Last month I took a look here at 1Spatial, which also saw my buying into the story ahead of what was a pending Trading Update, along with a slot for catching up with CEO Claire Milverton.
Since then, the company has delivered that update to the market which revealed notable progress coming through and ahead of expectations, along with a developing positive trend that sees cash generation at last coming to the fore.
On the back of the release, I was yesterday able to catch up with the CEO to gain some further insight into the story and the prospects moving forward, which provides for a glimpse of what may lie ahead for the company.
Firstly though, it is worth recapping on some of the content in an announcement that demonstrated what appears to be a building momentum, resulting in positive cash generation that came out ahead of broker Liberum’s forecasts.
Full year 2021 revenue is now expected to hit £24m against the anticipated £23.5m, with net cash moving to circa £4.3m from a forecast number of £3.9m.
Overall, the picture was a solid one against the market wide disruptive Covid backdrop, with that strong cash generation being registered.
This is a key component from an investment perspective, particularly with a business like 1spatial in the software spot and with an increasing focus on driving recurring revenues.
That sentiment certainly wasn’t lost on the CEO when we spoke yesterday morning as she commented , “we are very pleased with the performance and we had a really good second half where cash has been positive and free cash flow excellent, so I feel like everything is now coming together”.
It is good to hear such positive noises on the back of the update, particularly as 1Spatial has - as I mentioned in my earlier piece - failed to deliver in the past, proving a long haul for shareholders.
Now, it does look as though the prospects look increasingly brighter and there appears to be much going on for further progress, with a determination to push the business towards stronger and longer term goals and returns.
Milverton sees the situation as one where the market is now catching up on what they have been preaching for years, in that spatial data is not only of significant importance, but needs to be highly accurate and correct.
Expanding, she adds, “I’m really excited, as all the hard work we have put in, particularly over the last three years with the turnaround plan now sees us in a really good spot to take advantage of a market that has moved in the right direction for us”.
Within this developing picture Milverton says that one of the main aspects of the turnaround was to get the cash perspective right, in conjunction with improved EBITDA.
That now appears to be coming together as evidenced by the update, where good contracts feeding through, along with an improved structure on working capital are key components.
Potential investors running an eye over 1Spatial will no doubt be looking beyond the near term for continued progress here though and no regress to an under performance that has arguably shackled it in the past.
To this end, the CEO adopts a reassuring stance with an optimistic tone on the prospects going forward.
“We really want to gear up now as we can see the potential out there and as a result of that, we have invested heavily in the US with sales people in what is a huge market. Obviously, we still have to invest in R&D but alongside that, we do now have a floor on EBITDA which we don’t want to drop below”.
Having over the last year announced a number of positive and more notable contracts. I asked the CEO to update me a little more in this area and what sets 1Spatial aside.
To this end, Milverton refers to the most recent announcement that relates to the Ordnance Survey and the Energy Networks Association, the latter of which is focused on a major project to deliver an-in-depth digital system map of the UK’s energy system with the objective of supporting the transition to net zero.
The aim of this project is to both support management, development and demand, of not only existing energy sources, but more importantly the shift towards renewable energy generation that takes in the likes of electric vehicles and potentially hydrogen.
The CEO says that at present, there are many different companies out there across this energy space that hold different sets of geo spatial data and which are also in different formats that include assets such as power stations.
It appears to be such, that to date, much of this information is highly fragmented and not joined up in order to maximise efficiency, coordination or planning.
Utilising what she describes as a transformational product launched last year in the form of its 1 Data Gateway, the different parties holding their own data will be able to upload the various data sets they hold to the 1Spatial Gateway Portal, which will in turn enable everything to be brought together and in an easily accessible format.
This will ensure spatial data quality and consistency across the energy space and enable the successful planning and management of energy assets and infrastructure with numerous parties being able to connect.
This is only one example of where the business is making its mark and Milverton also adds that there is a lot of big stuff coming out of the UK now. Data is, she says, becoming ever more important and critical and up to 80% of all data now has a location element to it.
That is good news for the Cambridge based company and there is clearly plenty going on across the space, although not just here in the UK where there are she says, some big spending initiatives taking place now.
To this end, Milverton also adds that some of the business emerging is potentially very large which opens the door further to 1Spatial partnering up with others and there are some really exciting things going on across the area.
The US is one region in particular that is clearly playing a big part in the company’s growth ambitions where having once really only having the US census on board as a customer, it is now reaching out and being adopted by others.
“In the US they actually don’t have a nationwide map system such as we have here with Ordnance survey” says the CEO.
“As a result, we last year won a contract with the State of Michigan to assist them across data infrastructure that takes in various areas, in particular the covering of emergency services”.
That deal is worth an initial $2.6m over five years and is supporting the states base-map for businesses and emergency services in order to assist in planning and efficiency.
Milverton adds that they really liked the 1Spatial technology and that the company was now starting to get noticed more widely across the US.
Alongside the Michigan win, it also inked a contract with the state of California that is directly connected to the infrastructure of emergency services and the efficiency of running its operations.
Such wins can arguably be seen as something of a platform or springboard for further adoption by other states across the US where the offering which generates recurring revenue is highly scaleable.
Milverton says that at present, they really are just scratching at the surface in the US and there are plenty of opportunities for the company ahead. This, when combined with home turf prospects and other regions, makes for plenty of growth targets.
The company also has a very important relationship with the big hitting ESRI which the CEO says is going from strength to strength and which looks like it could bode well for further associated deals and potentially on a global basis.
Since the CEO implemented the much needed three year turnaround plan, 1Spatial appears to have really turned the corner and the area it serves appears to be opening up and at pace, which puts it in a strong position for further ongoing progress.
Recurring revenue which can be a welcome and predictable element providing for visibility is on the up, with a 15% increase in the first half of full year 2021 and now makes up 44% of total revenues.
That suggests it is well on track to reach Liberum’s expectation of half of all revenues to be recurring by full year 2023.
On the forthcoming launch of its cloud platform which the broker believes could be a game changer, the CEO points out a number of benefits including increasing scalability with ease of implementation.
It will also provide for greater flexibility which in turn will reduce barriers to customer sales, providing for increased opportunities for the company.
The shares are currently trading at 35p and the company delivers its full year results next month where Investors should hear more of the wider potential and of the improving picture going forward.