IKE - IKE GPS Group

[Left Field]

FY24 Q1 results out........not as rosey as some anticipated..... a slow down or just a well signalled seasonal glitch..... the market will decide.


https://www.nzx.com/announcements/415241

Highlights:
� Q1 FY24 revenue of ~$5.6m (-18% vs pcp).
� Subscription revenue of $2.5m (+36% vs pcp)
� Transaction revenue of $2.1m (-45% vs pcp)
� Q1 FY24 gross margin approximately of ~$3.4m (-11% vs pcp), with a gross margin percentage of ~61%. (up from pcp of ~56%)
� Total cash and receivables as at 30 June 2023 of $18.1m, comprised of $13.7m cash and $4.4m receivables, with payables of $1.1m and no debt.

Commentary and outlook

IKE CEO Glenn Milnes commented, "The Q1 period saw strong continued momentum in underlying software subscription revenue growth, but as signaled in prior updates & communications we had a temporary and well signaled slow-down in transaction revenue. This was primarily due to the engineering practices of an underlying utility where two larger IKE customers are building fiber networks. This specific situation has been addressed, and based on guidance from these and other long-term customers we expect transaction volumes to build strongly throughout FY24. We have not changed our growth outlook from a broader FY24 perspective.

[winner (n)]

It's the story that counts Leftie ....and what a story eh

[Minimoke]

""The Q1 period saw strong continued momentum in underlying software subscription revenue growth, but as signaled in prior updates & communications we had a temporary and well signaled slow-down in transaction revenue."

So not a lot of surprise here. I guess we always look to periods on period growth - but like every company there will be ebbs and flows.

I still like the pipe line and potential market. 

And as always - cash on hand, debt free and receivables exceeding payables.

Next-generation structural analysis software product, PoleForeman, sounds very positive if they can execute. A x5 increase in subscription revenue sounds too good to be true. So I won't get excited until I see results in  1 1/2 years.

[Left Field]

It's the story that counts Leftie ....and what a story eh

Yep all depends on the future story unfolding. Do we believe IKE's assurances or not?

This version of the update includes more info and some pretty charts for you Winnie.

https://ikegps.com/wp-content/uploads/2023/07/230726-IKE-Q1-FY24-Performance-Update-Final.pdf

The following provides IKE's perspective on past Q1 TOTAL Revenue.....

Q2 FY24 revenue better impress!

[Untamed]

While I still have faith in this company, I have to say, it pisses me off that they pick and choose which Q&A to respond to, after these presentations. I think I have submitted a question every single time, and not once have they ever answered it. That is something that disappoints me greatly. I could understand it if they were inundated with questions, but they were not.

On a more positive note, I am not too concerned about the drop in transaction revenue. The explanation given is acceptable when one understands that the transaction revenue is related to customers' operations, rather than to IKE's. If there are hold ups or problems with customer A's project at any given time, that is obviously going to impact on the "per asset" transactions, and is really out of IKE's control. If it was subscription revenue that was down, that would be an entirely different matter, and a major concern.

[Left Field]

Paraphrasing comments from today's briefing....

"Cash and Balance sheet (strength) are our No1 Priority."

"we are aiming at positive EBITDA this year....(and beyond.")

"our customers forecast/expect 'substantial growth' over FY23."

" there are indications subscription income will grow substantially (materially)  in the next 12 to 18 months."

It seems that lots of story with a heavy dose of wriggle room is the way to go.

[winner (n)]

Paraphrasing comments from today's briefing....

"Cash and Balance sheet (strength) are our No1 Priority."

"we are aiming at positive EBITDA this year....(and beyond.")

"our customers forecast/expect 'substantial growth' over FY23."

" there are indications subscription income will grow substantially (materially)  in the next 12 to 18 months."

It seems that lots of story with a heavy dose of wriggle room is the way to go.

Burnt through $4m of cash in 1st quarter ...wouldn't want to do that for many more quarters

[Gerald]

Had a look and gosh IKE's been listed for 10 years and poor shareholders are down 35% or so.

[winner (n)]

Had a look and gosh IKE's been listed for 10 years and poor shareholders are down 35% or so.

Never reported a profit .....accumulated losses $75m

But that's the past .....good story about the future

[Left Field]

Never reported a profit .....accumulated losses $75m

But that's the past .....good story about the future

Just like Xero.... (Xero accumulated losses a mere $433m.)

The new 'normal'.

[Left Field]

Forsyth Barr's view of IKE's update.......FB see SP value to $1.21

"IkeGPS (IKE) reported a subdued 1Q24, with short-term weakness in Platform Transactions partially offset by continued growth in Platform Subscriptions. After +93% growth in FY23, total revenue in 1Q24 fell -18% to NZ$5.6m, as compared to 1Q23, driven by the significant, but well signalled, temporary slowdown in billable transactions. Transactions by number fell -30% to 77k while revenues sunk -45% against the same quarter last year to NZ$2.1m.

This transaction slowdown reflects temporary delays in fibre network deployments from two of IKE's largest customers. On a positive note, subscription revenue climbed +35% to NZ$2.5m, with customer growth exceeding our expectations. Group gross margin recovered to 61% in 1Q24 from 54% in 1Q23, however, we consider this entirely from the change in product mix reflecting a higher proportion of Subscription revenues (~84% gross margins) over Platform Transactions (~24% gross margin in 1Q24 versus an average of 32% over the last three years). We retain our FY24 revenue forecast of NZ$38.8m but recognise this requires a solid second half — boosted by industry tailwinds, continued customer wins, a rebound in transactional revenues and the introduction of the updated PoleForeman product to several of IKE's largest customers. Our blended spot valuation rises +NZ6cps to NZ$1.21 due mostly to the continued expansion of multiples in the peer group.

The fall in transaction volumes was anticipated, but more than we expected. The temporary slowdown in transaction revenue in 1Q24 was not unexpected, given commentary provided by IKE at its FY23 result that 1Q24 could track behind the run rate seen in 4Q23. We note 1Q24 weakness should be viewed in the context of the +193% year-over-year lift in transactional revenues during FY23. The fall in transaction activity relates to two of IKE's larger customers delaying fibre network deployment due to "the engineering practices of an underlying utility" in one of the locations where these networks are being built. We estimate these two customers accounted for a large proportion, if not all, of the -NZ$2.3m decline in transactional revenue from 4Q23 to 1Q24, highlighting customer concentration. IKE has signalled that the issue with these customers has been resolved, and we anticipate transactions will recommence with these customers shortly, however, with some drag on the 2Q23 result.


FY24 outlook remains robust — with a number of promising dynamics at play
Despite the temporary downturn in transaction revenue in 1Q24, the outlook for the remainder of FY24 remains robust. To date, IKE has seen no economy-led weakness in fibre network deployment or electricity network hardening work undertaken. IKE expects transaction activity to rebound strongly into the second half of the year as it has streamlined processes with its two largest customers. Further, IKE's subscription business is exhibiting strong momentum. IKE added 15 new enterprise customers in 1Q24, which would equate to +16% annual customer growth if this rate holds. The company has also begun to roll out its next-generation PoleForeman product within its Structural business segment. The new PoleForeman product runs on a "per-seat" subscription model that IKE expects could "generate more than five times the level of subscription revenue per annum per customer... vs the legacy solution". We also consider it possible for IKE's partnership with one of the largest data companies in the world to contribute revenues before the end of FY24, after two and a half years of co-development on AI driven automation."

[Untamed]

Zero reason for concern. Business as usual.

[winner (n)]

Just like Xero.... (Xero accumulated losses a mere $433m.)

The new 'normal'.

And just like Xero one day IKE will come right and the share price will take off and will head to 50 bucks, maybe even 100 bucks

[Left Field]

Smart acquisition, expected to be accretive immediately. Imbedding IKE into engineer education/training, however considered not 'materially significant' to IKE's main revenue streams.

https://www.nzx.com/announcements/415624

[Minimoke]

Smart acquisition, expected to be accretive immediately. Imbedding IKE into engineer education/training, however considered not 'materially significant' to IKE's main revenue streams.

https://www.nzx.com/announcements/415624

I Like it. You train people. They become aware of your products. They become advocates for your products. Great long term strategy.