IKEGPS GROUP LIMITED

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FOR IMMEDIATE RELEASE

12 February 2021

Q3 FY21 performance update

Acquisition of Artificial Intelligence software business

ikeGPS (IKE) is pleased to release an update for the quarter to 31 December 2020 (all figures NZD).

The IKE platform allows electric utilities, communications companies, and their engineering service providers to increase speed, quality, and safety for the construction and maintenance of distribution assets. The revenue engine for IKE is driven be the number of assets being processed through the IKE platform. In the Q3 FY21 period, less engineering activity occurred on certain network projects while COVID-19 response measures were put in place in specific U.S. regions. Deferred contracts in Q3 are generally transitioning to delivery and recognized revenue from Q4 FY21, which IKE expects to grow against prior calendar period (pcp).

Highlights for the December 2020 quarter:

＋ The process to acquire certain assets of Visual Globe LLC, a US-based Artificial Intelligence (AI) and low code software company that specializes in the automated analysis of power poles from very large data sets.
＋ Revenue in the quarter of approximately $2.1m and approximately $6.5m YTD (pcp of $7.3m) reflects a solid outcome in the context of Q1 and then Q3 periods disrupted by COVID-19 impacts on customer projects.
＋ New contracts closed in Q3 FY21 were for approximately $2.5m.
＋ Gross margin of approximately $4.3m (pcp of $5.2M), with a gross margin percentage of approximately 67% (pcp of 72%).
＋ Total cash and receivables 31 December 2020 of approximately $18m, with no debt.

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Takeaways

❏ IKE’s revenue mix has shifted materially with greater than 75% of revenue expected from transaction & subscription sources in FY21 (shown by the blue bar in the chart). ❏ This is an important transition in terms of increasing revenue quality and predictability to underpin growth.

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

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Q4 FY21 outlook

＋ The final quarter of FY21 has commenced strongly.
Approximately $3m of new contracts have been closed in the initial five weeks of Q4, laying a platform for a significant sales quarter.
New contracts won are supporting network projects for important underlying customers including AT&T Inc. (the world’s largest communications company), Corning Optical Communications Inc. (the world’s largest fiber optics manufacturer), and ALLO Communications (a communications business operating across Nebraska and Colorado).
Several deferred projects from Q3, as detailed above, are coming online as specific impacts of COVID-19 ease.
＋ IKE’s focus for Q4 FY21 is on three core items: The delivery of contract backlogs, the extension of revenue opportunities from existing customers, and integration of the recently acquired AI-software business.

Research coverage

＋ Bell Potter (https://bellpotter.com.au), one of Australia’s largest full-service financial advisory firms, has initiated research coverage on IKE. The associated report outlines the growth potential of the business.
＋ From Q4 FY21 IKE will report additional quarterly metrics. These additional key metrics include transaction revenue, Platform-as-a-Service revenue (PaaS), and the number of PaaS customers subscribing to the IKE platform (vs legacy business model Software-as-a-Service subscribers).

Acquisition of assets of Artificial Intelligence software business

＋ A significant focus in Q3 was acquiring certain assets of Visual Globe LLC, a US-based Artificial Intelligence (AI) and low code/no code software company that specializes in the automated analysis of power poles from very large data sets:
＋ This strategic acquisition complements IKE’s existing offering and aligns with the Company’s vision to become the standard for collecting, analysing and managing power pole information.
＋ Visual Globe’s AI platform provides the potential for IKE to grow its addressable market within the electric utility and communication industries and to significantly increase the number of transactions that can process efficiently on its platform.
＋ The addition of Visual Globe’s technology will enable IKE to process extremely large volumes of pole data that can be collected from new additional sources including drones and smartphones, making the Company’s platform even more attractive to electric utilities and communications groups in the North American market.
＋ The consideration comprised an initial payment of US$3.3m in cash and with a potential earn-out component comprising up to an additional US$4.99m of cash and up to US$2.1m of IKE shares. The earnout payments are subject to the acquired assets delivering revenue targets totaling US$21M in aggregate over the period to March 2024 (80% of the total earn-out) and the retention of key people to 31 March 2024 (20% of the total earn-out).