ikeGPS Positioned For Multi-Decade Tailwinds

Small Caps | 12:33 PM

Sales of ikeGPS Group's suite of products are benefitting from structural trends. New research explains these tools remain critical for a range of large customers, with the current focus on North America.

-New research highlights structural tailwinds for ikeGPS Group
-Strong data capture, analytics, and AI capabilities
-Subscription ARR growth outpaces key peers
-Sales to North America remain the focus

By Mark Woodruff 

Leveraging broad structural thematics, ikeGPS Group ((IKE)) delivers software and data solutions that enable utilities and infrastructure owners to efficiently plan, analyse, and execute capital upgrades.

Rising demand from decarbonisation, the electrification of transport, and the growth of data centres is reshaping electricity supply and demand patterns. These are areas where ikeGPS Group's tools are critical for managing distribution assets such as poles and wires, according to freshly released research by Moelis.

Management has invested heavily in developing its data capture, analytics, and AI capabilities to support long-term growth.

Bell Potter sees ikeGPS as a key beneficiary of multi-decade tailwinds from electrification and grid hardening, forces expected to accelerate with the rapid rollout of power-hungry AI infrastructure.

While the business is not yet earnings-positive, Moelis feels sustained momentum could see the company achieve positive earnings and cash flow by FY27.

At recent FY25 results in May (March year-end), management forecast FY26 subscription revenue would achieve growth levels of 35% or greater, with earnings to break even on a run-rate basis within the second half of FY26.

These projections reflect existing contracts and broader business momentum.

Headquartered in Denver, Colorado, ikeGPS serves electric utilities, telecommunications companies, and engineering service providers, primarily in North America but also elsewhere.

Solutions help these clients accelerate infrastructure deployment, improve asset data quality, support regulatory compliance, and reduce costs.

Revenue derives from platform subscriptions, transaction-based usage, and associated services, with a growing focus on recurring software revenue.

When initiating research in April, Shaw and Partners estimated the group was growing three times faster than its peers. Subscription annual recurring revenue (ARR) at circa 40% compares to 13% for US-based Bentley Systems.

ikeGPS Group is still less than 10% penetrated, noted the broker.

The US opportunity

Bell Potter.highlights management's focus will remain on embedding the company as the industry standard in the North American market.

The US is home to an estimated 200 million above-ground power poles, notes Moelis, spread across millions of kilometres of network infrastructure.

Inadequate maintenance of these assets can lead to serious consequences, including power outages, property damage, and public safety risks.

Shaw notes ikeGPS' platform is currently being standardised in eight of the ten largest utilities in North America.

Rejected takeover

Strong industry fundamentals have driven increased consolidation activity, including interest from private equity, with Moelis noting partnerships or M&A could unlock meaningful synergies.

In late 2024, a private equity firm submitted an acquisition proposal at NZ$1.00 per share, representing an around 60% premium to the prevailing share price.

Following a brief due diligence process, the board declined the offer, venturing that shareholders were unlikely to support a transaction at that valuation.

Bell Potter anticipated the rejection on the basis key shareholders were likely anticipating multi-decade tailwinds in upgrading critical distribution networks for utilities and communication networks across North America.

The approach indicated significant value creation potential, suggested the broker, as management continues to acquire new customers and transition existing ones to its higher-value, next-generation products.

It also demonstrated the strategic appeal of integrating the group's software platform into a broader energy transition and digital infrastructure portfolio.

SaaS solution

ikeGPS' software suite supports end-to-end utility pole life cycle management, from data collection and engineering to compliance and permitting. The company is increasingly focused on recurring SaaS revenue, particularly from IKE Office Pro, IKE PoleForeman, and IKE Insight.

IKE Office Pro is a cloud-based platform for pole data capture, measurement, and analysis, enabling field engineers to collect and manage pole-related data such as height, span, attachments, and condition.

The company acquired PoleForeman in 2019 and, in late FY24, launched an enhanced SaaS version, IKE PoleForeman, featuring expanded functionality and modern cloud-based delivery.

This is a structural analysis tool which simulates pole load capacity under different conditions, ensuring safe and efficient network design. It is fully aligned with the standards and regulations set out in the US National Electrical Safety Code (NESC).

Offered on a per-user subscription model, the new platform has driven a significant acceleration in recurring revenue growth over the past 12 months as customers transition to the upgraded solution.

During the FY25 results presentation, management noted total contract value (TCV) closed for the product had surpassed NZ$17m, driven by adoption of tier-1 electric utilities in the US market.

An AI-powered image analysis engine, IKE Insight automates feature recognition from unstructured imagery or Light Detection and Ranging (LiDAR) data.

While there can be rapid capture of vast volumes of field data through digital imagery and LiDAR surveys, much of these data remains unstructured and time-consuming to manually process, especially across networks spanning thousands of kilometres.

IKE Insight addresses this challenge, highlights Moelis, with an automation tool trained to recognise and extract features from unstructured image and LiDAR datasets. It supports a wide range of image formats, including thermal, LiDAR, photographic, video, drone, and street-level imagery.

Accounting for the majority of the company's transaction-based revenue, IKE Analyze launched in late-FY18. This service aims to take field data and perform the detailed desktop measurement, annotation, engineering, and analysis for each pole.

The IKE team will perform pole load analysis in the proprietary software, PoleForman.