$IKE has landed a new material contract.

IKE wins Subscription Contract for expected $1.5m+ supporting a Customer that is Assessing more than One Million Distribution Assets

ikeGPS Group Limited (ASX/NZX:IKE) or IKE, today announces:

• That it has signed a new subscription contract with a large U.S.-wide infrastructure customer, in this instance supporting a network assessment in California.
• This customer contract is expected to generate approximately $1.5m or greater of subscription revenue in the coming 18 to 24 months.
• This is a contract extension following an initial proof of concept deployment.
• This customer is utilizing the IKE software platform to speed the engineering assessment of ultimately more than one million distribution network pole assets.

IKE CEO Glenn Milnes commented, “The growth across this infrastructure customer further demonstrates the value that the IKE platform provides to communications companies and electric utilities, and our ability to expand the use of our platform over time across customers. The initial contract with this customer is large, however there are opportunities to deliver significantly more IKE capability into this group over time. This customer also represents the new and large market opportunity for IKE in California, with recent regulatory requirements requiring all pole owners to perform a full engineering assessment of their networks. IKE products dramatically increase the speed, quality, and safety for the construction and maintenance of distribution assets. Our broader in-market momentum with existing customers and targets gives us a high degree of confidence for strong long-term growth.”

My Take Away

The next few reports ($IKE follows an end-March FY but provides quarterly performance updates) will be critical to my thesis on this utility SaaS provider. Having grown contracts and transactions strongly through FY22 (which looked like a "breakout year") revenue and platform usage then declined through 3 consecutive quarters in FY23/1QFY24. The explanation was that a major customer was delivering infrastructure in a jurisdiction where the pole-owning utility would not allow the use of $IKE's digital tools. Investors have been assured that as the rollout moves beyond this utility's area, growth would resume.

While good news to see a repeated commitment to growth, the issue raised a question about customer concentration, something on which $IKE's reporting is not transparent.

So today's report is welcome news. Large contracts diversifying the customer base are key to supporting the thesis. It is also good to see proof of concept (POC) trials translating into material contracts. Given $IKE's large list of customer "logos" of the very large US utilities and engineering service firms, the customer concentration issue belatedly dawned on me that many of these "logos" are likely to be in an evaluation phase rather than a deployment phase. Hopefully, more of these POCs will convert over time. So more of today's type of annoucement are key to supporting the thesis.

On the back of abovementioned declines, I have earlier in the year scaled my RL position back to a more modest 1.2% (from 2,5%). One swallow does not a summer make so, while I take today's announcement as encouraging, I'm sitting tight for now and looking forward to further evidence of renewed growth momentum. But it does take time to build a business!

Disc: Held in RL and SM