Good morning or good afternoon, and welcome to the ikeGPS's Q1 of the financial year, 2024, 2025, sorry, performance and update and outlook. From the company today, we have the CEO, Glenn Milnes, and the company CFO, Brian Musfeldt. Before I pass over to Glenn and Brian to go through the presentation up on your screen, I'll just remind you, you can submit questions through the Q&A panel, the button at the bottom of your screen, and we'll get to those post the end of the presentation. Glenn, I'll hand it over to you. Thanks.
Thanks, Simon. Thanks everyone for taking the time to join this update call. It was a very positive quarter for the business, and we'd like to touch on the headlines. Yeah, also introducing Brian Musfeldt, our CFO. Brian and I are both based out in our Colorado, USA headquarters. So what we'll do is get to the key charts first. Please take note of this important notice. We'll look at performance headlines. There's some near-term outlook items that we would like to highlight. And there's some further detail in this presentation around our addressable markets and our products and value proposition, which many of you are familiar with, so we'll pulse through that quite quickly. So moving on to some of the performance charts that we released this morning.
Yeah. Great. Thanks, Glenn. Yeah, so platform subscription revenue continued to show, you know, consistently strong growth with a 3-year CAGR of about 41%, growing to $3.2 million for Q1 of fiscal year 2025. The growth was driven by a combination now of our IKE Office and IKE Office products, and of the, through the successful sell-through of our next gen IKE PoleForeman subscription product that we launched back in Q2. So we're excited to report the growth, and the company really does expect this growth to continue in this segment through fiscal year 2025, forecasting approximately 50% growth during fiscal year 2025 in subscription revenue. Next slide, Glenn. Thanks. So starting in Q1 2025, we're now gonna report our exit run rate, our ERR, for our annualized subscription revenue at the end of the reporting period.
In our case, you know, these figures represent the contracted annualized platform subscription revenue of the company at the end of each of the reporting periods. So as of June 30th, we have an exit run rate of just under $13 million, and our two-year CAGR for that ERR was about 35%. And again, we also expect this to continue to grow this year, with the end of the year expected to be closer to 50% period over period at the end of the year. You know, this growth is again driven by our IKE Office and our IKE Office products, but it's also now being generated through that IKE PoleForeman and subscription model that we've put in place at the end of last year.
PoleForeman and subscription products have already closed a little over $12 million of TCV since the launch in Q2 of 2024.
I think the other metric again, that we'll now be reporting quarter-over-quarter, ties to the number of subscription seat licenses. We've seen really substantial growth in this metric. If we look at PCP and also the FY 2023 financial year, it really evidences the transition we're making in terms of our products that we're bringing to market and the business model we're selling. So again, really substantial increase in subscription seat licenses. And, you know, this represents many thousands of engineers at utilities and communications companies who are using our products for design and assessment of distribution networks.
Yeah. So our platform's transaction revenue showed a, shows a three-year CAGR of about 23%, but they were slightly lower in Q1 of 2025 as compared to 2024. And, you know, this decrease is really just due to the strong activity from key communication customers in Q1 of 2024. In turn, you know, the margins from this platform transaction revenue have actually improved substantially. You know, if you look at Q1 of 2024, we were about 24% margin, and in Q1 of 2025, we're showing 41% margin. And this improvement's really just been due to the operational efficiencies we've talked about the past few quarters, that really are allowing us to deliver on these revenues a little more effectively. So, you know, based on the contracts in place and, you know, the guidance from our long-term customers, customers are...
You know, we expect the transaction volumes and the associated revenues from these platform transaction revenues to build again in Q2 and through the rest of the year, fiscal year 2025.
Yeah, adding to that, we've got that confidence based on contracts that have been closed through the Q1 period, that we build into delivering and billing through Q2 and Q3. And the last item is bringing it all together in terms of total revenue. We've had a three-year CAGR of 31%, and just based on product mix, the blue bar represents subscription revenue. In this chart, the green bar represents transaction revenue. And just due to that product mix, we're seeing our gross margin continue to strengthen. It's at 70% as of Q1, FY 2025.
And as Brian mentioned, we do expect a healthy growth rate through the rest of this financial year based on contracts that have been put in place. I think this is the key metrics table that we publish every quarter. I won't go through this line by line. It's a bit hard to read, but this presentation's available later today, so you can again look at it, or it's also in the document that was released this morning. And, you know, the takeaways really tie to the key things that we've already talked about in the previous graphs.
Yeah, and I think the one other key takeaway we haven't covered is just really cash and receivables at the bottom there. So, you know, cash receivables were about $14 million at the end of June, comprised of, you know, $10 million in cash and $4 million in receivables. Just like to point out, you know, that's consistent with our cash position at March 31, you know, year-end, and up from our cash position on December 31 of $8 million.
So if we just touch quickly on some other update and outlook items, there are just probably two things we were keen to highlight for this call, given time constraints. But it really is to do a look back and also a look forward around where we're getting to with IKE PoleForeman. So remember, this is distribution network design software. We're one of the three standards in North America for the design process, and CAD design of networks. We compete with two other firms. Again, the recap is we acquired the assets of the PoleForeman business in late 2019, for a little over $3 million. At that time, it had about $0.3 million of recurring revenue.
We've built the next generation product. We had the help of a customer council that had the standards directors from many of the very largest utility customers and communications companies in the North American market. That really helped us, I think, to get our product market fit correct. We've sort of seen the impact of that. Total contract value, which we mentioned, sits at more than $12 million now, across a range of existing customers, but also some important new ones. Although we don't publish a lifetime value estimate, these customers are extremely sticky in nature. They become extremely reliant on these workflow processes. We think we've built something that's the best in the market.
So we expect the customers we're winning to last for very long periods of time, with extremely low churn. We're gonna win more major customers in the near term, and ultimately, by the end of this year, we should have eight of the 10 largest utilities in the North American market standardized on the IKE PoleForeman standard. So, you know, the other part is, I think the industry is recognizing the strategic nature of assets like this, and similar design assets for the electrical grid. And, you know, some of the activity around acquisitions, et cetera, around comparable assets, has been something that we think is relevant. The second item, again, that we're excited about, we've invested substantially into building AI, as this hopelessly overused term, obviously everywhere at the moment.
But we've worked really hard to build very specific automation capability for designing and engineering a distribution electrical grid, and we're, you know, excited to be bringing new products to market this quarter. There's an example solution here around being able to assess an entire network area for survivability, for attaching fiber or more electrical grid capacity. And there's other automation tools that we will be inserting into existing products that will just make our customers go much, much faster and be much more productive in terms of very specific workflows. So that's coming to market. You know, adds to the potential subscription footprint, if we're successful, selling these in or upselling into our existing customer footprint. So it's something certainly to look out for in terms of innovation this year.
From here, I will greatly accelerate because many of you have seen these slides, but we put them in, you know, in case we've got folks on the call that aren't as familiar with our business. But I'll push quick from here. You know, we've developed a suite of products to add productivity into the engineering of distribution networks. And so our suite covers the entire life cycle of planning a network, then the digitization or assessment of a network, what you actually already have in the field. Remember, these utilities tend to have, you know, millions of assets that they need to be assessing. And then we've got tools for the design, maintenance, and also for grid hardening or grid resiliency. And lastly, the above are subscription-based products.
We have our IKE Analyze offering, which is where we help our customers do parts of their processes faster with a service and with some technology to accelerate their workflows. It's a big market, more than 3,000 electric utilities in North America, and they've got to make the grid resilient, so it doesn't fail in a storm. They've also got a big problem around adding capacity onto the electrical grid, so they've got to get more than 50% of power in North America onto the electrical infrastructure. And that requires lots of engineering, and our products help improve the quality of these processes.
These are $ billions in terms of the activity in the market, but it's growing, and analysts forecast it's just gonna continue to grow in terms of CapEx and OpEx spend across the North American landscape, just given the age and aging of their infrastructure and some of those problems that we just talked to with, you know, more storms, more capacity requirements. Just a visual representation here of simply how large the North American landscape is. These are the big investor-owned utilities. There's 106 of them. We're in about 32 of them today, and, you know, making strong progress in terms of you know, pursuing these, these really large, slow-moving, but, but extremely sticky customers. And then you go down a level, these are the smaller municipalities and co-ops.
There's 2,800 of them, again, providing power into smaller rural environments, but they all represent sales opportunities for the IKE product set. Again, most of you have seen this, but our footprint continues to expand. We've got 8 of the 10 largest utilities, more than 400 customers subscribing to our platform today, and a total addressable market of more than 5,000 enterprise target accounts. A complementary market opportunity is the fiber industry. So these are communications companies deploying fiber networks across North America, spending a huge amount of capital to... They're in a race to get their networks built and beat their competitors, about 200 comms companies that are fighting to be first or second into any region.
Our products are the same for this group of customers, but the value proposition is all around dramatically speeding up their network deployment process. And there's some metrics here around the level of spend. Things are just continuing to grow and grow in terms of fiber deployment activity. The item that has been slower than what was anticipated three or four years ago is 5G network deployment. It's a much smaller part of this market opportunity for us, but that's the item that hasn't quite gone as quickly. Again, just some example logos here. You might not be familiar with too many of them, but AT&T, most of you will know, the biggest comms company in the world, Crown Castle, the biggest shared infrastructure group in North America, both standardized on IKE.
Some more details here around TAM, which I'll go through quick. In terms of market tailwinds, we're just lucky to be in the right place at the right time. Probably twenty or thirty years of very strong tailwinds sitting behind the problems that we solve. And the biggest, you know, additional item has been the amount of energy that needs to be put onto the grid by 2050 to meet targets and power the, you know, the EV and the data center market from just 20% today. Some examples of what our products look like, this is looking into our software. This is AT&T in Florida, showing, you know, all the submodules or networks where they've assessed assets using IKE.
This is AT&T looking down at their national footprint and some of the projects that they're running, in this case, across about 7 states. So we do span, you know, the coast to coast in terms of the U.S. market. The thing I'm probably, you know, just most pleased with through the last 12 months is what we've done from a team perspective. Just some detail here around some really talented people that we've added through the last year at a leadership and board level. Obviously, a number of ways that we're looking to continue to grow the business in the mid short term and in the long term. We go to market directly with a direct sales group.
So sales team expansion, you know, adding new logos. There's a big cross-sell and upsell opportunity. Once we win a customer with one product, there's other divisions in that business we can sell our broader suite of products to. We've done three. From an inorganic growth perspective, we've done three acquisitions through the last four and a half years. I think all of them have created substantial value into the business. Talked about like PoleForeman previously, and the AI that's coming to market this year. And at the moment, we're just hyper-focused on North America. It's such a large industry opportunity here. But over time, certainly an international market expansion opportunity.
With that, I'll pause, and, Simon, happy to take any questions for myself or Brian can pick up relevant ones.
Great. Thanks, Glenn. Thanks, Brian. First question, just wondering whether you could put a bit more color on the cash flow. Do you expect IKE to need to raise money over the next 12 months?
Yeah, I guess, I guess the short answer to that is no, we don't expect the need to do a cash raise over the next 12 months, as we talked about at our year-end calls. Company's striving to be EBITDA positive in the second half of the year, and so we don't envision a need for a cash raise.
Great. Thanks, Brian. Have industry discussions regarding grid capacity accelerated recently with generative AI or data center trends?
Sorry, Simon, could you please repeat that? I just lost you midway through.
That's all right. Does generative AI demand potentially accelerate the need for fiber or 5G development?
I mean, the biggest requirement from what we're hearing from utilities is the amount of power the data centers need to run those, yeah, to run those data centers, and to run those AI-based tools. And that means the utilities need to put more capacity on their grid. That means, you know, more conductors, more wires, more loading, and that means more engineering, and that's what we support. You know, PoleForeman is at the absolute center of those processes, be it a fiber wire going onto an existing power pole, or be it more grid capacity or grid hardening, so the network doesn't fall over in a storm.
Great, thanks, Glenn. Congratulations on the progress on PoleForeman. How far through the client onboarding are you, of existing clients likely to take on the new offering? And given your comment on it being best of market now, where do you see revenues getting to over time?
Yeah, we've just sequentially sought to convert our client list of about 140 customers using the legacy product. Per the metrics we've released, we've also been closing some important new customers. I think just based on the efficiency and ease of use of this product versus the others in the market. So we're still, you know, early in terms of market penetration. But so far, touch wood, the onboarding process has gone really well. And the feedback on the product, you know, you naturally have some bugs and items that you need to attend to when you launch new software into these huge enterprise customers, but the feedback from the engineers using it has been overwhelmingly positive, which has been great.
Great. Thanks, Glenn. Where, if any, potential upside in FY 25 subscription revenue is likely to come from?
I mean, we're sort of diversifying that subscription revenue base, which Brian talked to. So there are some very large opportunities on the IKE Office Pro side, as we see new customers adopting IKE Office Pro. And then, you know, we have good line of sight to IKE PoleForeman seat license revenues, and some big customers that are yet to formally make the switch, but they are very committed to doing so.
Great. Thanks, Glenn. Can the AI-based products assist with gross margin improvement?
Very much so, yeah, for our customer base and for IKE internally with our IKE Analyze offering. So that's critical. It's about taking as much time as possible out of back office engineering. Engineers are expensive people and from an hourly rate perspective, so you start saving them, you know, minutes and minutes per asset that they're working on, that becomes very meaningful for, yeah, for customers externally and for ourselves internally.
Thanks. So Glenn, I'm just wondering whether you could help us through to understand how much your clients save or gain with using your tool suite, to try and put metrics around that.
Yeah. I mean, we work with them, and I actually, by chance, actually, I was looking at it, doing a call with AT&T this morning, and they ran a lot of productivity tests. And, you know, their data suggests that IKE Office Pro is two times faster and more accurate for field engineering, and it's five times faster in terms of back office engineering. So, you know, automating with software a lot of the manual analysis processes they run. So yeah, very, very substantial savings.
We also, for a lot of customers using legacy workflow practices, which includes, you know, a Hastings stick and some other manual tools for assessing assets, you know, we bring teams down, field teams down from two to one, and, you know, that's very substantial cost out, you know, if you're an engineering company. It's not always a big driver for an electric utility, in terms of the cost out piece, but it's another very clear benefit of our system.
Thanks, Glenn. And how are costs across the business sitting now relative to where you want them to be against your internal view of forecast revenues?
Yeah, I can take that one. You know, we're tracking within our budget of where we expect cost to be. If you remember our business, you know, 80% of our costs are our people, so obviously that's critical to being successful. But as of right now, you know, we're gonna be pretty flat year-over-year, as we've talked about, as far as costs, and we're tracking to where we want to be to get to a bit of positive.
Great. Thanks, Brian. Has the outlook for transaction revenue in FY 25 changed after the first quarter? And do we still expect transaction revenue to grow this financial year?
Yeah. So outlook has not changed. We do expect to grow. You know, we've had some of our bigger customers have returned for Q2 , and a couple other projects have shown up. So right now we're still expecting growth in transactions revenue. As we've talked about, you know, it's our higher, highest risk area when it comes to fluctuations and kind of the band we've reported. But at this point, we're still looking good to see that grow year-over-year.
Great. Thanks, Brian. And just, in terms of comparable assets or other companies, how are they trading, in terms of whether they're listed or how are they transacting, in terms of acquisitions, Glenn?
There's quite a number of examples. I think this space, you know, energy distribution technologies has become a lot hotter over the last year or so, I think, just given those macro-market trends we've talked about. So, you know, we're seeing some of the bigger players, you know, looking pretty hard at how they get a foothold in this space. I mean, just because we've been talking about IKE PoleForeman, there were two highly comparable assets that were acquired over the last 12-18 months, and one was called SPIDA Software. It was acquired by Bentley for a very large number. It's a substantially smaller business than our IKE PoleForeman business is now.
And yeah, there's another transmission design software business called Power Line Systems that was acquired for $750 million. It was about a $35 million revenue business, but highly profitable, and had been in the industry, you know, as a standard for 35-40 years. But they're folks we know well and have worked with and integrated with over the last few years.
Great. Thanks, Glenn. Can you just detail us whether there's any gaps in your product suite, and how much would you have to spend on development to fill those gaps?
Yep. I mean, there's always gaps in a product suite, and we're fortunate to have a really strong customer council and to have quite good relationships with some very safe customers, and they give us very full and frank feedback. So yeah, there are more features and benefits we're keen to put into the product. When we do so, we raise pricing based on value, and you know, that's a big driver with some of this AI capability. For example, you know, it adds to a subscription cost because it takes cost out of a customer's equation.
To the question of how much do we need to invest to continue to add to the product stack, you know, our intent is to keep our research and development costs pretty stable and flat to where they have been for the last two years.
Great. Thanks, Glenn. Just last question: Can you give us an update on your Google partnership and when they will release products to market?
Well, yeah, it's a good question. Google and Google data sits underneath the... For example, the product I outlined earlier in this presentation around network assessment and network planning and viability. So that's taking some of this mass, you know, mass data that's available through things like Google Street View, and running AI over the top of it to, you know, very specific to some distribution network workflows.
All right. Thanks, Glenn. That concludes the Q&A segment. I'll just hand it back to you for closing remarks.
Great. Thank you, Simon. Now, thanks again, everyone, for joining. Brian and I are available anytime for follow-up questions, et cetera. So we appreciate your time, and look forward to staying in touch.
Great. Thanks, guys. Thanks all for joining.