ikeGPS Group FY2020 Results announcement

ikeGPS Group Limited
Results for announcement to the market
Reporting Period12 months to March 2020
Previous Reporting Period12 months to March 2019
Amount (000s)Percentage change
Revenue from ordinary
activities
9,838 NZD+23.0%
Profit (loss) from ordinary
activities after tax attributable to
security holders
-5,683 NZD+12.0%
Net profit (loss) attributable to
security holders
-5,683 NZD+12.0%
No dividends declared
31 Mar 201931 Mar 2020
Net tangible assets per security
0.060 NZD0.040 NZD
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ikeGPS Group Limited p. 1
350 Interlocken Blvd, Suite 390, Broomfield CO 80021, USA
Office: +1 303 222 3218
www.ikegps.com



FOR IMMEDIATE RELEASE
29 June 2020

Record Revenue & Margin in FY20.
Solid performance through Covid-impacted Q1 FY21.

ikeGPS (IKE) today released its FY20 financial results for the year ending 31 March 2020 and
provided an update on performance for the Q1 FY21 period ending 30 June 2020.
FY20 performance for period ending 31 March 2020 was in line with the headline metrics
communicated to the market April 2020;
+ Record revenue of approximately $9.8m (growth of approximately 23% against PCP)
+ Record gross margin of approximately $7.0m (growth of approximately 30% against PCP).
+ Gross margin percentage of approximately 71% (PCP of 67%) with this increase due to IKE's
revenue mix shifting further to transaction and recurring subscription sources.
+ Operating loss for the year was approximately ($5.6m) against PCP of ($5.1m).
+ Operating cash flow for the year was approximately ($1.1m) against PCP of ($4.0m).
+ Total cash and receivables 31 March 2020 of approximately $5.8m. No debt.
The financial results released are unaudited. The audit process itself is near completion.


Takeaways;
+ IKE’s revenue mix from its core
Communications & Utility segment has
continued to trend positively the past 12
months.
+ Approximately 70% of FY20 revenue was
from transaction & recurring sources
(shown by the blue bar in the chart).
+ This is an important transition in terms of
increasing revenue quality and
predictability to underpin growth.

ikeGPS Group Limited p. 2
350 Interlocken Blvd, Suite 390, Broomfield CO 80021, USA
Office: +1 303 222 3218
www.ikegps.com



Takeaways;
+ The positive momentum of the past 24
months continued through FY20 with
respect to revenue, gross profit, and
operating cash flow performance.
+ Total Cash & Receivables 31 March 2020
are approximately $5.8m.

Relating to the FY20 result, IKE CEO Glenn Milnes, commented.
+ We are pleased to have delivered strong growth in both revenue and gross margin however we
believe the most important development for shareholders through FY20 was the continued
transition to higher quality revenue via the IKE Analyze solution and associated business
model.
+ Looking ahead market timing remains optimal for IKE with an expected US$350B investment
super cycle occurring into fiber and 5G network development in North America over the next
five or so years.
+ Our solution speeds the network pre-construction process for both the Communications and
Electric Utilities segments, and we have multiple customer proof points that represent account
acceleration opportunities in FY21 and beyond.
+ We are pleased to have further developed capability over the past 12 months in terms of brand,
customer experience, and process efficiencies., We also deepened our product offering with
the recent successful acquisition of PoleForeman for pole loading analysis, where our
embedded customers include many of the largest investor-owned utility groups in the U.S.
+ Our people capability also grew across the areas of leadership and pole project expertise. In
addition, our governance was strengthened with the inclusion on to the Board of Mark Ratcliffe
as a non-executive director. Mark is the former CEO of Chorus and former CIO & CTO of Spark
(formerly Telecom NZ).
Relating to headline Q1 FY21 performance, Milnes added.
+ “IKE performed solidly through the Q1 FY21 ending 30 June despite significant Covid-19
impacts across North America.
+ We expect to achieve revenue of approximately $2M for the quarter, which is a 15-20% reduced
run rate revenue level against FY20 (and pre Covid-19 impacts).

ikeGPS Group Limited p. 3
350 Interlocken Blvd, Suite 390, Broomfield CO 80021, USA
Office: +1 303 222 3218
www.ikegps.com


+ The positive indication through June is that network construction, the process that the IKE
solution supports and accelerates, is resuming to pre Covid-19 levels of activity.
+ We expect to end Q1 FY21 with total Cash & Receivables of approximately $5.2m (against 31
March 2020 position of $5.8m).”
With respect to update on broader Covid-19 impacts.
+ “Although IKE’s North American customers did experience a substantial slow-down in activity
March through May 2020 due to the sudden uncertainty created by Covid-19, their operations
have resumed in June, even with the continued presence of Covid-19 across the U.S.
+ Shelter-at-Home’ orders across the U.S. are exempting companies deemed “Critical
Businesses” that includes IKE and its target customers, being communications companies,
electric utilities, and their associated engineering service providers involved in constructing and
maintaining Critical Infrastructure.
+ Notwithstanding these mitigating factors and these U.S. Critical Business provisions, we are
conservatively planning for a scenario of lower activity Q2 FY21 and considering the impacts
should Covid-19 surge again in specific regions or states where our customers operate.
+ IKE is continuing to closely monitor risks related to Covid-19, with a focus on the health &
safety of staff and the company’s resilience across supply chain, customers, and technology.
+ Operationally, IKE has transitioned its U.S. operation to mostly remote working, while its New
Zealand operation is back to “in-office” status in the Level-1 environment.
+ Due to the cloud-based nature of IKE’s products, systems and processes, and the critical nature
of the industry it serves, the changes required to IKE’s operation throughout this situation have
continued smoothly for the most part. As such, IKE people and products are expected to
continue to deliver the highest levels of performance, availability, and security.
+ The Covid-19 situation continues to change and develop in the U.S., so these statements are in
the context of what is known at this point-in-time. IKE’s fuller customer update can be seen at
https://ike4.ikegps.com/our-covid-19-response/ .



ENDS
IKE seeks to be the standard for collecting, analysing and managing pole and overhead asset
information for electric utilities, communications companies, and their engineering service
providers.
Contact: Glenn Milnes, CEO, +1 720-418-1936, glenn.milnes@ikegps.com

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ikeGPS Group Limited
Financial Results
Year End // 31 March 2020

Contents

Consolidated statement of profit or loss and other comprehensive income ............................................2
Consolidated statement of changes in equity...............................................................................................3
Consolidated balance sheet ...................................................................................................................................4
Consolidated statement of cash flows.............................................................................................................5
Notes to the consolidated financial results ...............................................................................................6-18

p. 2

Consolidated statement of profit or loss and
other comprehensive income


Year ended 31 March
Group


Unaudited
March 2020
Audited
March 2019
Continuing operations
$'000's $'000's
Operating revenue

9,838 7,996
Cost of sales

(2,878) (2,646)
Gross profit
6,960 5,350
Other income

1 102
Operations cost
5
(541) (643)
Sales and marketing expenses
5
(4,697) (3,226)
Research and engineering expenses
5
(3,361) (3,210)
Corporate costs
5
(4,011) (3,443)
Foreign exchange (losses)/gains

5 (39)
Expenses
(12,605) (10,561)
Operating loss
(5,644) (5,109)
Net finance income

(22) 17
Net loss before income tax
(5,666) (5,092)
Income tax (expense)/credit

(17) 4
Loss attributable to owners of ikeGPS Group

(5,683) (5,088)
Other comprehensive loss


Exchange differences on translation of foreign operations

563 168
Comprehensive loss

(5,120) (4,920)



Basic and diluted loss per share

$ (0.06) $ (0.06)







The accompanying notes form part of, and should be read in conjunction with, these financial results.

p. 3

Consolidated statement of changes in equity



Share
capital

Accumulated
losses
Share based
payment
reserve
Foreign
currency
translation
reserve

Total

$'000's $'000's $'000's $'000's $'000's
Opening balance at 1 April 2018
49,263 (41,088) 60 (283) 7,952
Changes in accounting policy - 274 - - 274
Restated balance at 1 April 2018 49,263 (40,814) 60 (283) 8,226
Loss for the year - (5,088) - - (5,088)
Currency translation differences - - - 168 168
Total comprehensive income/(loss)
- (5,088) - 168 (4,920)
Issue of ordinary shares 5,869 - - - 5,869
Recognition of vesting of share-based
options
- - 188 - 188
Share based payment reserve movement - 56 (56) - -
Total transactions with owners
5,869 56 132 - 6,057
Balance at 31 March 2019 55,132 (45,846) 192 (115) 9,363


Share
capital
Accumulated
losses
Share based
payment
reserve
Foreign
currency
translation
reserve

Total

$'000's $'000's $'000's $'000's $'000's
Opening balance at 1 April 2019
55,132 (45,846) 192 (115) 9,363
Change in accounting policy - (45) - - (45)
Restated balance at 1 April 2019 55,132 (45,891) 192 (115) 9,318
Loss for the year - (5,683) - - (5,683)
Currency translation differences - - - 563 563
Total comprehensive income/(loss)
- (5,683) - 563 (5,120)
Issue of ordinary shares 5,940 - - - 5,940
Recognition of vesting of share-based
options
- - 259 - 259
Issue of shares from exercising share
options
37 - (27) - 10
Share based payments 389 - 281 - 670
Total transactions with owners 6,366 - 513 - 6,879
Balance at 31 March 2020 61,498 (51,574) 705 448 11,077






The accompanying notes form part of, and should be read in conjunction with, these financial results.

p. 4

Consolidated balance sheet


Year ended 31 March
Group

Unaudited
March 2020
Audited
March 2019
ASSETS $'000's $'000's
Current assets

Cash and cash equivalents

4,327 3,475
Trade and other receivables

1,566 1,370
Prepayments

694 294
Inventory

821 1,691
Total current assets

7,408 6,830
Non-current assets


Property, plant and equipment

1,188 944
Intangible assets

6,523 3,604
Inventory

589 -
Lease assets
3
705 -
Deferred tax asset

- 17
Total non-current assets

9,005 4,565
Total assets

16,413 11,395
LIABILITIES


Current liabilities


Trade and other payables

1,014 505
Employee entitlements

231 226
Provision

458 -
Contract liabilities

2,311 1,246
Total current liabilities

4,014 1,977
Non-current liabilities


Lease liabilities 3 787 -
Provision

480 -
Non-current contract liabilities

55 55
Total non-current liabilities

1,322 55
Total liabilities

5,336 2,032
Total net assets

11,077 9,363
EQUITY


Share capital
6
61,498 55,132
Share based payment reserve

705 192
Accumulated losses

(51,574) (45,846)
Foreign currency translation reserve

448 (115)
Total equity

11,077 9,363



The accompanying notes form part of, and should be read in conjunction with, these financial results.

p. 5

Consolidated statement of cash flows


Year ended 31 March
Group

Unaudited
March 2020
Audited
March 2019

$'000's $'000's
Cash flows from operating activities

Cash receipts from customers

10,392 8,401
Cash paid to suppliers and employees

(11,351) (12,422)
Payment of low value and short term leases

(73) -
Interest paid

(34) (14)
Net cash used in operating activities
7 (1,066) (4,035)


Cash flows from investing activities


Purchases of property, plant and equipment

(781) (477)
Additions to intangible assets

(683) (603)
Purchase of assets in business combination

(2,749) -
Interest received

12 31
Net cash used in investing activities
(4,201) (1,048)


Cash flows from financing activities


Payment of principal portion of lease liabilities

(161) -
Exercising of share options

10 -
Proceeds from issuance of shares

5,940 5,869
Net cash from financing activities 5,789 5,869
Net (decrease)/increase in cash and cash equivalents
522 785
Cash and cash equivalents at 1 April

3,475 2,586
Effect of exchange rate fluctuations on cash held

330 104
Cash and cash equivalents 4,327 3,475

















The accompanying notes form part of, and should be read in conjunction with, these financial results.

Notes to the consolidated financial results



p. 6

1. Reporting Entity
ikeGPS Group Limited (the “Company”) is a limited liability company domiciled and incorporated
in New Zealand, registered under the Companies Act 1993 and listed on the New Zealand Stock
Exchange (“NZX”) and Australian Securities Exchange (“ASX”). The Company is an FMC reporting
entity for the purposes of the Financial Markets Conduct Act 2013. The unaudited financial
results for the year ended 31 March 2020 comprise the Company and its subsidiaries (together
referred to as the “Group”) which include ikeGPS Limited and ikeGPS Inc.
The principal activity of the Group is that of design, sale, and delivery of a solution for the
collection, analysis, and management of distribution assets for electric utilities and
communications companies.
The unaudited financial results were authorised for issue by the Directors on 29 June 2020. The
audited financial results will accompany the annual report release.
2. Basis of preparation
The principal accounting policies applied in the preparation of these unaudited consolidated
financial results are set out below. These policies have been consistently applied to all the years
presented, unless otherwise stated.
Basis of measurement
These unaudited financial results do not include all the notes of the type normally included in an
annual report. Accordingly, this report should be read in conjunction with the audited financial
results of the Group for the financial year ended 31 March 2019. All significant policies have been
applied on a basis consistent with those used in the audited financial statements of the Group
for the year ended 31 March 2019 other than as disclosed in note 3.
Critical estimates and judgments
The preparation of these unaudited financial results requires management to make judgments,
estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is revised and in any
future periods affected.

Notes to the consolidated financial results



p. 7

2. Basis of preparation (cont.)
Going concern
These unaudited financial results have been prepared based on the Group being a going concern,
which assumes the Group has the ability and intention to continue operations for a period of at
least 12 months from the date of the financial results. During the Group’s current growth phase,
investment continues into increasing revenue by developing and expanding the Group’s product
and service offerings. The Group has continued to reduce, but still incur, net cash outflows from
operating activities during this phase. During the fiscal year 2020 (FY20), the Group had cash
outflows of $1,066,000 (2019: $4,035,000) relating to operations, and $4,201,000 (2019:
$1,048,000) relating to investing activities for the twelve months ended 31 March 2020. The cash
balance at 31 March 2020 was $4,327,000 (2019: $3,475,000). While making material
improvement on prior years cash outflows, if the current level of cash outflows continued the
Group would not be able to fund its operations without the need to raise additional capital or
alternative funding.
The approved base business plan for FY21 includes the impact of Covid-19 on the market,
specifically first quarter revenue of FY21 and prudent management of costs while continuing
investment in realising the significant sales opportunities for the entity’s products and services.
The plan takes into consideration:
+ forecast sales increases of its IKE Solution, focused on sales into telecommunications
infrastructure companies within the United States that are deploying fibre and 5G
+ continued subscription revenue associated with the IKE Solution
+ transaction revenue from the IKE Analyze solution
+ new revenue associated with Pole Forman pole loading analysis
+ continued prudent operational cost management
+ continued focus on optimizing working capital
+ the ability of the Group to manage its growth activities and associated costs
+ the uncertainty around Covid-19 on the communications and utilities market in the US
+ IKE’s target customers being communications and utilities companies that are deemed
‘critical businesses’ have the ability to continue operations.
Further cost-cutting measures are available to the Group if one or more components of the plan
are not realized. To assess the degree of sensitivity, stress testing has been performed on the
FY21 plan, reducing forecast receipts from customers by 18% and reducing additional planned
headcount and discretionary costs such as travel and cash bonuses. The Impact being that the
Group remains a going concern, albeit with reduced available cash funds. In FY20 the Group
completed a Private Placement and Retail Offer raising $6.5m. The dual listing on the NZX and
ASX provides the Company with the potential option to pursue capital raise opportunities from a
wider market in order to among other things; expand existing business, and acquire or establish
new businesses. The Directors believe that additional capital could be raised should
circumstances necessitate. In FY20 Sales by the core Utilities and Communications business
unit grew and more specifically IKE Analyze revenue.

Notes to the consolidated financial results



p. 8

2. Basis of preparation (cont.)
On this basis, the Directors believe that the Group has sufficient funding to continue operations
for at least the next 12 months from the date of authorizing the financial results, and hence
consider the use of the going concern basis appropriate.
The Group’s ability to improve its financial capacity and cash flow generated from its operations
cannot be assured. Should the Group fail to achieve its FY21 business plan (particularly forecast
sales growth), manage costs or obtain alternative sources of financing, then this represents a
material uncertainty that may cast significant doubt on the validity of the going concern
assumption. The existence of this material uncertainty may result in the Group’s inability to
realize its assets and settle its liabilities in the normal course of operations. These consolidated
financial results do not reflect adjustments in the carrying values of the assets and liabilities, the
reported revenues and expenses, and the balance sheet classifications used, that would be
necessary if the Group were unable to continue as a going concern.
Impairment
The carrying amounts of the Group’s assets were reviewed to determine whether there is any
indication of impairment. The Directors concluded the Utilities and Communications operating
losses as an indicator of impairment of the intangibles assets directly associated with the
Utilities and Communications Business, requiring an estimate of the Cash Generating Unit’s
(CGU1) recoverable amount. Additionally, it determined that due to the low relative revenue from
the Spike Business unit, an indicator of impairment existed requiring an estimate of the Cash
Generating Unit’s (CGU2) recoverable amount of the assets directly associated with the Spike
Business.
CGU1 was determined to be the IKE & Core platform intangible assets, total property plant &
equipment, leased assets and working capital totalling $3,929,940. Future cash flows are
forecast based on a five-year business model for CGU1, which included Utilities &
Communications average revenue growth rate of 22% and operating expenses reflect the FY20
business plan. A pre-tax discount rate of 12.7% was used to establish the net present value.
The forecast financial information is based on both past experience and future expectations of
operating segment performance and requires judgements to be made as to revenue growth,
operating cost projections and the market environment. The value in use assessment is sensitive
to changes in each of these assumptions, actual results may be substantially different. The
terminal growth rate assumed is 1 x year 5 net operating profit.
Sensitivity analysis was performed on key assumptions, a likely material impairment would need
to be considered if any key assumption did not meet, substantially meet, or exceed that
calculated, resulting in the recoverable amount being in excess of the carrying value.
The Directors have determined that no impairment is required as CGU1 continues to have a
useful life and that the current carrying value of the CGU1 does not exceed its value in use.

Notes to the consolidated financial results



p. 9

2. Basis of preparation (cont.)
CGU2 is the total intangible assets of Spike applications, SDK (software development kit) and
working capital totalling $1,968,849. Future cash flows are forecast based on a five-year
business model for CGU2, a pre-tax discount rate of 12.6% was used to establish the net present
value.
Spike revenue reflects the FY21 business plan, a revenue growth rate is assumed to be 2% from
year 2. An estimate of the cashflows required to market and sell the Group’s products was based
on the business plan for FY21 and forecast revenue profile. The terminal growth rate assumed
is 1 x year 5 net operating profit.
The forecast financial information is based on both past experience and future expectations of
operating segment performance and requires judgements to be made as to revenue growth,
operating cost projections and the market environment. The value in use assessment is sensitive
to changes in each of these assumptions, actual results may be substantially different.
The Directors have determined that an impairment of CGU2 is required as the fair value in use
calculation exceeded the current carrying value by $1,100,000.
Intangible Assets
Information about significant areas of estimation uncertainty and critical judgments in applying
accounting policies that have the most significant effect on the amount recognised in the
financial results are the measurement and impairment of intangible assets.
Annually the Directors are required to assess the appropriateness of the asset’s amortisation
period. In the current year, the Directors have assessed the amortisation period and have
concluded that:
+ the core technology platform underpinning the IKE and Spike devices extends beyond the
life of the current hardware product offering and supports multiple future product releases.
Management has reviewed and reassessed the useful life of the core platform to be 6 years.
+ the period over which the economic benefits to be recognised for the current IKE
applications and features available through the current and future product solutions
available to customers. On this basis the useful life of the IKE applications and features was
assessed to be 6 years.
+ the period over which the economic benefits to be recognised for Spike applications and
SDK. The future economic benefits will be realised through the current market share of the
signage market and the continued penetration into enterprise customers through
integrating these applications and features into the customers platform. On that basis the
useful life has been reassessed the useful life to be 6 years.
+ the period over which the economic benefits from Pole Forman and Sagline Software and
associated Trademarks will continue to accrue to IKE over an assessed useful life of 10
years

Notes to the consolidated financial results



p. 10

2. Basis of preparation (cont.)
+ the period over which the economic benefits from Pole Forman Training and support
seminars will continue accrue to IKE over an assessed useful life of 10 years
The amortisation rates reflecting the change in useful lives of the assets were reset from 1
October 2019. The table below summarises the impact of this change.
Reduction in amortisation expense due to rate change FY20
Annualised
impact

$'000's
$'000's
ikeGPS Platform
(26) (51)
IKE application & features
(70) (145)
Spike applications and features
(44) (94)
SDK (software development kit)
(17) (34)
Balance at 31 March 2020 (157) (323)
The pattern of benefits received from the capitalised development may ultimately differ from the
Directors' initial judgment due to risk of obsolescence or other future factors affecting the assets
useful life.
Amortisation is calculated to write off the cost of intangible assets less their estimated residual
values using the straight-line method over their estimated useful lives and is recognised in the
profit and loss.
In addition to the above, the Group makes judgments about the amount of costs to capitalise as
part of the development asset. The Group’s intangible asset capitalisation policy is used to assist
in making these judgements. The Group capitalises direct labour costs into its development
asset. The costs applied are based on judgment as to the nature of work employees performed,
and the amount of time spent on the task. This is assessed jointly by the engineering and finance
functions. Information about significant areas of estimation uncertainty and critical judgments
in applying accounting policies that have the most significant effect on the amount recognised
in the financial results are the measurement and impairment of intangible assets.
Business Combination
On 27 September 2019, the Group entered into an agreement to acquire certain assets of Power
Line Technology Inc. (“PLT”) for $5,350,000 (“Acquisition”). PLT’s flagship product, Pole Foreman,
is a leading pole loading analysis software solution used in the North American market. This is a
strategically important extension of the IKE Analyse platform. This acquisition provides
opportunities for IKE to lever PLT’s technology for further growth. The acquisition is profitable
and is immediately cash flow accretive.
The Acquisition price of $5,350,000 includes an initial consideration which comprises $2,749,000
of cash and $1,155,000 of IKE shares issued at $0.60 per share in equal tranches over a three-
year period.
The remaining $1,446,000 earn out component will be paid as 70% cash and 30% scrip across
all components. The earn out will be paid annually over a three-year period subject to the founder
remaining employed at IKE, and IKE shares issued under the earn out will also be issued at $0.60
per share.

Notes to the consolidated financial results



p. 11

2. Basis of preparation (cont.)
The Acquisition was funded through the issuance of IKE shares to PLT combined with cash
payments.
The purchase consideration was allocated to the acquired assets based on their estimated fair
values as at the date of acquisition,
Purchase consideration
$'000's
Cash paid

2,749
IKE shares

1,155
Total purchase consideration 3,904
Fair value of net assets acquired on 18 October 2019
Intangible assets
$'000's
Pole Forman pole loading software solution

3,694
Training materials

210
Total purchase consideration 3,904
A fair value assessment was performed on each intangible asset identified, the combined fair
value supporting the total consideration paid. The useful life has been assessed at 10 years.
Management assessed that no indicators of impairment were noted at the end of the financial
year and therefore no impairment test was conducted.
During the current financial year, the group recorded Revenue of $402,000 related to the Pole
Forman and Training business unit. If the acquisition had occurred on 1 April 2019, the revenue
and net loss after tax for the Group would have been approximately $10,326,000 and
($5,933,000) respectively.
3. New and amended standards adopted by the Group
NZ IFRS 16 Leases
Under NZ IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control
the use of an identified asset for a period of time in exchange for consideration. Under NZ IAS
17, a lessee was required to make a distinction between a finance lease (on the balance sheet)
and an operating lease (off balance sheet).
NZ IFRS 16 now requires a lessee to recognise a lease liability reflecting future lease payments
and a ‘right-to-use asset’ for most lease contracts.

Notes to the consolidated financial results



p. 12

3. New and amended standards adopted by the Group (cont.)
Impact of adoption
The Group has adopted NZ IFRS 16 from 1 April 2019 using the simplified transition approach.
Under this approach the cumulative effect of initially applying NZ IFRS 16 is recognised as an
adjustment to retained earnings as at 1 April 2019. Comparative figures are not restated but
instead continue to reflect the accounting policies under NZ IAS 17 leases.
On adoption of NZ IFRS 16, the Group recognised lease liabilities in relation to leases which had
previously been classified as operating leases. The liabilities are measured at the present value
of the remaining lease payments, discounted using the ‘incremental borrowing rate’ as of 1 April
2019. The Groups incremental borrowing rate applied to the lease liabilities on 1 April 2019 is
5.50%.
Adjustments recognised on adoption of NZ IFRS 16:
The impact on the Group's balance sheet as at 1 April 2019
$'000's
Dr Lease asset

367
Dr Retained earnings

45
Cr Lease liabilities

412


The impact on the Group's retained earnings as at 1 April 2019
$'000's
Closing retained earnings 31 March 2019

(45,846)
NZ IFRS 16 cumulative effect

(45)


(45,891)


A reconciliation of operating lease commitments at 31 March 2019 to the lease liability recognised at
1 April 2019 is shown below:
$'000's
Operating lease commitments disclosed at 31 March 2019
928
Discounted using the lessee's incremental borrowing rate at the date of initial application (76)
Leases not included under NZ IFRS 16

(71)
Different treatment of operating lease expense

(369)
Lease Liability Recognised as at 1 April 2019

412
Classified as:


Less than one year

86
One to five years

326
Lease liabilities recognised as at 1 April 2019

412

Judgements and practical expedients used

On transition and during the year the Group has applied the practical expedient provided by the
new standard to treat any lease with a term less than 12 months as a short-term lease and
therefore recognise the lease payments on a straight-line basis over the term of the lease.

Notes to the consolidated financial results



p. 13

3. New and amended standards adopted by the Group (cont.)
The Group has also applied the practical expedient allowing low value lease to be recognised on
a straight-line basis over the term of the lease.

The Group has applied an incremental borrowing rate of 5.50% on all lease liabilities entered
during the year.

Lease Liabilities

Lease liabilities recorded on the balance sheet.

$'000's
Balance at 1 April 2019

-
Additions due to first-time adoption of IFRS 16

412
Additions during the year

506
Payments made

(161)
Interest charges

30
Balance at 31 March 2020 787

The maturity of the lease liabilities is as follows:

Lease liabilities as at 31 March 2020
$'000's
Less than one year

327
One to five years

460
Lease liabilities recognised as at 31 March 2020

787

Lease Assets

Lease assets are recorded on the balance sheet.

$'000's
Balance at 1 April 2019

-
Additions due to first-time adoption of IFRS 16

367
Additions during the year

510
Depreciation charges

(172)
Balance at 31 March 2020

705
4. Operating segments
The CEO and senior management team are the Group’s operating decision makers. During FY20
the Group’s selling activities were focused and organised into two customer segments namely
Utility & Communications and Other Business. The Utility & Communications segment includes
sales to companies involved in the broadband fiber and cellular 5G roll out in the United States.
Other Business includes sales of Spike into the Signage, Architecture Engineering and
Construction (AEC) and Geospatial markets.

Notes to the consolidated financial results



p. 14

4. Operating segments (Cont.)
Within the Utilities & Communications segment the Group sold the IKE device, corresponding
annual subscription revenue and IKE anlayze transactions being an end to end technical solution
to customers performing make ready engineering (MRE) projects.
As part of the business combination with Powerline Technology Inc, the Group offered pole
loading software licenses including ongoing annual subscriptions for maintenance and support
into this segment.
The segment reporting format reflects the Group’s management and internal reporting structure.
Contribution is after allocating cost of goods sold. Reporting of overheads and balance sheet
position is not undertaken at a level lower than the Group as a whole. Geographically, revenue is
substantially generated in the United States.

2020

2019

Utility &
Communication
Other
Business
Group

Utility &
Communication
Other
Business
Group

$'000's $'000's $'000's

$'000's $'000's $'000's
Sale of product and services
(Point in Time)
2,251 591 2,841

3,587 640 4,227
IKE rental 491 - 491 466 - 466
Subscription (Over time)
2,810 50 2,860
1,825 36 1,862
Contribution
4,304 400 4,704
4,228 575 4,803
IKE Analyze solution (Point
in Time)
3,244 - 3,244

1,441 - 1,441
Contribution
1,854 - 1,854

547 - 547
Pole loading software
licenses, services and
subscriptions (Point in time &
Over time)
402 - 402
- - -
Contribution 402 - 402 - - -
Gross Profit

6,960


5,350
Sales and marketing costs
(4,697)

(3,226)
Net attributable (other
corporate income and
expenses)
(7,929)

(7,216)
Net loss before tax
(5,666)
(5,092)

Notes to the consolidated financial results



p. 15

5. Operating expenses
Operating expenses
Operating expenses consist of operations costs, sales and marketing expenses, engineering
and research expenses and corporate expenses.


2020 2019

$'000's $'000's
Audit of financial statements


Audit and review of financial statements

149 141
Other services


Other assurance services
1.


6 6
Tax compliance services

- 20
Total other services
6 26
Total fees paid to auditor
155 167
Amortisation of development asset

914 975
Amortisation of patents and software

- -
Depreciation

287 117
Total amortisation and depreciation
2.


1,201 1,092
Employee benefit expense

6,462 6,158
Share-based payment

541 188
External contractors and consultants

644 360
Employee benefit expense capitalised
3.


(683) (603)
Operating lease expenses
4.


180 370
Direct selling and marketing
5.


836 1,160
Impairment of assets
6.


1,100 -
Credit loss provision and write off expense

317 26
Other operating expenses
7.


1,857 1,604
Total operating expenses

12,610 10,522
Notes
1. Other assurance services comprise the review of Callaghan Innovation research and
development grant claims.
2. All of amortisation and $115,000 (2019: $117,000) of depreciation are included in
engineering and research expenses, $172,000 related to lease assets under NZ IFRS 16 is
included in corporate costs. The balance of depreciation totalling to $395,000 is included in
cost of sales (2019: $248,000).
3. Relates to employee benefit expense, external contractors and consultants’ expenses that
are directly attributable to the development of intangible assets and have been capitalised.
4. Relates to short term leases and common area maintenance costs. In FY19 it included
operating lease payments now recorded as lease liabilities as per NZ IFRS 16.
5. Selling and marketing expenses includes expenses incurred mainly in relation to
promotional activities which include travel, commissions and other direct marketing
expenses

Notes to the consolidated financial results



p. 16

5. Operating expenses (cont.)
6. Impairment includes intangible assets of Spike and SDK.
7. Other operating expenses include corporate advisory, travel, engineering expenses, facilities
and IT expenses.
6. Contributed equity
Share capital

2020 2019
$'000's $'000's
On issue at beginning of year 55,132 49,263
Issued under share placement 5,306 5,000
Issued under share purchase plan 1,194 1,250
Less listing costs offset against issue proceeds (560) (381)
Exercise of share options 37 -
Issued as part of business combination 389 -
Total share capital 61,498 55,132
Share capital on issue

2020 2019
Fully paid total shares at beginning of year 90,469,567 78,450,255
New ordinary shares offered 10,833,333 12,019,312
Ordinary shares issued on settlement of options 242,134 -
Ordinary shares issued as part of business combination 649,014 -
Fully paid ordinary shares 102,194,048 90,469,567

Notes to the consolidated financial results



p. 17

7. Cash used in operations


2020 2019

$'000's $'000's
Loss for the year

(5,683) (5,088)
Less investment interest received

(12) (31)


Non-cash items included in net loss

Depreciation

680 365
Amortisation of intangible assets

914 975
Asset impairment

1,100 -
Spike raw materials write-off

146 -
Debtor & Creditor write off

258 26
Deferred tax expense

17 (4)
Share based payment expense

541 188
Write off of obsolete materials, assets and IKE devices transferred to
customers on rental close out

118 13
Foreign exchange (gains)/losses

(5) 26

3,757 1,558
Add/(less) movement in working capital items



Decrease/(Increase) in trade and other receivables

(514) (65)
Decrease/(Increase) in inventories

134 (470)
Decrease/(Increase) in prepayments

(401) (22)
Increase/(Decrease) in trade and other payables

568 (182)
Increase/(Decrease) in deferred revenue

1,067 369
Increase/(Decrease) in employee entitlements

6 (135)
860 (505)
Net cash used in operating activities
(1,066) (4,035)
8. Related parties

2020 2019

$'000's $'000's
Short term benefits to directors and senior management 1,535 2,238
Share option expense directors and senior management 160 172
Key management are identified as the Chief Executive Officer, Chief Financial and Operating
Officer and Directors.
In the comparative year this included the Chief Technology Officer and SVP Utilities &
Communications who are no longer considered key management. FY19 benefits of those
individuals were made up of short term benefits of $607,012 and share option expenses of
$12,236.

Notes to the consolidated financial results



p. 18

8. Related parties (cont.)
The Group issued 1,049,999 of unlisted share options at NZD$0.51 to Directors and key
management during the period in accordance with the ikeGPS Group Limited Employee Share
Scheme.
In addition to the unlisted options issued, the Group net settled 270,841 unlisted options (187,503
exercisable at NZD$0.40 and 83,338 exercisable at NZD$0.54) resulting in 86,695 new ordinary
shares being issued to key management.
9. Subsequent events
On 1 May 2020 IKE received approximately $825,000 NZD under the U.S. Federal Government
CARES Act Paycheck Protection Program (PPP) via its bank, Silicon Valley Bank.
Under the PPP structure the loan principal amount is forgivable so long as the proceeds are used
to cover payroll costs, rent, and utility costs over the 8 week or 24 week period after the loan is
made. Loan forgiveness is contingent upon recipients requesting forgiveness, providing
supporting documentation, and certifying compliance to the forgiveness conditions as per the
PPP legislation. Recipients would be responsible to repay any amount of the loan that is not
forgiven. The interest amount is 1% per annum.

p. 19

ikeGPS Group Limited
Level 7, Willis Street
Te Aro
Wellington 6011
Telephone: +64 4 382 8064

Directors of ikeGPS Group Limited
Richard Gordon Maxwell Christie
Bruce Harker
Alex Knowles
Glenn Milnes
Frederick Lax
William Morrow
Mark Ratcliffe

Legal Advisers
Chapman Tripp
10 Customhouse Quay
PO Box 993
Wellington 6140
Telephone: +64 4 499 5999

Auditor
PricewaterhouseCoopers
PwC Centre 10 Waterloo Quay Pipitea,
Wellington 6011
Telephone: +64 4 462 7000

Share Registrar
Link Market Services Limited
PO Box 91976, Auckland 1142
Level 7 Zurich House
21 Queen Street, Auckland 1010
Telephone: +64 9 375 5998

Bankers
Bank of New Zealand
Harbour Quays, Ground Floor,
60, Waterloo Quay, Wellington 6011
Private Bag 39806,
Wellington Mail Centre,
Lower Hutt 5045

---

IKE FY20 Results and Q1 FY21 Update
Significant Growth Opportunity in the U.S. Communications &
Electric Utility market

Confidential

Glenn Milnes, CEO. glenn.milnes@ikegps.com
29 June 2020.

Important Notice
➕is for general information purposes only, and is not an offer or invitation for subscription, purchase, or recommendation of securities in
ikeGPS Limited;
➕should be read in conjunction with, and is subject to, ike’s FY20 financial statements, market releases, and information published on ike’s
website (www.ikegps.com);
➕includes forward-looking statements about ike and the environment in which ike operates, which are subject to uncertainties and
contingencies outside of ike’s control – ike’s actual results or performance may differ materially from these statements;
➕includes statements relating to past performance, which should not be regarded as a reliable indicator of future performance; and
➕may contain information from third parties believed to be reliable – however, no representations or warranties are made as to the accuracy
or completeness of such information.
➕All information in this presentation is current at the date of this presentation, unless otherwise stated.
➕All currency amounts are in NZ dollars unless stated otherwise.
Information in this Presentation:
Receipt of this Document and/or attendance at this presentation constitutes acceptance of the terms set out above in this Important Notice.

Notice

2
Confidential

Contents
➕FY20 performance metrics for the 12 months to 31 March 2020, inline with the pre-announcement early April.
➕Record revenue & gross margin.
➕The continued transition of IKE’s business model to transaction & subscription revenues.
➕Including an overview of IKE’s solution, called IKE Analyze, that increases revenue quality.
➕Q1 FY21 performance update and Covid-impact assessment.
➕Solid performance through the Covid-impacted Q1 period with revenue of approximately $2M.
➕IKE’s has ‘essential business’ status in U.S.A, and its customers are resuming network activity to pre-Covid levels.
➕Market overview.
➕Optimal market timing across two core segments. >$350B investment super-cycle into fiber network and 5G network deployments in North America
over the next 3-5 years. The IKE solution speeds pre-construction processes.
➕Team overview.
➕A Board and executive team with deep industry & business-building experience.

Contents

3
Confidential

FY20 performance & momentum

4
Positive shift in revenue composition.
Takeaways:
➕IKE’s revenue mix from its core Communications & Utility segment has continued to shift positively and materially the past 12 months.
➕Approximately 70% of FY20 revenue was from transaction & recurring sources (shown by the blue bar in the chart).
➕This is an important transition in terms of increasing revenue quality and predictability to underpin growth.

Confidential

FY20 performance & momentum

5
Positive overall financial momentum.
Takeaways:
➕The positive momentum of the past 24 months continued through FY20 with respect to revenue, gross profit, and operating cash flow performance.
➕Total Cash & Receivables 31 March 2020 are approximately $5.8m.

Confidential

FY20 Results Highlights
＋Record revenue growth in the core Communications & Electric Utility segment:
＋Total recognised revenue FY20 of approximately $9.8m (23% growth against PCP).
＋Gross margin growth:
＋Record gross margin FY20 of approximately $7.0m (30% growth against PCP).
＋Gross Margin percentage improved to 71% (against PCP of 67%).
＋Improved operating cash flow:
＋Operating cash flow of approximately ($1.1m) against PCP of ($4.0m).
＋Operating loss for the year was approximately ($5.6m) against PCP of ($5.1m)
＋Record sales into the U.S. Communications and Electric Utility market, with approximately $9.2m revenue including;
＋$2.8m revenue generated from annual software subscriptions and $3.2m from IKE Analyze (approximately
125% growth in IKE Analyze revenue against PCP)
＋Cash and receivables:
＋IKE ended the period with total cash & receivables of approximately $5.9m.
FY20 Results

6

FY20 Results Highlights cont.
＋Transition to the IKE Analyze business model was continued in FY20
＋As a result approximately 70% of FY20 revenue was from recurring subscription or transaction sources.
＋The focus continues on two large markets, specifically speeding the pre-construction process in the Communications and Electric Utilities
segment in North America.
＋Market timing is optimal.
＋Multiple customer proof points.
＋With account acceleration opportunities.
＋Operating momentum.
＋Across pipeline, brand, customer experience, and process efficiency.
＋The right people.
＋Leadership, pole expertise, and governance in place so to lead our niche. The period included the appointment of Mark Ratcliffe as
non-executive director, the former CEO of Chorus and former CIO & COO of Spark (formerly Telecom NZ).

FY20 Results

7

Profit & Loss (unaudited)
FY20 Results

Continuing operations $'000's$'000's
Operating revenue9,838 7,996
Cost of sales (2,878)(2,646)
Gross profit 6,960 5,350
Other income1 102
Operations cost(541)(643)
Sales and marketing expenses(4,697)(3,226)
Research and engineering expenses(3,361)(3,210)
Corporate costs(4,011)(3,443)
Foreign exchange (losses)/gains 5(39)
Expenses (12,605)(10,561)
Operating loss (5,644)(5,109)

20202019
8

Solid Q1 FY21 Performance. Covid-19 impact assessment.
＋IKE performed solidly through the Covid-impacted Q1 FY21 (period ending June 2020) with revenue of approximately $2M. This represents an
approximate 15-20% lower run rate revenue level than FY20 (pre-Covid).
＋IKE expects to end Q1 FY21 with Total Cash & Receivables of approximately $5.2m (31 March 2020 position of $5.8m).

Covid-19 impact outlook
＋IKE’s North American customers and their operations resumed high levels of network construction and maintenance activity in June, even with
the continued presence of Covid-19 across the U.S.
＋This market did experience a substantial slow-down in activity March through May 2020 due to the sudden uncertainty created by Covid-19,
however activity levels have since increased as above.
＋IKE is deemed a “Critical Business” in the U.S. ‘Shelter-at-Home’ orders across the U.S. are exempting companies deemed “Critical Businesses”
that includes IKE and its target customers, being communications companies, electric utilities, and their associated engineering service providers
involved in constructing and maintaining Critical Infrastructure.
＋Notwithstanding these mitigating factors and these U.S. Critical Business provisions, IKE is continuing to closely monitor risks related to
Covid-19, with a focus on the health & safety of staff and the company’s resilience across supply chain, customers, and technology.
＋We are conservatively planning for the scenario of lower activity Q2 FY21 and are considering the possible impacts should Covid-19 surge again
in specific U.S. regions or states where our customers operate.
＋＋The Covid-19 situation continues to change and develop in the U.S., and these statements are in the context of what is known at this
point-in-time. IKE’s fuller customer update can be seen at https://ike4.ikegps.com/our-covid-19-response/.
＋＋Operationally, IKE has transitioned its U.S. operation to mostly remote working, while its New Zealand operation is back to “in-office” status
in the Level-1 environment.
＋＋Due to the cloud-based nature of IKE’s products, systems and processes, and the critical nature of the industry it serves, the changes
required to IKE’s operation throughout this situation have continued to be mostly smooth. As such, IKE people and products are expected to
continue to deliver the highest levels of performance, availability, and security

FY20 Results

9

Meeting Market Demand

Communication Infrastructure Providers (CIPs)
Pain point IKE solves;
＋Bring networks and services online faster.
＋Standardize costs & data Standard across multiple geographic markets.

Applications;
＋Fiber network deployments
＋5G network deployments

Market opportunity for IKE;
＋Bottom up;
->$225m revenue opportunity over 5 years from the largest 15 players in the U.S.
->200 CIPs in the North American market.
＋Top down;
->$300B forecast investment into fiber networks in the U.S over next 5+ years.
->$50B forecast 5G network investment
Engineering Service Providers (force multipliers for IKE)
Electric Utilities
Pain point IKE solves;
＋Need to maximize efficiency and profits. Typically doing >50% of the network
development work for the CIPs and Electric Utilities.

Pain point IKE solves;
＋Sharply increasing pole attachment permit requests.
＋Require a Standardized way to assess if poles are compromised.

Applications;
＋Joint-use requests from CIPs
＋Network hardening to protect against storm and fire risk.
＋In some cases, building their own fiber networks.

Market opportunity for IKE;
＋The largest potential market for IKE in the long term;
->3,200 electric utilities in North America
->$750M per annum Total Addressable Market
＋IKE expects that this segment will develop more slowly than the CIP and
Engineering Service Provider market
IKE speeds network pre-construction for two large markets
Timing is optimal...
Confidential
10
Market opportunity for IKE;
＋>1,000 engineering groups in the U.S. Use of IKE tools for field engineering drives asset data
back to the IKE Analyze transaction platform.

Proof Points

11
With significant account expansion opportunities.
And is working with the biggest names in the business
Confidential

Extending the IKE Analyze solution to deliver more value

Basic pole
assessment
Make Ready
Adjustments
Annual Subscription
＋IKE Device
＋IKE Field s/w
＋IKE Integration Suite
＋Software updates & maintenance
＋Technical Support
＋Hot Swap*
＋Training*
＋Joint Use Coordinator Support
* = Customer Paid Shipping
Per Pole Transaction Pricing
Pole Load Analysis
(Digital Twin)
Deliverables
IKE Field Tools & Software
IKE Cloud Pole Analysis Platform

＋IKE Report (pdf)
＋PLA Report
＋MRA Improvements
＋Pass/Fail Maps
＋IKE Office Cloud Database
＋IKE Photo Records
＋Permitting
IKE Analyze Deliverables
IKE Analyze solution offering

12
And substantially extending IKE’s revenue model as the core growth driver.
Confidential

Rapid growth in usage of the IKE platform
IKE Analyze drivers

13
>17M aerial asset records on the system. And growing each day.
Confidential

Evidence of assets as they exist in the field.
Example IKE Solutions Outputs

14
Photo-Verifiable Accuracy
Confidential

Pole Loading Analysis, via the FY20 PoleForeman acquisition
Embedded customers include a number of the largest investor-owned utility groups in the U.S.
Pole Loading
Structural integrity
Clearance Analysis
NESC compliance

Example IKE Solutions Outputs

15
Confidential

Optimizing Workflow management
Example IKE Solutions Outputs

16
Confidential
Starting with a customer
deliverable and finding the
most efficient way to define
workflows.

Schedule & route planning to ensure ‘One-Trip to the Field’ efficiency.
Example IKE Solutions Outputs

Data Management Products to Ensure Quality
17
Confidential

Automated Attachment Permit Applications; eliminating manual input errors & dramatically speeding up permitting.
Example IKE Solutions Outputs

18
Enabling Faster Permitting
Confidential

Achieving dramatic productivity gains and improvements in quality & safety for our customers.
IKE Analyze drivers

19
Key Drivers of the IKE Solution
Confidential
* Data above as at September 2019.
17.7 Million
Photos
of poles to date
2.8 Million
Assets
in IKE Office
75%
Reduce
personnel requiring field visit
0
Zero
revisits to the pole
2x Faster
Improve
workflows from end to end
8x
Reduce
permit request rejections

Rick Christie / (MSc (Hons) Chemistry)
Chairman and Independent Director
Rick Christie is the former Chairman of Ebos Group,
where he was Chair through much of its growth to
become a >$3B business today. He has experience
on a number of other major boards, including
TVNZ. Rick was previously CEO of investment
company Rangatira Ltd and had 20 years’ executive
management experience in the international oil &
gas industry.

Governance Team

Team; Governance Strengthened through FY20
Board of Directors
Glenn Milnes (MBA (Dist.), BSc (Hons), BPhed)
CEO & Managing Director
Glenn Milnes is the CEO and managing director at ikeGPS,
where he is accountable for the company’s overall
strategy, performance, and growth. Prior to leading
ikeGPS, Glenn previously held senior executive, strategy
and corporate development positions in the
Communications industry with Cable & Wireless
International, and with No. 8 Ventures.

Bill Morrow
Independent Director
Bill currently leads a business-wide strategy initiative at
AT&T, the world’s largest communications company,
reporting to its Chairman & Board. Bill has held positions
including CEO of Vodafone Europe, President of
Vodafone KK Japan, CEO of Pacific Gas and Electric. Bill
was also CEO of NBN co., where he led the build of
Australia’s $40B universal broadband network that has
connected more than 6.5 million homes and businesses.
His Board experience includes as a member for eight
years at Broadcom Inc. (one of the world’s largest
semiconductor businesses) and Openwave.

Dr. Bruce Harker / (PhD Electrical
Engineering, BE (Hons))
Independent Director
Bruce is currently Director of H.R.L. Morrison & Co’s
Energy Group and is also Chairman of ASX listed
Tilt Renewables. Among other directorships, he
was previously Chairman of NZX listed TrustPower
and Z-Energy.

Alex Knowles
Director
Alex has investing and operating experience with international
companies in the information technology and transportation
industries. Based in Los Angeles, He was formerly Chief
Operating Officer of the largest international freight forwarder
and small parcel consolidator in the U.S.
Fred Lax / (MSEE AND BSEE)
Independent Director
Fred Lax is an executive leader with extensive global experience in
the telecommunications industry and related technologies. Based
in California, he is a former director of NASDAQ listed Ikanos
Communications Inc. (acquired by Qualcomm Atheros), and former
Chief Executive Officer and President of NASDAQ listed Tekelec Inc.

20
Confidential
Mark Ratcliffe
Independent Director
Mark joined IKE most recently from Chorus, where he was its CEO
leading the deployment of New Zealand’s national fiber network.
Prior to Chorus Mark was CIO and COO of Spark (formerly Telecom
NZ). His other governance roles include as non-executive director
of 2Degrees Mobile and as Chairman of First Gas.

Pole People

Team; Executive leadership & Pole experts
Supporting a direct go-to-market model; selling & delivering directly into the largest infrastructure companies in North America.

Mike McGill
Senior VP, Utility & Communication Business Unit

Liz Etzel
Support Lead

Matthew Worster
VP, IKE Analyze

Blake Collins
Solutions Engineering Manager

Glenn Milnes
Chief Executive Officer & Managing Director

Leon Toorenburg
Chief Technology Officer

Chris Birkett
Chief Financial & Operating Officer

Dan McGrady
Director of Customer Success

21
Confidential

Who are focused on:

-Faster network deployments.
-Improving network and data quality.
-Keeping crews out of harm’s way.
-Meeting the demands of regulators.

Thanks...

Dedicated to Serving
Communications Companies &
Electric Utilities.
IKE is...

22
Confidential