1Spatial Plc (SPA) Earnings Call Transcript & Summary

Good afternoon and welcome to 1Spatial Plc Full Year Results 2022 Investor Presentation. Throughout this recorded presentation, investors are in a listen-only mode. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. After the company review all questions submitted today, will publish responses where it's appropriate to do so. Before we begin, we'd submit the following poll. I'd now like to hand you over to Claire Milverton, CEO; Andrew Fabian, CFO. Good afternoon.

Good afternoon. Thanks for the introduction, Paul. So good afternoon, everyone, and warm welcome to you all. I'm Claire Milverton, CEO of 1Spatial. I'm joined today by Andy Fabian, our CFO. And the main order of today is to take you through our final results to the end of January '22. Before going into all the detail on that, first of all, I wanted to really ensure that during the course of the presentation today that I get across to you why the Board and I believe that we actually are at the start of a real transformational growth opportunity for 1Spatial. And the main reasons for that are, firstly, customer and partner credibility, we are really gaining that in the market. And you'll see that by those landmark wins we've gained in the period. And we're also in a significantly growing and resilient market, and we have a fantastic opportunity in the U.S., and I'll take you through that more in the presentation. And we have our market-leading software platform, the Location Master Data Management, what would enable us to capitalize on that significantly growing market. So I'd like to start today with a picture. So some things that you may all be -- you probably all be familiar with, which is a dug-up road and underneath, there's like a sea of pipes and roadworks. And it may astound you to know that there's no one register in the U.K. of all the pipes and cables underground. So if you are a contractor, to say, a water company, you need to dig up the road, you may know where your water pipe is, but you don't know where all those other pipes are and that can cause fatalities. And it actually cost the U.K. economy GBP 1.2 billion per annum. So the U.K. government has now decided to create a National Underground Asset Register. And this is sponsored by the Geospatial Commission that was set up a couple of years ago because of the importance of location data to the economy. And to provide that, to build that map, it's bringing in data from over 650 data asset providers because all this data in our country, all held by these separate entities, all different utility companies and local authorities. And we won this contract at 1Spatial in conjunction with our partners, Atkins and Ordnance Survey, and it's our second largest win at GBP 6.5 million. And the reason why I'm sharing this example with you, not because it's a fantastic win for 1Spatial, but it really gives you a flavor and insight to some of the things that we're doing. So being able to share data and bring that data then to lots of different sources is so important these days when you're trying to bring together national pictures to do things for planning for net zero. But anyway, we can use our platform to bring in this data. And as you can imagine, this data is in different systems, in different formats and in different levels of data quality, but we can deal with that in a very automated way with our technology. And location of [ the ] data is never found still, it's always changing every day, and we have an automated way to make these updates. And it's these sort of projects and why our technology is having such traction in the market. And this isn't just happening in the U.K. These national pictures are needed everywhere for assets above the ground and overground. So it's a really replicable solution, but one of the first of its kind that's happening. So I just want to start with a snapshot of 1Spatial, where we currently are. So we're a software and solutions company, helping our customers to make critical decisions from location data, addressing key agendas such as health and safety and sustainability, and we enable this through our market-leading platform for Location Master Data Management. And we're working with powerful partners and they're key to our growth strategy. And we've added 3 names to that list during the year, but we're adding more all the time. We work with 1,000 customers globally, with no one customer dominance, which is good from a risk perspective. And growing revenues is key. We were at the first year of our 3-year growth plan and absolutely, all focus is on growing revenues. But really, it's around growing those annual recurring revenues from software. So they're currently around 45% of our total revenue, but we're looking to get that up to 60% in the short term. And our revenue by geography is predominantly dominated by U.K. and Ireland and Europe. But again, we're trying to change that proportion and in the short term, the U.S. should start to become the biggest proportion of that. So when I go on to the group for highlights for FY '22, well, we've had a good year. From a customer's and partners' perspective, we bought us number of significantly high-valued contracts, not only giving us some good revenue in this year, but actually, it's really about a platform for future years. And our term license revenue and annual recurring revenue has increased by 160%. And we've had growth in the U.S. of 37%, and we have a strong growing pipeline of prospects. And we have our market-leading platform, which we've been really investing in, investment in adding more data types. As you can imagine, we've got to bring in that data from 650 different systems -- data types, sorry. We've been adding 3D capabilities. We can see the needs for this coming down fairly -- coming down the road fairly soon. And we've been investing in our multi-tenancy cloud platform, which is really important for our strategy, and we're looking to launch some of our SaaS and Validation as a Service options in cloud in H2. So let's have a look at some of these new wins in the year. So firstly, new customer wins, and these are multi-year license-based contracts. We had our biggest ever win [ ever ] with a government agency for GBP 8 million. That was in partnership with our partner -- a new partner Qinetiq. We had a win with HM Land Registry. We've had a win with VINCI Highways in France. And already, as I mentioned, we've got the win with the National Underground Asset Register with our partner Atkins. And we've had 4 new wins in the U.S. in various states with our Emergency Services solution for NG911, with the state of Minnesota, Georgia, Montana and Arizona. And we also had growth from our existing customers, including multiyear license-based deals. From DEFRA, Land and Property Services in Northern Ireland, Rural Payments Agency and Google. And I'm now going to hand over to Andy, who's going to take us through the financial review.

Many thanks, Claire. And just to remind everybody who's been following us, about 18 months ago, the Board agreed to a new 3-year growth plan. And this is all about focusing not on short-term profitability, but on growing revenues significantly over the 3-year plan. And this is the result at the end of the first year of the 3-year plan, and we're very pleased with progress. And just to add to that, that we've had 3 upgrades this year on the numbers. So we're very pleased with progress. In terms of the key revenue metrics we're focusing on, term licenses is really important to us. And although the numbers are relatively small at the moment, we did get 167% growth in revenue, and this is all about building up longer term revenue contracts that have much higher margins using our own IP. Recurring revenues as a total was also up 15%, and that includes support and maintenance agreements. But the bulk of that growth in recurring revenues came from the term license growth. So overall, our revenue was up 10%, double digit, which is great. And in constant currency terms, it was actually 13%. And we also focus on annualized recurring revenue as a lot of software companies do. This is an important leading indicator. And again, some of the success this year were the big wins that Claire was talking about, are not really reflected in this year's numbers, but in future numbers. So the ARR was up 26% to GBP 13.4 million, which we're very pleased with. Also coupled with winning some big projects, the services revenue backlog was up 129% to GBP 12.5 million. And although we're not really focused so much on growing the services, but actually services is part of delivering the technology and delivering training and getting implementations and rules implemented. So that is also important. And another very important factor for us is that we actually achieved a positive profit before tax, first time for over a decade. So very pleased with the GBP 1.6 million swing on the bottom line. In terms of our focus on recurring revenue, the term license, as I mentioned, was a really key thing. And you can see that visually growing from GBP 1.6 million to GBP 4.1 million at constant currency. The major contributors to that were the 2 big wins that Claire has mentioned, which added GBP 1.7 million to the ARR. But it's not just the U.K., with that wins, in the U.S. and Australia that have really helped that drive that number forward and up 160%. So the revenue mix is now 45% recurring. And we're really focused on getting to a point where it's the majority and indeed, maybe even 60% or higher. That's the focus. Another key KPI was that the renewal rate improved to 93% from 90%. And it's really important when you win clients is that you keep them. So we're pleased with that. And then going back to the combination of growth in annualized recurring revenue, which is a sort of leading metric for our start of year recurring revenue plus the services backlog. If you add those 2 up and some of that revenue won't be delivered in FY '23, but actually falls into FY '24 or beyond. Nevertheless, that is a metric of the target revenue in the market of just under GBP 13 million this year, is about 87%. So we've got a very good platform for achieving our numbers this year. And the equivalent metric for last year would have been about 60%. In terms of the regional focus, we're focused in 4 geographical markets. I'm really pleased to say that we had organic revenue growth in all regions and double-digit revenue growth in 3 out of the 4 regions. The really strong performer overall was the U.S. at 37% in relative terms, but really good performance in the U.K. and Australia. Europe, the revenue went down in sterling terms, but actually at constant currency, it was up 2%. And in the prior year, we had some sales of legacy software, which we're no longer marketing, roughly GBP 0.5 million or so was in there. So on a comparative basis, that impacted the relative performance. But now in Europe, we're really focused on selling some of the business apps that Claire will talk about. And we think that, that revenue growth will pick up in Europe. So in terms of the P&L, as I said, we're really focused on growing the revenue rather than the bottom line. But nevertheless, we did have a nice swing of GBP 1.6 million at the operating profit level. And in terms of gross margin, the performance was fairly flat year-on-year on a like-for-like basis. Last year, we had a GBP 0.3 million benefit from some COVID support. We are definitely focused on driving that gross margin forward. But I guess the way that will increase is when we get more of the revenue from term licenses, which are much higher margins. We also have an elements of our revenues from third-party software, where the margin is only 40%. And it's not a focus area, but it does support the rest of the business. But going forward, we would like to target maybe 60% gross margin or even higher than that. Having said all that, the adjusted EBITDA margin was up to 15.5%. So we're pleased with that. And we expect to make more progress on that this year. In terms of cash flow, I guess, on a -- the operating cash flow was lower than the prior year, mainly due to working capital requirements on some of the larger projects that we won towards the end of the year. But also there were a number of one-off factors. So I'll put this table in, which gives you, if you like, a normalized operating cash flow, which was a little lower than last year, but nevertheless, GBP 3.1 million versus GBP 3.5 million. And I guess the important thing for us is that we do generate operating cash, and that gives us choices in terms of what we invest in. And as I said, the key focus in this first year and a little bit in the second year is to make sure we are spending sufficient on having sufficient salespeople and delivery people and also investing in the product so that we can really get to transformational growth on revenue. And we ended the year with net cash of GBP 3.2 million. So really, just to summarize, we're very pleased financially with the progress against our 3-year targets. And a really important one is the term license ARR, which is up 160% because that will -- we continue to add to that, that will lead to a much higher revenue growth and more predictable revenue and higher margins. Total ARR up 26%. We're very pleased with an overall revenue growth of 10%. So I guess even though we're not focused short term on delivering profitability increases, we nevertheless increased our adjusted EBITDA by 15% whilst continuing to invest in technology, sales and delivery capacity. So I will hand back to Claire.

Thanks very much, Andy. As Andy said, that was year one of our 3-year growth plan, which -- where we feel we've made some real solid progress on. And really, what I want to take you through now is our market and our proposition and our progress on that. So first of all, demand for up-to-date location data has never been greater. Organizations are using location data to make better decisions. Some of the key agendas around the green agenda and saving lives, and a couple of the opportunities that we're working on with our clients are around planning for electric vehicles and maintaining the nation's flood defenses and improving response times for emergency services. And the key market drivers for this growth are around 3 key areas. So firstly, it's around ESG and things like the sustainable development goals. A number of the government agencies that we're working with have got these targets and goals that they need to measure against. And the digital economy is a key driver. If you get to do things like digital twinning, so planning for the future, we're doing scenario analysis with your digital system, you need to have good accurate data in that system. And there's a real greater need to share data across organizations in the public sector, which we do. And there's an increasing demand for Cloud First and SaaS-enabled solutions, which we're looking to launch in H2. And there's money for this. There's real government investment initiatives. And you'll see later that we're doing some work with NG911, there's just been a release of $500 million of funding. So there is this growing market opportunity, these opportunities are -- there's a lot going on in the world today. But these things that we're looking at are pretty resilient to some of those issues. So we believe we have a real unique proposition in the market. So we are at the intersection of 2 key global markets. First in the Geospatial Information Systems, all the big mapping GIS providers, such as our partner, Esri, that's currently worth GBP 10 billion per annum and looking to increase to around GBP 21 billion by 2027. And then we've got the mainstream on Master Data Management sector valued at GBP 12 billion, and estimated to get to GBP 46.8 billion by 2027. And what we do, we [indiscernible] are the enabler between these 2 global markets because we have the location data expertise, but we're really data and we're system agnostic. And we're calling this Location Master Data Management. An important growth strategy for us is working with partners. So partners that have access to the mainstream, these big digital transformation tenders are coming out. And then part of that needs some location expertise, and that's where we're coming forward with Location Master Data Management. And that's why contracts such as the National Underground Asset Register are really important because we're getting that visibility to the mainstream. So we've got these 2 big major markets that we are sort of intersect over. But what I would really want to do now, trying to really hone down and provide some tangible numbers against one of our addressable markets, now I just want to now go to the U.S. market on one specific solution, which is NG911, which is all about produce ensuring accurate data for Emergency Services to improve response times. Now in the U.S., there are specific standards for NG911 that the data needs to comply with. And that does include accurate data, both spatial and nonspatial data. So go into this a bit more, I think it'd just be worth accepting the context of how the process works for an emergency services phone call in the U.S. So if there is an emergency, if there is a fire then the call, first of all, will get routed to the state. And then the state has to notify one of the public safety answering points that needs to send a fire engine to the fire. Now it's really important that there's a mirror image of the data, both at the state, at the city and the county and the public safety answering point. Otherwise, the state will be notifying the wrong public safety answering point to go to those [indiscernible] of the emergency. And in the left-hand bottom of the corner of the slide there, you could see an example of 2 public safety answering points, one in yellow and one in purple. And on there, we show an example of a spatial issue that without technology, consult. So what's happened there is there are 2 public safety answering points. Their boundary has overlapped. And so if the emergency is where that purple phone [ booth ] is, you could end up with the fire engine from both public safety answering points will go to that fire, or worse still, if there was a gap in the data, you might not have any fire engines go into the fire because you haven't got it. It's not allocated to the -- allocated to a public safety answering point. So that just gives you a flavor of some of the issues that we are solving. And why it's so important to have the consistent and accurate data at the state, at the country and the public safety answering point. And that's what we're enabling through our technology. And we are winning. We won the last 7 NG911 state tenders, and we've only been doing this for 18 months, and we've got a strong pipeline of work for future deals in this area. And so now we are really gaining significant credibility in this space with our NG911 business application. We get around $150,000 per annum for each NG911 solution that we sell. And I mentioned earlier, we talked about that there is funding for this. It's just been released, $500 million for this. So just sticking with the 911 addressable market for the moment, so we sit -- there are 50 states. So if we're selling each NG911 solution to all the 50 states, that gives us an addressable market just for that solution of $7.5 million per state. But we think there is a much more significant opportunity for this. So for all -- we believe that all the cities and counties can use our platform to validate all their public safety answering point location data prior to them submitting it up to the state. And what we're going to provide is a lower cost SaaS solution, but we're going to call this as a Validation as a Service solution for NG911. And the addressable market for this is 23,000 cities and counties. And so if you were just to take that, I mean, if we were assuming an addressable market for that for around $100 million, this is less than around $5,000 per state per annum. But -- so a huge addressable market and a really exciting opportunity for us, and we're going to have pilot trials of that in H2. So if we just want to go back to the states for the moment, if we just go to the individual states. So as well as having the NG911 to the state at $150,000 per annum, we've also got a solution for spatial data infrastructure that we're doing with Michigan, which is around $300,000 annual recurring revenue. And we have some other business apps, which were for HPMS, crash mapping and traffic count, which were around $150,000 of annual recurring revenue. So we believe solutions to the state, and this is our goal internally, that we can get to $1 million per state with software on sort of term license basis of annual recurring revenue. So that gives us an addressable market for the states of $50 million. So if you add back to our SaaS solution for the cities and counties, we can sort of touch and feel tangibly $150 million market opportunity. We currently got revenues in the U.S. of around $5 million. So we've got a huge opportunity to go after that we believe that we can execute on. And just as a bit of background, in 2017, we only have 1 client in the U.S., which was the U.S. Census. And we're now developing those relationships across [ 23 ]. So really, back to my point, we're gaining the credibility now in the states. And now we're really gaining credibility with our 911 solution in the States. So I'd now like to take you through our market-leading platform for Location Master Data Management. So at the bottom level in yellow, that is a part of our platform, but that's showing all the data that we can take in from all these different systems and sources. So for example, on the National Underground Asset Register, we've taken in 650 different assets tied to that, and all be in different systems and formats. So that data comes in through our cloud-enabled 1Data Gateway portal. And then our patented rules engine can get to work on the data, so we can validate and check the data for areas like we talked about with the 911. We can clean the data, we can synchronize the data, we can update the data and we can analyze the data and you complete components of that data management platform. So with NG911, we're just bringing in the rules from the standard for NG911, and we're just validating that data. We'll just say upload the data. We'll run it against some rules. And we'll send you back a report that says the data is 70% accurate, but 30% wrong and go and check the 30%. So there's different components of our platform that we can do for different purposes. But if you think about the Data Management, that purple bit in the middle, where we can do lots of different things, that's really where we have the bigger data management project, the big government project for GBP 8 million, the National Underground Asset Register. And these sort of projects will have a larger proportion of services and they will have a lower margin. But if you go up to the business applications, which is where we really now are trying to target more growth, if you just come up on the right-hand side with the 1Spatial business apps, this is where we're going to get much more pure term license and Validation as a Service type license, which will have much less services and even almost 0 services. And that's what we have like a repeatable application or a repeatable set of rules. So for 911, the rules are predefined, that's why we can offer that as a Validation as a Service opportunity. But we also have some other repeatable rules, which we're offering current year's term licenses, but there are a little bit of services, and that's for HPMS and crash mapping. We also have another SaaS-based solution, which we're looking to release in H2, which we've been working off and on over the last 4 years on for Traffic Management Plan Automation, and that's a really exciting opportunity, a new market for us really in the traffic management field. But we'll come back in H2 and talk a bit more about that, but a really great opportunity for us. And on the left-hand side on the business app side, in our French business, we have some apps that we're building on the Esri platform, including a really exciting Esri's 1Telecomms, because Telecoms is a really big, growing market at the moment. So just a quick overview of the benefits of our platform and why we're really winning in the market because, firstly, because we're allowing this data share within collaboration. We're data and system agnostic and we -- and that will enable it in the ecosystem. And we can create actually new data sets from existing data. So if you think about the National Underground Asset Register, that data set doesn't exist, but we're creating that by bringing lots of data together. We have an automated approach to data validation. So the whole way we run our platform, it's all automated. So it really ensures consistent accurate data, which is up to date and you really need that for the Emergency Services problem that I told you about. We can really process huge quantities of complex data with [ speed ], including 3D data. The 3D data is now really going to -- if we enabled our 1Integrate 3D data [ within ] last year, but we're really only starting to see the use cases come out now. And we know for NG911 soon, the SaaS is going to be asking for more about multiple occupancy buildings, apartments. And so we're ready for that when it arrives. And the self-service validation portal, 1Data Gateway that we launched 2 years ago has been a real enabler to our technology because it enables the supplier to push the validation down the supply chain, rather than them doing it all internally themselves. So all of those things gives our client great efficiencies, saving them real time and money. So just summarizing back on the growth engines, I've already talked about this in a bit of detail, but just it really helps, I suppose, bring to life. We do really have 2 different types of revenue, different characteristics. But I do think the data management and the business acts are very complementary. So we start with the data management side, is a larger complex digital transformation opportunities, they're multi-million pound, they're multi-year, they do have a longer sales, so -- and they're often services intensive, like [ Newall ], we wanted to get that deal because we're getting access to all these 650 data providers, but we felt it was the right thing to take on even though it has all these services. But it gives us this credibility in the market. And we're targeting this via the partners, as I mentioned earlier, because we're going to be the key enabler and ingredient in these large digital transformation product. And we're really getting increasing interest with an increased number of tenders, and we tend to win most of the tenders that we go for, with 80% success rate. And on the Business App, we're going to be targeting high-value sector-specific problems. So 1Water, 1Telecomms, NG911 and Traffic Management Plan, so these will have a smaller size deal usually about GBP 100,000 annual recurring revenues, shorter sales cycle and smaller map services. We have sector knowledge, repeatable rules, and we mainly target that project. And the sort of game changer in H2, which we're going to do is this sort of Validation as a Service with zero services. So say that thinking about our gross margin and where we are now, we're more on the Data Management side, but the journey is to move more from Data Management to Business App over time, and that will really have a massive impact to our gross margin. And so just to summarize then, so our FY '23 objectives and outlook. So first of all, really important to expand our partnership strategy. I've just taken on my new Global Head of Partners, just taking him on from IBM. And he's really going to help us with that. We've got to increase our sales and marketing capacity in the U.S. to capitalize on the opportunity there. And excitingly, launched these VaaS and SaaS offerings in H2, which has increased our addressable market and is really a game changer for us. And obviously, we're looking to grow recurring revenue, EBITDA margins and increased cash conversion. And so how have we started the beginning of the year, we've really got a really good strong growing pipeline of prospects, combined with increasing annual revenue -- annual recurring revenue and committed revenue. I think we've done -- nearly around 80% of our next year's revenue is already sort of in the bag. We're trading currently in the financial year, and that started positively. And whilst we're cognizant of all the sort of inflationary cost pressures, we're really confident about 2023 results being in line with at least current market expectations. So I think that's it now. And we're going to go to questions.

[Operator Instructions] I'd like to remind you the recording of the presentation, along with the copy of the slides and the published Q&A can be accessed via our investor dashboard on the Investor [indiscernible] Company platform. [Operator Instructions] And if I could ask you to read out the question where appropriate to do so and give your response, that would be fantastic.

Yes. I could take the first one, at least [indiscernible] a couple. EBITDA margins are pretty anemic for a SaaS business, where do you expect margins should be? Yes, indeed, we are not happy with the margin level as it were in the long run at 15.5%. I think the market forecast is, this year will be above 17%. But in terms of where we'd like to be, as I say, we'd like to get the gross margin much higher. But in terms of EBITDA margin, we're targeting 20% to 25%. But like all these things, it depends how much reinvestment you do. And at the moment, we're still in very much in an investment phase.

Yes. yes. I think it's focusing on that gross margin for me. And as I set out in the presentation, we'll -- as we transition from less data management, which is probably more around the 50% gross margin, probably 60% with the blend of other bits and pieces, but we're going to more SaaS base. We should see that the traction -- get the traction, I believe we're going to get from H2, I think that will significantly transform the margins. And that's not really built into our forecast yet. This is all about -- we're currently based on a bit of what we can really see, but that could be really transformational to those margins.

And there's another question from [ Stephen ] again. How do you ensure bidding discipline when you go after contracts? And how do you balance chasing revenue versus profitability? I guess we're -- in terms of any new contract, we're always chasing profitable contracts. So there's no point, us getting new business that's not profitable. And how we do that is, basically, we have a very detailed review of what's involved in the project, and it gets reviewed by the management team and also if it's a large project, then Claire and I obviously will have a good look at that. So we're definitely not chasing revenue for the sake of revenue, which is vanity and profit is definitely sanity. So I guess the key thing that we're trying to do is get more contracts where there are, well, term licenses than services, which ultimately will be more profitable.

I was going to say you should do the next one, Andy which is about IT, the staff cost and inflation stuff. Do you want to take that one? Or...

Yes. I'm just -- yes, tight labor market, yes. It's a tight labor market, especially in IT and software, where are you on staff cost inflation? What are you putting into your models? So I guess this is a challenge. Well, I see there's 2 aspects of the challenges for us, particularly. one is actually trying to recruit people and find them. And -- but also in terms of our key asset is our people. So we want to keep them happy. We all know that inflation is increasing and may pick up even further and so forth. So we've -- in the prior year, when we did pay reviews, I guess, we were quite tight. It was COVID and so forth. And this year, we've increased the pay level. And I would say it varies by territory, but probably it's 3% to 4% on average. Some regions, it's more than others. But I guess the key for us is we've done some benchmarking, and we want to make sure we are paying people the right wages because ultimately, if you don't pay your [ staff ] well, then they go off. And I think one thing that's felt in our industry and others is that with the COVID and people working from home, this, if you like, a little bit, power has moved to the employees who can be a little bit more choosy about who they work for. So I think the other aspect is making sure you're dealing with the soft side of recruiting people and people want to work for you, and we definitely found that we've had a lot of people wanting to work for us because they think we're a nicer place to work for. So there are some challenges at the other side of the cost inflation is that we're making sure that our salespeople and the managing directors are reflecting in their bidding increased prices to customers where we can.

I'll take one that's a bit further down from [ Miles ], who says, who do you compete with in the NG911 contract? So there's a couple of players in the market that we've been up against in the last few tenders, but we -- as I said, we've won the last 7, it's Michael Baker and Geocomm. And I think looking at the scoring, we do get to see it come back. I think generally, it's -- we're not necessarily the cheapest, but I think our technology solution is the best. And it's the way that we can manage huge amounts of [ location ] data from a consistent way, deal with all these sort of critical issues in rules. So yes, we seem to be winning in the market. So that's good.

There's a question here. Why do you think investors have ignored your exciting equity story? What are you doing to get your story better named with institutions? A good question and not one that's easy to answer. We obviously feel that the business is undervalued and so forth. But I guess the business has been through a little bit of a transition. And the key for us now is to try and just make sure we are explaining the business a bit more clearly and what we're doing. It'd be interesting to get feedback from people on the call in terms of whether the message is clear, but we are very focused on making sure we do explain the proposition. We are very excited about the opportunity for the business and the challenges for us to communicate that and have that reflected. I guess, ultimately, we've got to deliver, and that's what we're focused on as well.

Yes. And I think if we can just get past this GBP 50 million market cap hurdle, I think that also just get another range of institutions and people interested in it. So it's -- what are those things? But I think clarity of our story, which we've been really working on, we put more stuff on the website, we put a new video on yesterday. It's saying more about what we do. Everything we're just trying to really clarify our story. And I think the whole scene now, we've got the Data Management, the big deals. We're focusing on the Business Apps. We're going to launch our SaaS platform. I think that is starting to resonate. And hopefully, we'll get the benefit of that work that we've been putting in.

There's a question here. Could you discuss the pipeline in terms of size, geographic mix, like your recurring percent and historic conversion rates to the pipeline? Quite a lot in that and difficult to be precise. We don't actually publish a pipeline number. I know some companies do. But I think for me, there's so many different ways, some people put everything into the pipeline, other people might put it in any when they know they're going to close the deal. So what we do is we have a consistent way of looking at it, and we look at trends and essentially, the pipeline has grown in all regions that we're focused on. And so it's -- yes, I mean, I guess the U.S. has grown a lot, but actually in all the markets, in terms of the likely recurring percentage, we -- I can't give you a precise number or timing, but we do want to get to 60% or more that's recurring. And in terms of historic conversion rates, again, it's difficult to be precise. But the example that Claire gave, we've been very, very, very high, if not 100% in terms of particular areas like 911. But again, it's -- you have to work hard, and it does take a while to bring certain deals in. And there's one here, as an example, how much of new [ Esri ] contract is recurring and which parts of it? So the total contract value was GBP 6.5 million, of which GBP 1.5 million is effectively GBP 0.5 million per year of licenses. So it's GBP 0.5 million per year that's recurring and it's contracted for 3 years. And although there are some sort of option points but we expect it to go for the 3 years. And I guess the key thing after that is that there's no point, the government backing an investment and then allowing it to go to waste. So we imagine that there will be follow-on recurring revenue after that order, if not much higher.

And there are just a lot of services associated with that one. It is a bit of a one-off from that perspective. But we just thought it was such strategic importance because we want to be able to get in with all the 650 different asset providers. We feel that it was worth doing or getting involved. We could have actually not always done all of that services. It was part of the consortium, someone else could have done some of that. But we decided to take all of that because we wanted the access. And we think it's such a good deal, it's sort of -- it gives us really good marketing potential. We get a lot of inbound queries now because we've got such visibility through that contract.

There's one here, what catalysts or measures should investors look for over the next year to indicate the plan is progressing well? Well, I suppose we hope to announce some contract wins during the course of the year. And I guess the focus is on revenue growth. So we'll give a trading update at the AGM on the 21st of June. And again, in September, obviously, we'll update the numbers. So I guess for me is -- revenue growth is the key factor. There's a question here, in which areas are you focusing your research spending? Well, I guess the key areas for R&D are on the Business Apps now and the cloud-based solutions. So that's definitely the focus this year, and we want to deliver some of those products this year and that's the key focus, I would say.

There's another one from [ Stephen B ] here. He said, IQGeo is also listed in this space. What differentiates you from them? So if you remember back to my diagram, where we have the Data Management was in the middle and then we have the Business Apps on top. And then we went over to the left hand corner and it said apps built on top of those 3. And we said that I had 1Water app and we've got a 1Telecomm app. I have a -- we have a 1Telecomm solution, and that along with the Esri platform, that would be half some competition with what IQGeo does, but I think they tend to go to a lower level market. So Esri, because their platform is quite expensive plus our technology was out, so we would target a slightly different telecom market, but we're quite excited as our proposition there. So some interesting stuff coming out on that soon. But yes, so that's -- there's a very tiny crossover, but not really.

There's a question here, what's the biggest inhibitor to growth and how you're mitigating this? I guess, we are a small company and it's -- we're trying to punch above our weight. There are some challenges getting some salespeople to help us do more selling. There are -- there is the usual business changes of making sure we are closing sales and we're delivering on the services. But I wouldn't say there's nothing that's getting in our way of inhibiting growth. We don't need more capital. We don't need many more people. We just need a bit more success. And I think the fact that we've had some good success this year and people are beginning to call us rather than us having to call them and the good work we've done with partners, which gives us a much greater delivery capacity or scope for selling distribution capacity, I should say. These are the things that are really going to help us. So there's nothing that we feel is inhibiting us.

There's another question here from [ Ian Baggery ], your main competitors are winning 80% of the deals you bid for, who is winning the other percent and why? I think in France, in France, there is a bit more of a cost thing. So lower cost tends to win. So we have to be a bit more mindful of that. In the other markets, it's less. You see the scorecard for pricing for scoring the tenders is a lot more different. So it's a lot more balanced. And it's a lot more now. We feel it's focusing much more on the technical aspects and the solutions because there's no point investing in these things if it's not going to work, even if you get any cheaper, probably in France, it's a harder market in France. So we probably -- that's why the average is sort of 80-20 rather than 100% drag down, a little bit more bias Europe, really.

There's a question about Esri, Claire that you...

Yes. So a few questions around -- I see here from [ Stephen B ]. So yes, some stuff are really about Esri. So yes, Esri is our partner, and as you -- and it's a really important partner because that's where we have our Business Apps on in France are built on the Esri platform. And we -- and we'll be back to the Venn diagram, we're at the sort of intersection of 2 key markets, that mainstream master Data Management and that GIS world of which they're dominant. So it is important that we still have an understanding of what's happening in the GIS space. So we get that through the work we're doing with Esri and the work we're doing in France. The relationship is growing from straight to straight actually. We're working with them more collaboratively in the U.K. and U.S. So that is really another help to our growth. So that's really good. So the relationship is good. There's another query -- question here about the sort of owner of Esri. It's privately owned and the CEO, he is no spring chicken, he is the [indiscernible] in the question. I haven't said that. Yes, Esri is massive. It's a $1 billion company and it will continue on. Each of the -- all of the actual entities across the rest of the world, apart from the U.S., are actually owned by other private owners. So I think the U.S. runs like 49%. So all the distributors, all globally, of all 51% owned as separate entities in their own right. So there's all these separate entities, even though the U.S. is owned by Jack Dangermond, who I've met on several occasions. So -- but I think he's got very good plans and ideas of where this is going next. And it's not up to me to really say that what they are and not -- I really know it already, but Esri will be in good hands, there's no doubt about that.

There's a question. I see you as a key infrastructure asset enabler, but does the market understand your key role? I guess it comes back down to the previous thing about are we explaining ourselves as well. I think you're right. We -- there's a lot of opportunity, not just in the U.K. but globally on that. And I'm not sure if the market does understand it's up to us to really make sure it's clear, I suppose.

Yes, that was a good point, [ Stephen B ], we'll have a look at that and see how we can maybe make that clear. I think some of these projects I wanted to start with the new [indiscernible] in the picture because I think a picture says a thousand words, and I think you could then visualize. Some of the location data issues that we're solving, you have to create these maps. It's not so visible as [ survey ] in the country. You can't create those sort of underground maps unless you're taking data that's already there. So -- and as a final question here from [ Stephen B ], is the Board looking to strengthen its nonexecutive directors field sets? I would say actually, no, we've got a really, really strong Board. So I don't know if you know, we've got our Non-executive Director, Andrew Roberts, [indiscernible] on CEO roles, not exact roles for years. He's a seasoned professional on the listed market and in tech, and he sold that innovation group out, it's probably [ 8 or 9 ] years ago now for GBP 500 million to a Private Equity, Carlyle. We've got Francis Small, he's sort of run as a young number of years, really good from the governance perspective, audit committee. He's really solid. He's also got some very other good chairmanships, the British Bank. Well, we've got Peter Massey, who's -- he's from the sort of background where he's from a National Grid. So he's got the background, so he's got the industry skills. So across the [ 3 nets ], we've got the real -- we've got the aim, the shareholders. We've got the governance and we've got the industry expertise. And I think with Andy and myself, that's a really good Board. We've got a really good cross-section of skills and insights there.

I think on that note, Claire and Andrew, you've covered off every single question you've been fired. So thank you very much indeed. And of course, any further questions, the team will be able to review those. And we publish responses where appropriate to do so in the Investor [ News ] Company platform. Perhaps just before redirecting investors to provide you with their feedback, which I know is particularly important to you and the team, can I please ask you just for a few closing comments?

Yes. Well, I just wanted to start with one of the slides that I -- sorry, I just want to finish with one of the slides that I started with, which is why I believe 1Spatial has a really transformational growth opportunity because we're getting the customer and partner credibility. I mean, you don't get picked on a competitive basis to do -- to manage the Emergency Services data for the U.S. unless you're good at it. And it's a significantly growing market and it's resilient markets in this current world that we live in. And we've got visibility on the U.S. revenues for $150 million annual recurring revenue. And we have a market-leading software platform, which we can capitalize. And it's not just about the term licenses that we're currently selling to the likes of the states of the U.S. In H2, we've got these Validation as a Service and Software as a Service solutions that we're going to launch on our Multi-tenancy Cloud platform, which are really transformational and will give us that scalable growth that everyone is looking for. That's it.

Fantastic. Claire and Andrew, thanks again for updating investors today. [Operator Instructions] On behalf of the management of 1Spatial Plc, we'd like to thank you for attending today's presentation. That concludes today's session, and good afternoon to you all.