ikeGPS Group Limited ($IKE)

Good morning or good afternoon, and welcome to ikeGPS Fourth Quarter and the Full Financial Year of 2026 Performance Update. On the line today, we have Glenn Milnes, the CEO and Managing Director; and the company's CFO, Paul Cardosi. Before I hand it over to Glenn to go through the presentation on the screen. [Operator Instructions] With that, Glenn, I'll hand it over to you. Thanks for that.

Great. Thank you, Simon, and thank you all for taking the time to join. So we'd like to be respectful of your time in terms of today our results that we have released are in line with what we have communicated less than 30 days ago. So we'd like to just pulse through kind of where we are and probably touch on some competitive items, but I will hand over to Paul to take us through the numbers, again, which are in line with what we have guided to.

Thanks, Glenn. Starting with the summary. This slide is not materially different than what you saw, as Glenn mentioned, roughly a month ago when we gave our fourth quarter and FY 2026 update. So you can see that after being gone through the full audit of our financial statements, I'll cover those in a second. Materially, everything is pretty much as reported. I'd call out as a refresher that we finished the year with a 33% growth in our subscription revenue. We exited, which was in line with our -- within 1% of our target and guidance. We also achieved positive underlying EBITDA in the month of March, and our goal again was to exit the year with a positive EBITDA, and I'll talk about that in a second more. Everything else you see on here, again, just respectful of time is pretty much what we've reported. One item that we've added right at the bottom now that we've got audited financials, you can see we finished the year with an EBITDA, so taking our earnings and adding back some of the non-cash items, we ended up with a NZD 5 million negative versus NZD 6.9 million last year. So continue to progress that EBITDA line as we march towards profitability. So that's kind of the highlights. Again, most of it very similar to what we reported, if not the same as the update we gave a month ago. If we can Simon, just -- I don't know, Glenn, if you want to touch this, I'll pause.

Yes, I think so. So essentially, we have hit our financial targets. I know this is just the topic that the software industry is focusing on. We've taken very much an AI-first approach in terms of not just AI inside of our products, but AI inside of our operations. So we see various factors as being an accelerant versus a disruptor. And we're launching new product capability. And we've been able to increase pricing on our way through this last 6 months. We're bringing more AI-based capability to market. It's sitting inside our products. It's also sitting inside our operations. And we've got a pretty amazing database in terms of how we're training AI inside of our business. So we're excited about where we sit at the moment in terms of helping our customers be successful and helping the industry be successful.

Do you want me to move to any other slides?

Yes. Next slide, thanks. And probably the last item in terms of this session is we really feel like the U.S. market is still available to tap in terms of market development. So we think we've only got maybe 5% of the market penetrated at the moment, and there's another 95% to go and get. And we've got new products coming. We've been very fortunate to have investment backing to go and build new products and do new things around distribution asset development. And that's what we're investing at the moment. So we continue to win new customers and a lot of the market is still ahead of us. And Simon, there's maybe one more slide, if you can flip forward to. Now, I do think this is important when yes, we go back into the addressable market. We're addressing a big part of the workflow in terms of our customers. And if you look across some of these use cases, joint use, which is -- that's a utility that's got lots of different infrastructure sitting across their infrastructure. We look at grid hardening. It's like how does the grid stay hard when a storm blows through, or a fire or wind storm, or that type of natural event and also the digital twin workflow as well, which is how do you digitize your network, we sort of sit at the middle of these different items. And I do feel that IKE sitting at a really core midpoint of these different use cases, which makes us a valuable partner to the customers that we work for. And Simon, I'll probably just open things up from here because it was less than 30 days ago that we provide an update to the market and provide numbers, et cetera. Today, I think we're just confirming where we landed.

No problem at all. Glenn, was there any other further comments from you, Paul, that you might want to add? Otherwise, we can open up to questions.

Nothing from me, Simon.

I might allow James Lindsay to ask a question.

Congratulations on an impressive result again in subscription and the breakeven EBITDA for March. So I know those things aren't easy when you're a growing business. Maybe just the first one, just on the OpEx growth. Obviously, that's been well contained. And I think it was like 3% up on amended stuff. Just interested now that you're in a great financial position and obviously, operating leverage coming through, how should we see that OpEx growth for this year, given -- again, you're also talking about there's a very large market there to tap and I assume extra salespeople on the ground don't come cheap.

Yes. I think there's -- I'll let Paul comment after me. But what has changed in the last 6 months has been the cost of software development with some of these new tools. And we truly are now an AI-first business in terms of how we operate, and that has reduced the cost of software development. So I think that's a really positive thing for shareholders. And we're trying to be in front of a lot of these work practices. And then I'll let Paul comment on costs in terms of go-to-market because the barrier has shifted from software development, which used to be the biggest cost item. And now it is really around go-to-market and distribution and getting products to market. So that's where we've fortunately been very focused on for the last 3, 4 years in terms of customer experience and brand, et cetera. So Paul, maybe you can add.

Yes. I would just add further to that for you, James. One is you've seen the business progressively improve gross margin. We finished the year at 80% against 69% from a prior year. That gives us increasing leverage. Clearly, that's been driven from the -- not just the growth, but also the mix of revenue. That gives us more coverage to kind of invest in both go-to-market and development efforts. So -- the second thing we look at is the operating leverage, right? We're building a business where we definitely want to have the revenue growth outpace our spending. I think to specifically answer your question, I see the spend increasing in FY '27. Part of that is we have staffed to develop products faster. And I think you're well aware of some of the modules we've got on tap to be released later this year as well as really putting in that go-to-market effort to really deliver on that. But the goal would be gross margin progression and continue to make sure that we have positive operating leverage as we grow the business.

Great. And then maybe just on that -- those new product development. If I recall, it was sort of 6 to 9 months away or so from the first testing. Can you just give us an update on that? You said that's pretty much in line with expectations on that? And then just remind us again how far behind the second product is? Is that another sort of 9 to 12 months down the track?

Yes. The first product release is on track to be in customers' hands at the end of this calendar year. And we're excited about that because it takes us into the electrical management of networks. At the moment, we do structural design. This takes us into the electrical management side of networks. So that's tracking very well, and still lots of work to do, but that is looking good. In terms of the second platform, that's further into FY '27 and '28. And that gives us like a -- I don't like the term, but it's like a headless platform that puts all of our products into one cloud-based infrastructure.

Got it. Okay. And just interested in your -- you're talking, Glenn, with regard to the benefits of AI and being able to do things there more cheaply. Your view of sort of speed versus cost because obviously, you could just do things a lot faster as well. Just what that mix works for you.

Well, we have -- we've trained the whole IKE business on AI-first work practices. And some of these tools are quite incredible in terms of software development. You still have to have industry expertise and you have to have customer insights and customer engagement, but it's now possible to build things faster. So yes, we're quite excited in terms of what it presents for us. And we've built an internal system called Vitruvius, which is our IKE system for like AI-first operations, and that's how we're running. We're trying to be a great fast follower. I'm sure everyone on this call is probably in the same boat.

Yes, absolutely. And then just with regard to sort of R&D spend for this year, apologies if I've got these numbers wrong because we haven't had a huge amount of time yet to go through it. But it looks like only sort of $1.5 million of R&D was capitalized. So just your view about capitalized versus expensed for the year.

I'll let Paul take that.

Yes. I think, James, if you were to drill in, I know we don't disclose this, but if you look at the monthly profile of that capitalized development. You see it increase as the year progresses, which makes sense given we really started to ramp the new product development effort towards the end of the year to the second half of the year, including adding some resources to ensure that we stay on track with the release. So we exited with about -- I want to say, about $150,000 to $200,000 per month was the exit rate. So that gives you a sense of kind of the pace that we ended the year at. And I see that continue as we continue our path down into '27, with the new releases. So I see the capitalized portion pick up, and it's more likely to be at that $150,000 to $200,000 monthly run rate that we exited the year at.

Thank you very much for that Paul. That concludes the Q&A segment. I might just hand it back to you for closing remarks quickly, Glenn.

Thank you, Simon, and thanks, everyone, for joining. Obviously, Paul and I are available for Q&A and follow-up questions, as always. So thank you for your time.

Cool. Thanks, everyone, for attending.