ikeGPS Group Limited

ASX:IKE

ikeGPS Group Limited

ASX:IKE
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$0.950 (0%)
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#406
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Forum Topics IKE IKE IkeGPS Group Ltd General Discussion
shivrak
Added 3 years ago

Well done on a great write up of today's agm @mikebrisy, unfortunately I couldn't make it.

It does seem to be getting decent sales traction at the moment I freely admit, and I would love to buy back in if the business can demonstrate better cost controls in the next report. I'll be on the sidelines until then however – it's just got to show in the numbers before I'm convinced that operating leverage is real.

If so, I'd be happy to buy in at today's prices – or higher even – I just have reservations about Glenn's ability to do it.

After today's pop, currently sits on about 7-8 times sales(?) by my napkin math, so looks too expensive as well compared to the most recent cash burn – which was terrifying at the last report (though I admit, sales are growing very strongly.)

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mikebrisy
Added 3 years ago

@shivrak Yeah, that's why I asked questions today about cost and headcount. From the reply, it sounds like the push last year on investing to build out platform and acquire customers is showing the expected lag effect on revenue growth into FY23, which is what Glenn said when he was pressed on cost growth in FY22. The validation will be in the H1FY23 report as you say. My position is small, but I don't want it to be too small, because if we see operating leverage start to show, with continued strong revenue growth then, even in the current environment, this could soon re-rate to 8-10x if there is a path to breakeven.

Let's wait and see. (I was happy to take your shares off you ... it's not a loan, however. ;-))

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mikebrisy
Added 3 years ago

He has been pushing the key message of "fortress balance sheet" for a while now. With cash of $24m at YE22 and a burn of $10m in FY22, with 160% revenue growth, if there is op leverage staring to show through, then the burn rate will come down quite quickly. If there isn't meaningful leverage, then burn could increase and you'd be right. (The info I got on headcout today is one indicator that cost might be under better control now.)

Keep an eye out for the Q3 report Glenn has promised in a couple of weeks, which will include a statement on cash balance at end-Sept. Its not a full 4C, but a Quarterly update, like they gave in July. That should be a pretty good data-point one way or the other.

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mikebrisy
Added 3 years ago

No it wasn't discussed.

Your observation is valid. Equally, however. I think that with overall revenues still quite small, I wouldn't read too much into changes in margins at the component level, as you'd expect this to bounce around a bit from period to period. For example, for subscriptions, GM was 89% for Q1FY23, vs. 88%FY22 and 92% Q1FY22. Bouncing around a bit, but if it holds at 85-90+%, that's good enough to deliver good SaaS economics. As important for operating leverage is the rate of change of expenses below the GM line - that's why I was so encouraged with the headcount numbers reported in Q&A discussion had only moved modestly since YE22.

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mikebrisy
Added 3 years ago

Hi @shivrak , yes. I’m attending the call this afternoon so I’ll see what Glenn has to say about it.

On cash, remember in 1H they had a significant positive FX effect on their USD to NZD. In Oct-Dec that’s unwound from rate of c. $0.55 to $0.65, so that will have impacted the value of their closing cash. We’ll see if there is any comment on that on the call, but it could account for as much as half the “burn” by my estimate.

%GM decline appears to have stabilised. 53% was the number at 1H. But they say approx.

Good to see strong growth from existing customers, even if only +14% new customers over pcp.

I’ll offer my report after the call later today, but you are right in that we need to wait to FY to see all the moving parts.

12
Wakem
Added 4 years ago

Great interview with Ike, very focussed on opportunity and pathway to profitability by focussing on core competency


definitely on the watch list

7
RobW
Added 4 years ago

Thanks @strawman for the very insightful interview this morning. Have held IKE previously on the basis that they were gaining scale at high gross margin and reaching that point where they would become profitable. A case of buying too early. With that gleaned this morning, diarised to take a first position ahead of their half year results. For others considering entry, liquidity on the ASX is an issue, but that may change if they progress through FY2023.

RobW

13
mikebrisy
Added 4 years ago

Many thanks to @shivrak and @Strawman for setting up the Glenn Milnes discussion. I wanted to post my key takeaways, being things I learned that I had not known from earlier investor calls and presentations.

  • $IKE does not expect to have to raise further capital to support current operations. (Implication: not ruled out for acquisition)
  • Confident of strong growth ("as good as FY22") in FY23
  • Expect to see operating leverage emerge in FY23. (This has not been evident over the last three years.)
  • Some of USA's largest utilities sit on the $IKE's "User Council" (Exelcon, Southern etc.)
  • The 4 players in pole integrity software (i.e. PoleforemanOS) have currently penetrated about 45% of the market (unclear if by # customers or revenue). The race is for the 65% undecided and going deeper into existing customers.
  • $IKE are laser-focused on utilities (poles and wires) and their focus is to innovate to get deeper into this. The size of the US market is so material that for the foreseeable future, they are not looking elsewhere (This is highly commendable.)
  • $IKE expect GMs to expand over time. In balance to this, customers need support to ensure success, so more people come with more customers and it is not a pure SaaS margin. (We'll need to monitor this and it will be trackable through their unfolding operating leverage.)
  • There is a lot of prviate equity sniffing around this space, so perhaps $IKE are most vulnerable in the current market conditions. Nothing we can do about that.(Unsurprising, given the $1.2 trillion infrastructure program.)


Overall, on balance, I came away from the meeting with my convictions somewhat strengthened.

Disc: Held on SM and IRL. Of my speculative holdings IRL, $IKE is my largest.

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Solvetheriddle
Added 4 years ago

@mikebrisy i think your % add up to 110%

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mikebrisy
Added 4 years ago

Yep. Thanks. I was going to reply to correct it, but then I couldn’t remember if it was 65:35 or 55:45 … the danger of not proof reading your posts before hitting return! Good to see the StrawPeople are on it.

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