New Zealand-based ikeGPS Group Limited (ASX:IKE), part of the IT sector, is involved in developing, selling and marketing integrated GPS data capture devices, related software and consulting solutions. The company is committed to serving communications and electric utility sectors.
Record Revenue of NZ$7.3 Million in Nine Months
On 27 January 2020, ikeGPS Group announced its 3QFY2020 results for the nine months to 31 December 2019.
The company registered record revenue of approximately NZ$7.3 million in the nine-month period. Gross margin during the period was noted at NZ$5.2 million, while gross margins as a percentage of revenues came in at 72%. In the nine months ended year-to-date period, the company’s EBITDA stood at roughly (NZ$1.5 million). Total cash and receivables at the end of 31 December 2019 were noted at NZ$6.9 million.
In the third quarter, demand for the company’s platform remained strong. New contracts worth nearly NZ$3.2 million were signed in the third quarter. There was some seasonality in IKE Analyze transaction volume, primarily on the back of North America winter conditions, which resulted in slowing certain pole projects during the quarter.
Nonetheless, the company remains positive and expects significant transaction volume and revenue recognition growth in the coming quarter as compared to the third quarter based on the contracted backlog.
Key Takeaways: The company’s revenue mix has shifted substantially in the last twelve months period. Notably, more than 70 percent of revenue is anticipated to be driven by transaction & recurring sources in the financial year 2020, which is important in terms of boosting revenue quality and consistency to further drive growth prospects.
During the FY2019 period, the transition to the IKE Analyze business model also got completed, a move that was essential for shareholders and customers. The completion of IKE Analyze aids the company in delivering enhanced value to its customers by speeding various aspects of the network assessment along with make-ready-engineering process. IKE Analyze has requisite for deeper, longer term customer (& revenue) relationships.
Hence, IKE Analyze was rolled out by the company in the second half of financial year 2019. This solution has the potential of delivering a higher revenue profile per customer on a long term basis. Additionally, with the expansion of this solution, the company is registering growth in both revenue and gross margin.
Markedly, the company reported high customer retention rates, which were noted at more than 90%, thereby aiding subscription revenue growth. The aforesaid factors have helped in gross margin percentage growth, which is expected to be more than 70% in FY20F as compared to 51% in FY18.
Growth in Communications and Utility segment (Source: Company’s Report)
The third quarter represented a productive period for the company’s business.
Acquisition of PLT’s Certain Assets; Cross-Sell Prospects for IKE Analyze
IKE, during the period, acquired certain assets of PowerLine Technology Inc. (PLT), which is one of the top structural analysis software companies in North America. The company expected positive post-acquisition synergies.
The key customers of PowerLine Technology renewed their annual software licenses in November and December 2019. This translated to revenue of approximately NZ$0.6 million, which will be recognised over 12 months period. Further, IKE Analyze cross-sell prospects have merged with the customers of PLT.
NZ$6.5 Million Oversubscribed Capital Raising Completion
During the period, the company concluded an oversubscribed capital raise of NZ$6.5 million. The capital raising aided the company with the acquisition, as well as boosting its sales & delivery team with the addition of six new hires in the team.
New Board and Management Additions
ikeGPS Group also updated the market with several new appointments. During the quarter, the company announced the appointment a new addition to the Board, with Mr Mark Ratcliffe joining as a new independent non-executive director (INED). Mr Ratcliffe formerly worked as Chief Executive Officer of Chorus. Moreover, he was appointed as Chief Operating Officer (COO) Wholesale & Technology of Telecom New Zealand.
Further, the company also appointed US-based Chris Ronan as its new Chief Marketing & Brand Officer. Chris Ronan formerly played the marketing leadership roles with Dell, Ford Motor Company, Southwest Airlines, and Emirates Team New Zealand.
US-based Norwood Keel was appointed to the position of SVP Product. He formerly played the director-level product roles at Microsoft and Trimble, as well as VP and General Manager of Digital Solutions at Vaisala. Mr Keel’s rich experience related to market development, product management and executive leadership that he earned while working with world-renowned players is expected to aid the company in delivering solutions to the target market.
Revenue Expansion Opportunities
During the period, the company witnessed revenue growth in the core communications & electric utility segment. This led to the development of a significant new market opportunity for IKE Analyze product around developments of 5G-based mobile network.
Notably, the company stated that it is focusing on revenue growth opportunities across the largest communications and cable companies in the US market and is expanding new pipeline sales prospects.
The company expects promising results in FY20 and beyond, on the back of ongoing transactional revenue, market timing coupled with forward contracts. Further, the company remains on track to win additional customers by providing faster, cost-effective and high-quality network-based solutions.
IKE Financials at End-FY2019
Balance sheet of the company for the FY2019 period ended 31 March 2019, witnessed an increase in net assets, on the back of increase in total assets. The total shareholders’ equity reported at the end of FY2019 came in at NZ$9.363 million.
The company reported a rise in operating cash outflow to NZ$4.035 million in FY2019 from NZ$2.809 million in FY2018, on the back of increase in cash paid to suppliers and employees.
Cash used in investing activities stood at NZ$1.048 million. The main drivers of the cash outflow were the purchase of property, plant and equipment, along with the additions to intangible assets.
The net cash inflow from financing activities stood at NZ$5.869 million. The primary factors of cash inflow were proceeds from issuance of shares on listing.
By the end of FY2019, the company had net cash and cash equivalents worth $3.475 million.
Interesting Read: ikeGPS Group Released FY2019 Results; Positive Overall Momentum
IKE Delivers Over 58% in 6 Months
The stock of IKE has generated a positive return of ~58.18% and ~74% in the last six months and one-year period, respectively. The shares of IKE traded last on 28 January at a price of A$0.870. IKE has a market capitalisation of A$88.78 million and approximately 102.04 million outstanding shares.
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