full of shit and know nothing   

To be fair, it's a bad update either, and certainly not a yIKEs update.

Subs revenue has shown good growth and their cash situation is strong.  It's that trans revenue that needs further explanation - it's all very well to dismiss a 60% yoy drop as "outsized customer activity" but why?  Similarly, with the trans rev guidance of, "a wide range of potential growth profiles and as such represents higher risk – both upside and downside." Can anyone explain why this is so potentially lumpy? 

[Hectorplains]

Subscription revenue is set in concrete - it is predictable income. Transaction revenue is unpredictable in terms of timing, as this income is what customers pay (in layman's terms) when they "do stuff" using the IKE platform. Given the nature of the sectors IKE supports eg: electricity and telecommunications, IKE has zero control over when the customer "does stuff." There will be transaction income, but my understanding is that it cannot really be accurately projected by IKE - the customer decides when and how often they "do the stuff" that generates the transaction income.

Terrible explanation, but this is why transaction income is so lumpy and unpredictable. Which is why IKE is trying really hard to build subscription revenue, as that is the one they can control.

For example, an electricity company might have a plan to run a check on a section of poles, using IKE tools/platform (which is what they get access to with their subscription). But the weather might turn to shit, there could be a storm, or there could be some other delay which means they don't get that project done this month. Those things are out of IKE's control. They do know that at some point the project will happen, but the timing of that, is out of IKE's hands.

With regards to the previous year's "outsized customer activity" - again, I am guessing a customer had a significant project on during that year - major investment in whatever it was - which was a one-off, and not "usual activity" that occurs every year. So that project would have generated a significant amount of transaction revenue, which was out of the ordinary.

Anyway, this is my take on it, OR I could be full of shit and know nothing   

Thanks, Untamed.  Market seems happy enough with the ann, up just under 5% on a down day.

[Untamed]

I listened to the webinar, and while transaction revenue was a little disappointing, I understand why. Glen talked about transaction revenue being "volatile" and I think that is what I was trying to say in my previous post. That volatility is simply the nature of transactional activities, and I don't see it being anything to worry about. The income will come. IKE just can't always know when.

He mentioned they have developed a new product - Spike SignPilot - I didn't fully understand exactly what this is so will go back and have a closer look later, but a new product means new income.

IKE is still bringing an average of one new subscription customer onboard every week, and the uptake of the new Pole Foreman product, is reassuring.

They are still doing everything they have said they would do. The sheer scale of what they are endeavouring to achieve means it is going to take time. I see no reason why they won't achieve their goals. I just need to remind myself to be patient.

[Untamed]

OK, Spike Sign Pilot is:

A Site Survey Management Solution for the Sign and Graphics Industry.

So it must be a version of the original Spike product (link below), customised specifically for the Sign and Graphics industry.  Not a lot of info.

https://shop.ikegps.com

[Untamed]

I don't hold much faith in Simply Wall Street, so take everything they say with a big grain of salt. But thought their latest analysis (post the recent IKE results) was interesting.

Their "Fair Value" price target is $2.22. As much as I would be over the moon to ever see that, it seems well and truly ridiculous to me as things stand right now.

Also interesting to see that their IKE analysts are:

Bell Potter    James Filius
Forsyth Barr Group Ltd.    Lindsay James
MST Financial Services Pty Limited    James Lindsay

[Hectorplains]

I don't hold much faith in Simply Wall Street, so take everything they say with a big grain of salt. But thought their latest analysis (post the recent IKE results) was interesting.

Their "Fair Value" price target is $2.22. As much as I would be over the moon to ever see that, it seems well and truly ridiculous to me as things stand right now.

Also interesting to see that their IKE analysts are:

Bell Potter    James Filius
Forsyth Barr Group Ltd.    Lindsay James
MST Financial Services Pty Limited    James Lindsay

This explains the problem with Simply Wall St valuations.

[Left Field]

IKE building up expectations with more encouraging news.

https://www.nzx.com/announcements/430636

Five new IKE PoleForeman subscription agreements are being put in place with major U.S. Electric Utilities, with an expected Total Contract Value (TCV) of ~NZ$4m, and Annual Recurring Revenue (ARR) of NZ$1.3M.

Since the launch of this next-gen product in late 2023 the Company has added TCV of more than NZ$12m, representing ~NZ$4m of ARR.
+ These new contract wins include the largest parent electric utility group in the U.S. by revenue, who serves power to ~ten million underlying customers, and a Fortune 500 group that serves power to ~seven million underlying customers in the northern U.S.
+ In total, contracts to date will result in ~3,700 engineers using the software on a subscription basis across 47 utility groups (28 existing customers that have been upsold and 19 new customers).

[Untamed]

This is great news. Thanks for sharing.

This bit makes me even happier:

An expectation that within the next 12-18 months, eight of the ten largest Investor-Owned Utilities in the U.S. will be standardized on IKE PoleForeman for their distribution network design. More broadly, IKE expects that dozens of additional utility & engineering customers will transition to the platform in the short and medium-term given the market acceptance of IKE PoleForeman as an industry standard, and particularly given the market leading capabilities of this new product.
+ These customers represent a highly sticky footprint. This structural analysis & design product is core to the network design process within these businesses, often with hundreds of engineers using the product every day. As such, it is a difficult solution to replace, and long-term retention rates exceed 95%.
+ IKE therefore has an expectation for a significant life-time value multiple beyond the TCV levels currently being closed.

IKE building up expectations with more encouraging news.

https://www.nzx.com/announcements/430636

Five new IKE PoleForeman subscription agreements are being put in place with major U.S. Electric Utilities, with an expected Total Contract Value (TCV) of ~NZ$4m, and Annual Recurring Revenue (ARR) of NZ$1.3M.

Since the launch of this next-gen product in late 2023 the Company has added TCV of more than NZ$12m, representing ~NZ$4m of ARR.
+ These new contract wins include the largest parent electric utility group in the U.S. by revenue, who serves power to ~ten million underlying customers, and a Fortune 500 group that serves power to ~seven million underlying customers in the northern U.S.
+ In total, contracts to date will result in ~3,700 engineers using the software on a subscription basis across 47 utility groups (28 existing customers that have been upsold and 19 new customers).

[Untamed]

Well, the market definitely likes this announcement. Sitting at 48cents currently. Regardless of what the share price does, I think IKE has turned a corner, and are now well and truly "on the way." Sometimes I need a gentle reminder of why I hold this company. Nothing has changed. They are doing what they set out to do, and achieving a great deal more, in their huge and untapped market, than I think we give them credit for.

[Left Field]

TA looking auspicious.... with the SP 'bottom' not likely to be revisited.

As customer gains translate to revenue gains it's onwards and upwards from these levels.

[lorraina]

https://smallcaps.us14.list-manage.com/track/click?u=ac3a9fdb691a7372f8b04b033&id=91cadf13fb&e=6c1ad5cc63

[Left Field]

An interesting article that helps background the delays that have frustrated IKE's revenue goals and the legislative changes being made to hopefully improve the situation.


https://www.washingtonpost.com/business/2024/05/13/power-grid-transmission-lines-electricity/


"The commission unanimously approved a measure Monday that allows it to exercise those new powers if projects stall in 10 national transmission corridors to be identified by the Energy Department. The department's draft plan for the corridors include some 3,500 miles of power lines across the country.

But tens of thousands of miles of new lines need to be built by 2035 to keep up with demand and meet climate goals, according to the Biden administration.

The amount of new transmission lines installed in the United States has dropped sharply since 2013, when 4,000 miles were added. Now, the nation struggles to bring online even 1,000 new miles a year."

[Dolcile]

So IKE is currently valued by the market at $70m.  Has anyone had a go at trying to work out what the value of the addressable market is and what percentage share IKE could realistically expect to win.

I have read the recent contract announcements and they really aren't that large.  They are going to need a lot of them to make this a profitable company.

Thanks in advance.

[Left Field]

Tough year for IKE (as signalled ) -  though, increased losses & cash burn higher than I expected. ..... FY25 sounding more hopeful.... BUT FY25 better be good... otherwise I can see the need for more capital.

https://www.nzx.com/announcements/432074

+ Revenue of ~NZ$21.1m (-31% vs pcp).
+ Subscription revenue of ~NZ$10.7m (+21% vs pcp).
+ Transaction revenue of ~NZ$7.3m (-61% vs pcp).
+ Gross margin of ~NZ$12.7m (-22% vs pcp), with a gross margin percentage of ~60% (up from pcp of ~53%)
+ Net loss of ~NZ$15m (vs FY23 net loss of ~NZ$7.8m).
+ Total cash and receivables as at 31 March 2024 of NZ$15.4m, comprised of NZ$10.2m cash and NZ$5.2m receivables, with payables of NZ$1.2m and no debt (up from the position 31 December 2023 of NZ$8.0m cash and NZ$7.2m receivables, and flat against the cash position 30 September 2023).

FY25 Outlook

Subscription revenue in FY25 is expected to grow strongly, at +50% or greater vs pcp to ~$16m per annum or greater. This outlook is based on the ongoing growth of our core IKE Office Pro subscription product, which has seen >30% CAGR over the past three years and with ~95% customer retention. It is also based on the the success of the launch of our new IKE PoleForeman product, with more than NZ$12m of TCV closed since its Q3 launch and an additive subscriber base of >2,500 users.

Transaction revenue in FY25 is expected to grow, but with a wider range of potential growth profiles and as such represents higher risk – both upside and downside. Transaction revenue at IKE over the past three years has grown at a ~45% CAGR, although FY24 levels were down against FY23 due to FY23 seeing outsized customer activity. Based on guidance from long-term customers we expect transaction volumes and associated revenue to build into FY25.