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That's trended very positively through the past 12 months-24 months. Next slide, please. This table really just outlines the detail that we've looked at in the chart and then some other key metrics. But again, you know, a high growth year. A lot of momentum coming into FY 2023. We are, you know, optimistic cautiously around being able to keep the kind of growth momentum rolling into and through FY 2023 that we've seen in FY 2022.
Next slide. Thanks, Simon. I think there's a lot of detail here, but just laying out the P&L itself, we were loss-making through the FY 2022 period. We're very conscious of, you know, the changed lens of the market around large loss-making technology companies. You know, we've made a very conscious decision to continue to invest in our sales and delivery capability. Keep in mind that we serve the very largest infrastructure companies in North America, and there's a certain scale and quality that we need to deliver to. We're building decades-long relationships with these customers. And building out that delivery capability is something that we take very seriously. We're aiming to build the best customer experience in our industry.
The other element that we've continued to invest in is around product and technology development with a really acute focus on automation. Our customers have very expensive engineers, and they're very precious people within their businesses. We're trying to automate a lot of what they do through engineering workflows. There's a little more detail in this presentation that outlines why automation, we think, really matters. It's, you know, what we've been consciously investing in through this year. We'll continue to do so into FY 2023.
From a balance sheet perspective, we've got a very strong balance sheet. It's very sustainable now. We've got options in terms of levers. You know, we can choose timing now to operating cash and EBITDA break even. We're in a really strong spot where we've got a very good lens, I think, on what our customers are asking us to invest in. Again, as mentioned, we're building these very, really long-term relationships with these large infrastructure companies. We think if we can continue to win aspects of this market, we can keep these customers for decades to come.
I think most of you on the call, you know a lot of these elements in terms of what we do. Essentially, we've got three software solutions. We're targeting the North American electric utility and communications market and their engineering companies. The business model upshot of where we came from. You know, if you think where we came from, five years or so ago as primarily a hardware company, today we're very much software-based. Our customers pay us a recurring subscription to access any solution, and then they pay us an additive fee based on the usage of the software. That's the way this industry does business, on a per asset or per pole or per engineering exercise basis. We offer other value-added products such as IKE Analyze and IKE University, which is a training platform.
Just pictures are better than words. In terms of our products, the primary revenue driver and the primary revenue growth driver for FY 2023 is the IKE Office solution, which you can see here. This is all around digitizing and bringing verifiable accuracy to network engineering. We provide an end-to-end workflow for capturing engineering information in the field, through to analysis of poles and assets in the back office by engineers, also d ashboards that can show an executive or a manager, you know, how everyone's doing, how a project is doing, so they can track, you know, multi-state or even national network development projects.
Our second product is called IKE Structural. This is a CAD program. It's taking that real-world information and turning it into CAD or 3D models. We have one of the four accepted standards in the U. S. in terms of providing pole loading analysis. Our customers use this product every single day across their distribution engineering teams to design every pole in their grid to make sure they're meeting regulatory standards and also to make sure they're meeting their own engineering standards. This is a real choke point in the industry, and it gives us access, quite privileged access to the standards groups within utilities and communications companies.
Our newer product, which is exciting, is called IKE Insight. There's a lot of buzzwords here around low-code AI. What low-code means is you give customers the ability to use sort of drag and drop tools to do really complicated artificial intelligence analysis of their network. You don't need to be an expert in AI to be able to use this software. Why this matters, we believe, is that it gives us the ability to process existing data and new data that comes from any source about a utility's power assets. We can process data that comes from not just IKE Devices, but also from drones, smartphones, satellites, thermal imagery, et cetera. It plugs into all of the key systems across an electric utility network. If we just go to the next slide. Thanks, Simon.
There's just an example here. The big opportunity in our industry, we think, is around automation and letting utilities and communications companies do much more with the raw data that they have. This is just an example where we can now do automated detection of poles and pole assets, et cetera, using software. Taking some of these projects that can take a utility years and many millions of dollars and do it with computers and machines. We're really excited about the way IKE Insight not only can plug directly into our customer base, but can also drive automation in the two products that we looked at prior to IKE Insight.
Next slide. I'll go through this fast, but we're, you know, we're fortunate to be in the right place at the right time. We're supporting. There's some really large macro market tailwinds that sit behind the problems that we solve for our customers. Next slide, thanks. There's more than 3,000 electric utilities. They're all dealing with the same challenges in terms of aging infrastructure, aging workforce, a lot of regulatory and legal risk around keeping the power on and also not causing the next catastrophic event, be it a fire or power outage. More than 2,000 engineering companies that service these electric utility groups. Fundamentally, we dramatically improve the design and maintenance process for poles, and we're digitizing or bringing a lot of these processes into a very modern age.
Similarly, just in terms of where the U. S . sits for communications infrastructure build-out, there's more than 200 comms companies here in North America in a race to build fiber. They're putting most of it onto distribution poles. Just next slide, thanks. Putting most of this infrastructure up. You can see this picture here, some 5G antennas that are sitting on a power pole. This is just driving a huge amount of engineering work for the electric utility, for the communications company, for the engineering services firm. We expect this to continue for at least the next five years in terms of this explosion of fiber and broadband deployment. We, you know, dramatically speed up aspects of the engineering process, which is the value proposition we sell to. Next slide, please.
We've got more than 350 enterprise subscription customers today, and that's growing. The interesting part is that most of our growth through the last year, for example, came from existing accounts. Once we get our foot in the door and support a particular network project, the opportunity is just to grow and cross-sell our products across these groups. We've now got quite a number of examples of customers that have gone from tens of thousands per annum to hundreds of thousands, in some cases, millions.
We can start to get some real scale in terms of accounts and account management. I think that's the really exciting part. This isn't a winner-take-all market, but you know, we're targeting the very largest groups, and if we serve these groups well and provide a great customer experience, we're gonna keep them for decades to come.
Yeah. We can really stand behind some productivity outcomes for our customers. You know, we double speed of collection. We take 50% of cost and effort out for electric utilities and on and on. We've got some really strong value proposition items that we sell to, and this is why customers buy from us. We're in a fortunate position now of having a customer council that includes, you know, many of the largest electric utilities in North America that are standing behind our product roadmap and really helping us to make sure we're building the right capability for these key customers.
Our sales and delivery model is direct. What we do is very niche. It's a highly unglamorous sector. It's really important, and it's a big market. Delivering an end-to-end customer experience for us is really key. We employ outside plant experts. That's what our whole business is made up of, and it's really part of the reason to buy for us. We've got around 85 FTEs today. Yeah, really talented group of folk that have come out of the electric utility space or the communications space.
Yeah, and also fortunate to have a great board with deep industry experience. Four of us are based here in North America, and Rick Christie and Mark Ratcliffe based in New Zealand. All folk that have got a lot of experience directly in our market and also with scaling technology businesses. I think the summary is that we do expect the strong growth of this last year to continue into FY 2023 and beyond through to March of next year. We've got a very strong signed contract backlog that underpins that view.
On top of that, we do expect to continue to close new business and recognize that revenue through this year or aspects of that revenue through this year. As mentioned, our balance sheet's strong. You know, if anything, we're just becoming more and more focused. Everything we do, we've got very specific distribution applications that we support for our customers. We're not getting drawn into other parts of the infrastructure market. What we support is such a big problem and such a big market. We're just gonna focus in harder and harder.
For us, it's about recognizing or delivering the backlog, the signed contract backlog. You know, we've got sales campaigns that are focused on broadening the customer footprint that we have today. We will continue to invest and enhance our three software products. As I mentioned, our focus is really on bringing more and more automation and analytics capability to our customers. That drives productivity for our customers. It can also drive much higher revenue per user or ARPU by customer type. Yeah, it's a pretty laser-like focus in terms of FY 2023. I'll stop there and be happy to take questions.
Great. Thanks, Glenn. There's a number of questions that have come through. So just a reminder, if you did have any questions, please do so via the Q&A button at the bottom of the screen. The first question, Glenn, congratulations on the result. Can you please provide us some color on how we should think about gross margins for the transactional side of the business? Where do they sit and how should they improve?
Yeah, the transaction side of what we do, there are very different price points depending on which transaction a customer contracts to. At one end of the spectrum, it's called a self-perform transaction. That's where a customer is using our software themselves. We don't touch it. It's 100% gross margin, but we take a small fee. At the other end of the spectrum is a customer will send us the raw data they're capturing in the field, and we'll use our software to send them back a deliverable, much higher revenue, you know, up to close to $100 per transaction. But there are higher COGS associated with those transactions.
The blended gross margin, I believe, is 52% through the last year. Because we're introducing software technology into everything that we do, we expect that gross margin to continue to grow from a percentage perspective. Our ultimate goal is to have as much automation as possible, but we also wanna track that value through the transaction structure.
Great. Thanks, Glenn. Next question. Do you think there's an opportunity to grow at the same rate as FY 2022 in the coming years? What are the opportunities and what are the challenges to continue growth at this rate?
Well, yes. There certainly is. We've got a lot of momentum. It's continued as well into Q1 of this year. We're two months into the Q1 . So yeah, we do think it will continue. I think the challenge is just tied to execution now. Our products are rock solid and yeah, we just see a need to make sure we put the right team in place, the right plans in place in terms of, you know, customer acquisition and account management, account growth.
Great. Thanks, Glenn. Of the 15 million-17 million of contracted pipeline for FY 2023, can you give us an idea of or indication of the current split between subscription and transaction revenues?
Yes. The approximate split is around NZD 6 million of subscription and the balance of transaction.
Great. Thanks, Glenn. Are you seeing any cost challenges associated with the uptick in inflation in the business at the moment?
Well, I think there's competition for talent. I mean, everyone's been talking about the competition for talent for, gee, as long as I can remember, 10 years, and we're meant to be in a great resignation. I think we could say with our hand on our heart, IKE hasn't lost any key personnel through the last 12 months-18 months. I think there's various factors for that. I think we've been pretty fortunate in terms of our recruiting and build our team over the last year or so.
Great. Thanks. Artificial intelligence solutions are traditionally data-heavy and therefore low gross margin. What type of gross margin should we expect from IKE Insight, both now and as it scales?
Yeah, that's a good question. I mean, AI is this hopelessly overused term in the market. We actually if we're presenting to a customer, we stay away from even mentioning AI or machine learning because there's a whole graveyard of broken promises from companies that say they're doing this stuff, but they're not. I mean, for us, we are truly building an AI engine that uses machines and not people. So ultimately for customers at scale, yeah, we expect very high gross margins. I think the question stems from, this is kinda part of the problem with companies that say they're doing AI that aren't. It's all just custom. It's all just custom projects.
They say they're using AI, but you end up with just lots of people doing QA QC and processing and reporting, et cetera. We're building a low-code platform, which means that our customers can drag and drop the kind of analysis that they wish to do. It doesn't require IKE. We're also focusing in on very specific applications. We're not trying to be everything to everyone. We're trying to build automation for things like pole loading analysis and pole audits. Very specific applications that we can repeat and take to the whole market, because every one of the 3,000 utilities we talk to has the same problem with pole auditing or pole inspection.
Great. Thanks, Glenn. You have 350 customers. What proportion of work done by the thousands of utilities and communications businesses does this 350 represent? Putting it another way, what percentage of work is IKE doing for its customers?
No, just a small fraction. We're just getting started. I think we've got around 5% of the addressable market. If you just look at the number of businesses that are involved in this area, there's probably about 6,000. And we're in the early stages of growing a lot of our 350, so still early. But we're, we are targeting the very largest and working our way down the market. That includes the engineering companies. The engineering companies are becoming more and more important here in the North American market with the utilities and communications groups outsourcing a huge amount of their engineering. The engineering companies really matter in that customer ecosystem.
Great. Thanks, Glenn. If IKE Insight can use data from different sources, i.e., drones, iPhone, et cetera, does that suggest hardware revenue will fall away over time?
Well, do you know about two years ago when we were formulating our plans around bringing in AI and being agnostic to field data, we assumed so. What we've learned is that our hardware devices are unique and valuable for very specific applications. I think any of our customers have engineering feet on the street and need to do very specific work, particularly around structural analysis. The IKE Device is still the very best tool to do that work with.
For that reason, we think that the IKE Device remains a you know a really important part of the offering. I think hardware revenue, even though we reduced pricing quite significantly on hardware and increased the software pricing, we still had an uptick in hardware revenue last year based on demand. Yeah, we don't see it going away.
Great. Thanks, Glenn. Can you give us some more color on how the rollout and development of IKE Insight tracking, how it's been received by customers you've shown it to, and can we expect to see it begin to materially scale this calendar year?
Yeah. I mean, it should start to scale through this year. We've got some really high quality tier one customers that have been through first phase contracts, paid contracts. What we do know is that this market always takes a little bit longer than we all want to really get to scale. Our customers are quite risk averse, and they like to do things in controlled increments. We do expect to see a really nice uptick of revenue from IKE Insight through this year.
Good. Thanks. Can you comment further on the research and engineering expense item? Do you see this continuing to increase, and is there some guidance for future expectations, just perhaps as a percentage of revenue?
Well, yeah. It's the area. If you look at benchmarks in terms of functional efficiency, engineering, development and research is the area where we're overspending in terms of where we will ultimately land. Well, I wouldn't say overspending. That's where we're concentrating investment. It's simply because we've got a customer footprint now, and we've got some customers that are telling us what they're gonna buy, and what capability they need. This year, we'll still have a slightly outsized investment into R&D, but it will, I think, flatline. Relative to revenue, it's gonna get back into or it'll get into line from a functional efficiency perspective, taking an FY 2024 and FY 2025 lens.
Great. Thanks. Just in terms of that commentary around R&D, can you just talk to when you expect to potentially break even, you know, whether it's FY 2023 or further out?
We haven't provided guidance in that regard. As mentioned, I think we're fortunate now just with growth and contract backlog. We can pull levers now to get to that position as quickly as we wish. Our balance sheet's strong. It is very much, you know, on our minds and it's in the board's lens as well. Yeah, there isn't explicit guidance, but, you know, we're trending in that direction all the time.
Great. Just a few more questions. Employee expenses are up significantly on last year. Will this continue in the current year?
No. It's much more modest growth in terms of employee costs. Well, yeah, all of these items. We really you know, if we go back 24 months to the start of the pandemic, we you know, we made a few decisions to try to get on the front foot. We made an acquisition. We did a capital raise. We didn't lay off any of our staff. I think the executive team and board took pay cuts, but no one else did. We've really tried to build the business so that we could pop out of the pandemic as strongly as possible. I think by and large, it's been a good outcome. We're quite close to being optimized in terms of you know, some of our departments and our headcount items.
Great. Thanks. Just in terms of software development, can you give us some examples of increasing ARPU from these developments?
Yes. You know, we've continued to raise pricing through the last several years. We don't do it based on inflation or anything like that. It's based on releasing more capability. A recent example is bringing out a lot of analytics capability through dashboards and items that let our customers start to control and see project productivity. Alongside that, we've introduced additional subscription fees to access that kind of functionality. It's very much the same theme. The deeper we can go into these workflows for customers and the more productivity we can drive, you know, the higher we can price the products. You know, that's very much our model. We introduce new modules of software, and we raise pricing in behind that.
Great. Thanks, Glenn. Momentum continued into Q1. Can you just give us some color on the first two months, as to how the business is tracking?
Well, I think, you know, closed contracts have continued to run through very strongly through these first eight weeks, and that's the key leading indicator. Yeah, the recognized revenue item through April was also strong, and, you know, slightly ahead of plan. We'll continue with our quarterly updates and make sure everyone in the market is, you know, getting full visibility into how revenue and margin and closed contracts are tracking. You know, our cadence is to do it every 90 days.
Thanks. Just conscious of the SPIDA takeover by Bentley, is that an outcome you would seek, or do you see more growth into the future?
Oh, in terms of an outcome for IKE? I mean, there's been an enormous amount of, all of a sudden, this space has become pretty heated in terms of M&A activity, and we're on a great trajectory. I think we're, you know, just looking to build a really great company with a long-term lens. I guess if any of those kind of M&A items were to come along, they just need to be assessed with the best interest of shareholders in mind. There's nothing imminent at this stage.
Great. Just last question, Glenn. Could you please elaborate on the work that IKE has been undertaking in partnership with Pointerra?
Yeah. Pointerra, for those that don't know, Pointerra is a company based out in Perth in Western Australia, but are focusing on point cloud management for poles and also a bunch of other assets. Yeah, we've been fortunate to work with Pointerra at an East Coast electric utility on a particular proof of concept, and that's gone well. Yeah, we've enjoyed the partnership with Pointerra. We're hoping it leads to some bigger things.
Great. Thanks, Glenn. That concludes the Q&A segment. I'll hand it back to you for closing remarks.
No, thank you, Simon. I appreciate everyone taking the time to join the call. I think we've covered all the key elements. As mentioned, our next update will be after June 13th, 2022 in terms of a Q1 update. Otherwise, thanks very much.