Good morning, and welcome to ike GPS's first half of financial year 2025 performance update, as released on the NZX and ASX this morning. In the company today, we have the CEO, Glenn Milnes, and the CFO, Brian Musfeldt. Before I hand it over to Glenn and Brian to pulse through the presentation up on your screen, I'll just remind you that you can submit questions through the Q&A button at the bottom of your Zoom screen. Or alternatively, for analysts, you can raise your hand and ask a question verbally. Glenn, I'll hand it over to you. Thanks very much.
Great. Thanks, Simon, and thanks everyone for taking the time to meet. We had our annual shareholders meeting about a month ago. We're keen to talk you through the second quarter of the year, in particular. It's been a really strong quarter for the business, so there's a bunch of exciting things happening, and, you know, continued good momentum. So what I'd like to do is have Brian, our CFO. Brian and I are both based here in Colorado, in our headquarters. Brian will take you through some of the key numbers for eight or nine minutes. I'll do the same in terms of some product updates and product vision, in terms of what's coming. And then would like to open things up to Q&A.
Thanks for all the questions that have already come in. Appreciate the engagement, so keen to cover those to the extent we can. So Brian, if you're able to share the screen, and I'll let you pulse through the numbers.
Great. Thanks, Glenn. Yeah, so starting on slide four, platform subscription revenue continues to show consistently strong growth with a three-year CAGR of 38%, growing to NZD 6.5 million in the first half of fiscal year 2025. The growth continued to be driven by a combination of growth from both our IKE Office and IKE Office Pro products, and the successful sell-through of our next generation IKE PoleForeman subscription product, as well as retention rates of approximately 95% in our subscription platforms. Platform subscription revenue now represents over 53% of our total revenue, and our sales pipeline for new business is strong and growing. The company expects continued growth from this segment, forecasting approximately 40% or greater growth during fiscal year 2025. Next slide.
Starting in fiscal year 2025, we are now reporting our exit run rate, our ERR, of our annualized platform subscription revenue. These figures represent the contracted annualized platform subscription revenue at the end of each reporting period. As of September thirtieth, the company has over NZD 13.2 million in exit run rate, representing a 34% growth year-o ver- year, and we expect this to grow by approximately 40% or greater by the end of fiscal year 2025 as well. And that is, that's gonna be driven by the growth in our IKE Office and IKE Office Pro products, as well as a successful sell-through of our next generation IKE PoleForeman subscription product that has already closed NZD 12.5 million of TCV since its launch in Q2 of 2024. Next slide. Beginning in fiscal year 2025, we've also started reporting our seat licenses.
These licenses each represent an engineer actively using our subscription offerings. Seat licenses have grown over 179% in the last year, and we now have approximately 6,000 active licenses. Seat counts have grown at accelerated pace due to customer additions, upsells, as well as transitioning customers onto a new per-seat subscription model when adopting the new IKE PoleForeman product. To date, 50 customers, representing over 3,000 licenses, have converted to the new IKE PoleForeman product. Next slide. Our platform transaction revenue came in at NZD 4 million for the first half of fiscal year 2025, representing a three-year CAGR of over 20% and a 6% increase over prior year.
In addition, margins from the platform transaction revenue have improved to 107%, from 19% in the first half of fiscal year 2024 to 37% in the first half of fiscal year 2025. This increase is due to software improvements and operational efficiencies made during late 2024. This allows us to deliver on these revenues more cost effectively. Based on the contracts in place and the strength in our pipeline, the company expects transaction volumes and associated revenue from platform transactions to build into the second half of fiscal year 2025, but has consistently stated, timing delivery of these transactions are customer dependent and therefore can be variable. Next slide. This table summarizes our key metrics that we have historically reported over the past few years.
I think we've covered most of the key revenue metrics on this table in previous slides, and I note that the metrics are all tracking in line with our current plans. A few different key items to note, you know, our blended gross margin profile continues to improve, with the first half of fiscal year 2025 coming in at 67%, up from 59% in the first half of 2024. This is driven by improvements in our platform transaction revenue margins, as noted above, and a continued shift in the product mix toward higher margin subscription revenue. We expect this trend to continue into fiscal year 2025 and beyond. Total cash and receivables as of September thirtieth were NZD 11.1 million. That's comprised of NZD 6.8 million in cash and NZD 4.3 million of receivables.
With payables of NZD 1 million and no debt, our balance sheet remains strong. As context, you know, cash has reduced NZD 3 million over the last 12 months, but this is during a period of substantial investment into building five new products, three of which have now been launched. This investment into product development is paying back. You know, a good example of this is IKE PoleForeman. You know, this new product has been in market for approximately nine months, and to date, 84 customers have subscribed to this new platform, of which 50 were existing and 34 are new. The product has generated over NZD 12.5 million in total contract value and has increased IKE's ARR by NZD 4 million. The company intends to continue, you know, developing and investing in our platform development. With that, I will turn it back over to Glenn for a CEO update.
... Thanks, Brian, and Simon, if you can just bounce forward a couple of slides, please, to the PoleForeman slide. Now, I apologize to all those online. I'm on a delayed flight, so I'm operating from my mobile. I can't see the slides necessarily. I did just wanna sort of follow up on a number of items that Brian's covered, so we've been particularly surprised on the upside with what's happened around PoleForeman, so keep in mind, you know, we've built here one of the design standards for the electric utility market for distribution networks, and we've been winning customers at a much faster rate, I think, than what we had anticipated in terms of go-to-market.
So, yeah, I won't repeat the stats and the data from Brian, but the new IKE PoleForeman product's been really well received by our core customers. You know, we truly think we are gonna set the standard for distribution design. So, it's a very privileged position to be in in terms of where we sit now. So we've got, you know, thousands and thousands of engineering designers using IKE PoleForeman today to design software standards. And there's been a few questions around, well, you know, all these storms and hurricanes, et cetera, that have flowing into the United States, you know, how does that, h ow does it impact IKE?
Yeah, I mean, we're sitting behind a lot of the grid hardening and grid resiliency processes across North America now. And we do expect more Tier 1 investor-owned utilities to adopt and standardize on IKE PoleForeman through the coming quarter and through the second half of this year. So, that new product innovation has been tracking really well. As Brian mentioned, you know, 85 customers now have utilities have come on board. 35 of them are new customers. So it's really having an impact in terms of the investment we're making. And then, Simon, if you can go ahead two slides, please, to talk about the other product innovations and I guess market vision that we have tied to what we're doing with artificial intelligence.
AI is a horribly overused term in, in so many places today, but we've spent a lot of time, and we've invested significantly in building automation tools tied to specific workflows around, again, around distribution power utilities. And yeah, we were excited this quarter to get two other new products to market, which have been well received. So the first of these is called Double Wood Detective. These are technical products, but necessarily so. I think the magic of AI is when you can apply them to very specific workflows inside a company and or inside a network. So for us, Double Wood Detective lets us use. We've partnered with Google and a couple of other bulk data businesses.
We're able to go in and tell a utility, you know, remember, these folk typically are managing millions of assets, but we can go in and tell them where they have, double wood or ghost pole or twin pole, situations. It's the very weakest and most vulnerable part of a power network. Go in and tell them kind of where they have a challenge, and where they need to be looking next, to deal with the next storm or the next, you know, wind event or whatever it might be, that they're, you know, staying up at night. So again, you know, really specific capability, but something that applies to the entire industry. There is probably 10 million double wood, pole vulnerabilities across the North American power landscape.
And we can help utilities just go find them and do a better job of detection. Simon, next slide, please. Tied to J oint Use Ticket Automation, this is a related application, but it's actually broader. Most power poles across the North American landscape are sharing infrastructure. So you've got the power at the top, and then you've got all of the other folk that are attaching their communications cables or cable TV or whatever it might be also across the same asset. Again, we've built a system like a whole-of-network scale, whole of North America scale. We're able to screen and look at violation reporting, make-ready construction situations, or pole transfer information.
This is a regulatory requirement for anyone that's sharing any overhead asset in the North American infrastructure sector. So again, this has come to market through this quarter. We drive lots of productivity in terms of accuracy, but particularly here in terms of speed and regulatory compliance. And we have other AI tools that are hitting the market through the second half of this year. Some of which will be going into our existing products, you know, across a very broad customer footprint. So that's exciting because it helps them as customers in terms of their efficiency, but also in terms of how we think about ARPU per user, because, you know, as we keep adding value, we can keep increasing pricing.
But some of these AI tools, which we've invested in over the last two or three years, are now, you know, hitting the market. So yeah, we're really excited about where things are getting to from a technology perspective. Next slide, please, Simon. I think it just goes to appendices. So I'd probably pause there, and I'd be keen to open things up to questions.
Perfect. Thanks, Glenn. Thanks, Brian. I might just allow Forsyth Barr team to talk. Please go ahead, guys.
Good morning, gents, and nice work on the period. A few questions from us, and then we'll probably just hand back and see if there's others. Yeah, we've got five or six. Obviously, 2Q was quite a good period for enterprise customer wins. I understand you're talking about a bit of that PoleForeman effect. Maybe the first one is that second quarter uplift. I think 16 new enterprise customers added. Is that just PoleForeman, really, or is there other things going on?
Thanks, James. It's been a mix. I think many have been tied to IKE PoleForeman, but others have been tied to other products, including IKE Office Pro. So, it's probably, you know, two-thirds IKE PoleForeman, one-third IKE Office Pro. But we keep running it, or we're going faster than one new customer a week. It's probably, you know, one and a half customers a week that are new, who are jumping on.
Yeah, it's a great success, and then maybe just talk, just with regard to the sort of. Obviously, with those numbers, we don't really have a sense of scale or size of those wins, but maybe just talk to the quality of the customers that are coming on and, you know, of the sort of the top hundred investor-owned utilities, just, you know, where you are positioned now as far as penetration.
Yeah, that's a good point. I mean, customers aren't equal, and for those on the call, like, there are more than 3,000 electric utilities across North America, but 110 of them are the big investor-owned utility groups. And it's the same with the engineering companies. You know, you've got the tier one national groups. There's probably 250 of those, plus, you know, a big, long tail of others. So they're not all equal. In the first half of the year, it's been a mix. We just flipped from a competitor, one of the, you know, five largest investor-owned utilities into IKE PoleForeman, I think, based on its productivity benefits. So that's, you know, that's massive.
Then there is a tail for us of engineering service providers that kind of sit behind that number. I think we're at about 40 new customers this financial year to date. So it is a mix for sure. We're growing across some of the bigger communications companies as well that have national footprints. I mean, think of North America as, like, 50 countries. It's not just one country. So these bigger national groups, you know, as you start to grow across those folks, it's obviously a lot more meaningful.
And then, yeah, just with regard to the talk about sort of, PoleForeman, contracted customers, just about what's driving the conversion, for that, and, you know, I assume it's pretty hard to get a sort of large utility across. But, you know, what holds that up, both within your organization and within theirs?
Yeah, they're just very big businesses that have a very established way of doing engineering and their operational activities. So it takes time in all cases to get someone engaged and then to get them to make a change. So we sell with... You know, our messaging with, particularly with IKE PoleForeman, it's around simplicity and clarity in terms of using the software. You know, I've got hundreds of design engineers working every day, so that, you know, if you can make it easy for them to do the job correctly, you know, that's the driver for conversion. So it does take time, and I, you know, with a sense of humor, to sell into these really large groups.
But, you know, that's the industry that we're in, and that's what we're pursuing, and we're kind of- you know, we are ticking off a lot of these bigger groups week over week.
Do you think that the restriction, though, is within your organization as far as delivery or theirs as far as just yeah, going through the processes?
Yeah, no, it's both. I mean, we target the... Our sales model, we sell directly and we deliver directly to customers. They really love that model. We're like a partner that they can't live without, essentially. So yeah, there's some constraints in terms of our size. But at the same time, you know, the industry makes changes at certain points. You know, all of these storms and all the grid hardening and grid resiliency and grid capacity requirements happening across the network now are driving utilities to come at this problem a little bit faster than what they probably had 10 years ago.
And, just a few more. I might just be greedy with time, if you don't mind. Just with regard to the Street View data and relationship with Google, just about, you know, how far away sort of that data is from being used and from getting revenue lines to yourselves?
Yep. I mean, we're using their data now, so, yeah, it's, it's exciting. And for context, for folk on the call, we partnered with Google, a year and a half ago or two years ago, and we still do.
Looking at all of their bulk data that they're capturing for other applications, so things that you guys might use every day with, you know, Google Maps and, what have you. So, we're grabbing that data and applying it to power poles and power infrastructure. So, yeah, it's been really interesting to be able to see what they're collecting and also the frequency that they collect that kind of data in terms of every city across the United States. And we're applying it to power poles. So, yeah, a couple of those applications are, you know, in customer hands at the moment.
Right. And then just quickly on the last two, just with regard to transactional gross margin, lifted a bit. Just wondering if you could give us some guidance about what's driven that uplift over a relatively short period of time?
Yeah, Brian, you can grab that.
Yeah. And we talked about that last year. You know, we did a reduction of our team here in the US in the third quarter of last year, and we shifted a lot of that production to a dedicated team in Mexico of contractors. So that shift has really reduced our cost base pretty significantly in that they're able to do it at a little under a third the cost of what it used to cost us here in the U.S. Also, you know, as you know, a lot of this development we're doing aids our internal analyst team. So a lot of these things we're doing are helping us speed up our own processes internally, so when we provide the analyst service, we can do that more cost-effectively, and we can improve our margins.
Combination of those has really improved the margin.
Oh, that's great. And then just finally from me, just with regard to sort of where you're directing the sort of R&D team at the moment, just on the product development and, you know, where would we expect to see sort of new product stuff coming in? I know you talked about a couple more AI products potentially.
Yeah. We're introducing, or we've actually already introduced it internally, some AI and automation inside of existing products. And again, for those that don't know our product suite, our core product is called IKE Office Pro. So we're putting automation technology inside of IKE Office Pro. And that matters because it helps our customers be way faster, and be more accurate in terms of, you know, productivity outcomes. So we're excited about that, and I think it's something that customers will be very pleased to pay for in terms of, you know, annual recurring revenue per, you know, under a subscription model. And then secondarily, it's not something we're necessarily shouting about at the moment, but we have a customer council.
We're very lucky to have 12 of the biggest utilities in the United States that sit on our customer council and help us sort of guide product decisions. So they've asked us to consider and build another new subscription product that we think is important and can drive, you know, another subscription product line. So that'll be something that we'll be working on through the next, you know, 12, 18, 24 months. But yeah, it's great to have new products pulled through by customers, which is, you know, what we're focused on.
Great. Appreciate your time, gents, and congratulations. All right, I'll pass it back. Thanks.
Thanks for that, guys. Next question: What is the impact for IKE when hurricanes and other weather events are increasingly hitting the U.S.?
Yeah, I mean, thanks, Simon. Sadly, with climate change, et cetera, it's impacting power networks. It doesn't matter if you're in Australia and, you know, worried about fire risk or on the, you know, East Coast or southern part of the U.S., with hurricanes and flooding, et cetera, but grid, you know, grid networks need to be hardened, and it's just pulling forward that requirement. So, you know, we're with a design standard, for example, for Florida Power & Light, you know, they've been hit by two hurricanes in the last month. So it does just push more, I guess, focus into these programs, and a lot of funding into these programs.
So yeah, it is, sadly, it's a tailwind for our business, 'cause we help build stronger networks, you know, in a better kind of way.
Thanks, Glenn, and are there any other solutions in the market similar to the Double Wood Detective?
Well, yes. I guess the process at the moment is quite technology poor, as in electric utilities are just out physically inspecting assets. Again, you know, try to imagine you've got, like, a million distribution assets in your network if you're running these things, and your double wood or ghost pole program ran back 40 years, you know, in terms of record keeping, so yeah, there's like a physical inspection component. That's how lots of this is being solved today. We're trying to bring, like, a completely new technology-enabled view to the same problem, so yeah, there's work that goes on, and we compete against those status quo workflows, but as far as we know, we've got the first tech-enabled ability to think about the same problem.
Great. Thanks, Glenn. And just last question: You speak to the additional 80% penetration opportunity. For the subscription revenue, can you give an idea on net retention revenue or a breakdown of revenue from existing versus new customers?
Yeah, Brian, you can grab that.
Yeah, so we report. Our retention rate is right around 95% with our existing customer base, so really strong, like we said and we've talked about. Most of our losses really don't come from the fact that we lose a customer as much as the smaller tier engineering firms will take on our products and our solutions for a project for one of the utilities or for one of the telecoms. And if that project ends regionally, they'll often, you know, stop using the subscription until they get another project. So we have numerous examples of, you know, customers disappearing for a year, and then they'll come back online as soon as they get another project. So when you think about our IOUs and the large telecoms, our retention rate is even far higher than that. We tend to not lose anybody in that big space.
They're heavy users, and it's really an integrated product. So, you know, it's kind of a mixed bag, and we do report it blended, but really that is coming out of our kind of engineering group. As far as penetration, and new customers versus upsell, we'll have to look into that to get you more detail, but it's a mix. You know, we have customers kind of ebbing and flowing with the product all the time. You know, as business picks up, they'll grab more subscriptions. We do sell at a minimum of a one-year term, so when people do come on, they come on for at least a year, but we will have some ebb and flow again with just projects.
But, great retention and our penetration within our existing customers is pretty good.
Okay. Thanks, Brian. And just last question submitted through: Are there any other M&A opportunities similar to the PoleForeman acquisition?
There are, and again, for context for those on the call not familiar with PoleForeman, we acquired that business four and a half years ago for NZD 3 million. And we've, you know, rebuilt the product and relaunched it. I think it's probably at 12 x the revenue it was when we acquired it, based on those activities. So yeah, we're always looking for new opportunities that are similar, you know, really high efficacy products, perhaps underpriced or undersold or under-marketed. And, Simon, yes, there are some other opportunities. Nothing imminent, in terms of our activities, but, there are things that we'd like to bolt on over time that just help us do more for the same customers.
You know, anything around overhead asset infrastructure that's software-based is, are things that we are interested in potentially acquiring.
Great. Thanks, Glenn. I think we've just got one more question, from James at Forsyth Barr. James, please go ahead.
Yeah. Good day. Yeah, just one other, if we can, and it follows up on a question I think was asked at the AGM as well, just with regard to, yeah, sort of cash levels as well. Obviously, noted, yeah, gross margin grew, what? 31-odd%, so, pretty impressive as a number. But just your confidence around current balance sheet at NZD 6.8 million in cash being sufficient?
Yeah, we're in good shape. We're lucky to have a strong balance sheet, and we can just choose now as to timing to ensure that we get to cash positive trading. I mean, I think over the last 12 months, we've consumed about NZD 3 million of cash, but we've been investing, you know, as you know, James, very heavily into new product development, new market development, et cetera. So, yeah, we're in good shape on that front.
Great stuff. Thanks for that. Appreciate it.
Great. Thanks, guys. Glenn, I might just hand it back to you now for closing remarks, and we'll finish up there.
Great. No, nothing else from me. Thanks, Simon. Thanks, everyone, for taking the time for the catch-up. Both Brian and I are available anytime, via our email or the, you know, our phone contacts there in the presentation documents. So, look forward to being in touch next quarter.
Perfect. Thanks, Glenn. Thanks, Brian, and thanks, all, for attending.